Grain volume, transport issues impact profits

Emil Klassen looks on as his truck fills with grain from Wilfing Farms east of Meadow Lake Feb. 18. Klassen later transported the load to a North Battleford grain terminal.

Emil Klassen looks on as his truck fills with grain from Wilfing Farms east of Meadow Lake Feb. 18. Klassen later transported the load to a North Battleford grain terminal.

by Phil Ambroziak

Sometimes you can have too much of a good thing.

That’s what grain producers throughout Saskatchewan have come to discover as large yields combined with increased pressure on transport systems continue to plague would-be profits.
“Everyone had such a big crop last year, there was just no way we could move it all and things fell behind,” remarked Ryan Wilfing, a grain farmer who operates east of Meadow Lake. “It was probably one of the biggest crops Canada ever produced. And, when you have extra supply on the market, it brings the overall price down. That’s just basic economics.”

Wilfing’s comments were reenforced by the latest report on export basis numbers for grain within the Canadian transportation and handling system, the numbers from which do not reflect good news according to industry experts.

“Rail transportation and handling capacity has not improved and this is being reflected in even lower returns for producers and a lower share of export values as the year progresses,” noted Bill Gehl, chair of the Saskatchewan Wheat Development Commission (Sask Wheat) – the organization that elicited the report.

The most recent numbers, released earlier this month, show even though FOB (when the seller pays for transportation of the goods to the port of shipment plus loading costs) prices for wheat are virtually unchanged, the primary elevator price has dropped an additional $20 per metric tonne since October. This means the excess basis cost for producers, relative to the posted costs for rail freight and primary and terminal elevator charges, is now more than $62 per metric tonne compared to $40 in October of last year.

“Producers are having to involuntarily carry inventories over into the next crop year and are losing $40 to $60, relative to the export market returns, on every tonne they market,” Gehl said. “To break this down, if you are a producer who markets 2,000 tonnes a year, you are losing between $80,000 and $120,000 depending on when you marketed your grain.”

In spite of this, Wilfing is confident profits will turn around sooner rather than later.

“They will have to,” he said. “A lot of guys are likely to now stop growing wheat because there’s no money to be made. Then, the supply will drop and the demand will rise. It’s the same way for any crop. Producers are always looking at which ones can make them the most money, but the unfortunate things is so much can change from the time you decide what you want to grow until you put it in the ground.”

Although he will continue to produce grain, Wilfing stated only about 30 per cent of his crop is sold on the export market. The rest, he said, is sold as seed to other farmers looking to grow similar crops of their own.

“How things like this affect someone all depends on their individual financial situation,” he added.

Meanwhile, Sask Wheat partnered last year with the Agricultural Producers of Saskatchewan (APAS), Sask Barley, and Sask Pulse to submit recommendations to the Canadian Transportation Agency (CTA) review panel, which included the creation of an oversight committee including producers, as well as more information transparency in terms of pricing.

“These organizations will continue to work together to ensure producer voices are heard at a national level,” Gehl said. “These new numbers only reinforce the need for improved government regulations of the industry.”

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