Canada Markets

Both sides of the argument surrounding the mandatory minimum volumes to be shipped each week by each railway are hitting the media. While last week's press covered comments from Federal Agriculture Minister Gerry Ritz which would suggest that the mandated volumes would be allowed to expire, this week's interviews indicate that the decision has not yet been made.

Fresh in the mind of many is the collapse in rail service faced in the fall of 2013. Unloads at the western terminals on the west coast, Churchill and Thunder Bay hit a weekly high of 783,568 metric tonnes in week 10 of the 2013/14 crop year, or the week ending October 13, and reached a low of 550,640 metric tonnes in the combined weeks of 21 and 22. It wasn't until week 43, or 32 weeks later that shipping had returned to the level reached in week 10.

The attached chart indicates that the export program from the western terminals is off to a strong start in the first quarter of the crop year, with a large carryover from 2013/14 combined with mandated weekly volumes shipped by the railroads supporting the movement. A total of 7.930 mmt has been shipped from the western terminals as of recent data, significantly above the 6.224 mmt shipped as of the same period in 2013, when prairie stocks were tight early in the crop year. Another point to note on the chart is the solid growth in movement through the terminals on the west coast (Pacific terminals or green bars), representing a growing Asian demand, which as of week 13 this crop year accounted for 85% of the movement through western terminals.

With mandatory minimum shipping volumes on the table, the discussion surrounding the potential impact to the industry is heating up. Prairie grain supplies are estimated at 77 mmt by the Western Grain Elevator Association which would be the second highest in history and will require a continued focus in order to achieve projections. Recent reports show 21 ships are waiting on the West Coast which is viewed as double the normal amount, while Mark Hemmes of Quorum Corporation tells Realagriculture.com that the problem is getting "the right grain at the right place at the right time."

Canada's large supplies, the onset of winter weather and the removal of the mandatory minimum volumes could easily result in one-step forward, two steps backwards as the country tries to re-position itself as a reliable shipper.

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Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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(ES)

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