Q3 2009-10 Quarterly Report
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Monitoring the Canadian Grain Handling and Transportation System Third Quarter 2009-2010 Crop Year Summary 1 Report Government Gouvernement of Canada du Canada Third Quarter Report of the Monitor – Canadian Grain Handling and Transportation System ii 2009-2010 Crop Year Foreword In keeping with the federal government’s Grain Monitoring Program (GMP), the ensuing report focuses on the performance of the Canadian Grain Handling and Transportation System (GHTS) for the nine-month period ended 30 April 2010. In addition to providing a current accounting of the indicators maintained under the GMP, it also outlines the trends and issues manifest in the movement of western Canadian grain during the first three quarters of the 2009-10 crop year. As with previous quarterly and annual reports, the report is structured around a number of performance indicators established under the GMP, and grouped under five broad series, namely: Series 1 – Industry Overview Series 2 – Commercial Relations Series 3 – System Efficiency Series 4 – Service Reliability Series 5 – Producer Impact Although the indicators that follow largely compare the GHTS’s current-year performance with that of the preceding 2008-09 crop year, they are also intended to form part of a time series that extends forward from the 1999-2000 crop year. As such, comparisons to earlier crop years are also made whenever a broader contextual framework is deemed appropriate. The accompanying report, as well as the data tables which support it, can both be downloaded from the Monitor’s website (www.quorumcorp.net). QUORUM CORPORATION Edmonton, Alberta Third Quarter Report of the Monitor – Canadian Grain Handling and Transportation System iii 2009-2010 Crop Year Third Quarter Report of the Monitor – Canadian Grain Handling and Transportation System iv 2009-2010 Crop Year Table of Contents Findings ___________________________________________________________________ 1 1.0 Industry Overview ________________________________________________________________ 1 1.1 Grain Production and Supply _______________________________________________________ 1 1.2 Country Elevator Infrastructure _____________________________________________________ 2 1.3 Railway Infrastructure ____________________________________________________________ 3 1.4 Terminal Elevator Infrastructure _____________________________________________________ 4 2.0 Commercial Relations ____________________________________________________________ 6 2.1 Tendering Program ______________________________________________________________ 6 2.2 Advance Car Awards Program ______________________________________________________ 8 2.3 Other Commercial Developments ___________________________________________________ 9 3.0 System Efficiency and Service Reliability ____________________________________________ 14 3.1 Trucking ______________________________________________________________________ 14 3.2 Country Elevators _______________________________________________________________ 14 3.3 Railway Operations _____________________________________________________________ 15 3.4 Terminal Elevator and Port Performance _____________________________________________ 19 3.5 The Supply Chain _______________________________________________________________ 20 4.0 Producer Impact ________________________________________________________________ 23 4.1 Producer Netback ______________________________________________________________ 23 4.2 Producer-Car Loading ___________________________________________________________ 24 Synopsis – Industry Overview ________________________________________________ 26 Synopsis – Commercial Relations _____________________________________________ 28 Synopsis – System Efficiency ________________________________________________ 30 Synopsis – Service Reliability ________________________________________________ 32 Synopsis – Producer Impact __________________________________________________ 34 Appendix 1: Program Background _____________________________________________ 39 Appendix 2: Commodities Guide ______________________________________________ 41 Appendix 3: Producer Netback Calculator ______________________________________ 43 Appendix 4: Acknowledgements ______________________________________________ 45 Third Quarter Report of the Monitor – Canadian Grain Handling and Transportation System v 2009-2010 Crop Year Third Quarter Report of the Monitor – Canadian Grain Handling and Transportation System vi 2009-2010 Crop Year Findings From its outset, the 2009-10 crop year looked as though it would be a difficult one. Beginning with a dry spring, the abnormally cooler temperatures that followed led to widespread concerns over the size and quality of the crops that would be harvested in the fall. But an unusually warm September shielded the late plant development from the potential effects of a killing frost, and largely preserved both the quantity and quality of the grain that was harvested. Even so, an excess of supply in most grain markets, coupled with the reverberations from the financial crisis that were still being felt around the world, saw further downward pressure being exerted on international grain prices. Although still widely superior to prices previously observed under the GMP, the price reductions posted to the end of the third quarter of the 2009-10 crop year suggested that there would be further erosion in the financial returns accruing to Canadian grain producers. 1.0 Industry Overview 1.1 Grain Production and Supply Overall grain production for the 2009-10 crop year fell to 56.1 million tonnes, a decrease of 7.0% from the previous crop year’s record-setting 60.4 million tonnes.1 Despite this reduction in output, the crop still ranked as the second largest in the last eleven years, coming in well above the typical 50-million-tonne mark. In keeping with this general decline, the production of all major crops, save that of flaxseed, fell in comparison to the tonnage harvested a year earlier. The most significant could be traced to a 2.3-million-tonne reduction in the barley crop, which fell by 20.4% to a three-year low of 8.9 million tonnes. Compounding this was a 1.4- million-tonne reduction in oats, down 35.0%; a 0.7-million-tonne decrease in wheat, down 3.6%; and a 0.2- million-tonne drop in canola, down 1.6%. Running counter to this pattern were the majority of special crops, which saw overall production increase by 8.1% to reach a GMP record of 5.6 million tonnes. Changes in provincial production varied Figure 1: Western Canadian Grain Supply widely, with comparatively modest gains of 34,900 tonnes and 93,600 tonnes for 80 British Columbia and Saskatchewan 70 Grain Supply respectively having been counteracted by 60 more substantive reductions in Alberta and 50 Manitoba.2 The most significant decline 40 was reported by Alberta which, owing to Grain Production 30 poorer growing conditions, saw total Carry Forward Stocks Tonnes (millions) Tonnes production fall by 20.1%, to 16.0 million 20 tonnes from 20.0 million tonnes a year 10 0 earlier. Given its scope, this accounted for 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 over 95% of the net decline in total grain production. The balance was attributable to a much smaller 3.0% contraction in Manitoba’s output, which declined by a total of 0.3 million tonnes to 10.1 million tonnes. Notwithstanding the 7.0% decline in production, the grain supply itself decreased by a much lesser 0.5%, falling to 65.7 million tonnes from 66.0 million tonnes a year earlier. What could have been a potentially greater fall was cushioned by a 68.5% increase in the amount of stocks carried forward from the preceding crop year, which rose to 9.5 million tonnes from 5.6 million tonnes. Much of the impetus for this build-up came as a result of mounting global grain supplies along with a softening in commodity prices. 1 Owing to revisions made by Statistics Canada, the production value cited here differs from the 55.1 million tonnes reported in the Monitor’s first and second quarter reports. 2 Although British Columbia posted a year-over year increase of 22.4%, total production rose to 190,800 tonnes from 155,900 tonnes. Similarly, the gain posted by Saskatchewan amounted to just 0.3%, with total output having risen to 29.9 million tonnes from 29.8 million tonnes. Third Quarter Report of the Monitor – Canadian Grain Handling and Transportation System 1 2009-2010 Crop Year Even with the decrease in the Canadian grain supply, the GHTS’s handlings in the first nine months of the 2009-10 crop year actually increased. Railway shipments for the period rose by 4.7%, climbing to 20.4 million tonnes from 19.5 million tonnes a year earlier. Although increases were noted for most commodities, the gain posted by the CWB grains was superior to that of the non-CWB grains, up by a collective 6.1% versus 3.0% respectively. Durum and barley were the strongest performers among the CWB grains, with volume increases of 21.4% and 13.6% respectively. Running well behind these was wheat which, owing to a 19.0% decline in third quarter tonnage, posted a volume gain of just 2.3% for the first nine months. For the non-CWB grains, the story proved much the same. Despite a significant increase in shipments for the majority of grains, an 18.7% reduction in third-quarter canola shipments served to counteract much of the gain that had been registered through to the end of the first half.3 The year-to-date gain was cut from 14.4% at the close of the six-month mark, to just 3.0% by the