The clogged rail system is affecting every grain producer on the Prairies, but oats growers are feeling additional pain.
Market analyst Randy Strychar has called the situation a “train wreck,” noting some companies aren’t putting out bids until February 2015.
“It’s not out of line to say that we’re probably one of the worst-hit crops,” Shawna Mathieson said at the recent Alberta Oat Growers Commission meeting.
“When 90 per cent of your exports are going to the U.S., that means that there aren’t a lot of oats going anywhere else.”
And shipping grain south isn’t a priority, said Mathieson, who grows oats on her Saskatchewan farm and is also executive director of the Prairie Oat Growers Association.
While Ottawa recently ordered CN and CP to double the volume of grain movement, the railways have said their priority is the West Coast, where a fleet of grain freighters are anchored and waiting for grain to arrive at port.
“Railroads have said that they are not going to the U.S. in the short term (and) no one will say what short term is,” said Mathieson.
Producers at the growers’ meeting in Leduc peppered industry officials with suggestions to move oats south of the border, and learned there are no easy answers. Trucking is tricky because certain types of Canadian trucks can’t legally haul grain to the U.S. As well, the Americans don’t have the right type of rail cars they could send north, tote bags on trucks wouldn’t be economical, and containers aren’t a solution because of logistical issues in unloading.
One producer even suggested a two-stage process.
“Could we ship to the border and refill into a car there?” he asked.
It’s no surprise oat producers are increasingly anxious about the situation, said Mathieson.
“It’s a very big issue, not only for our growers, but for our millers,” she said. “There’s going to be a trickle-down effect because if the millers can’t mill, they can’t provide it to their customers either. There needs to be a solution found and if rail can’t do it, then hopefully there’s another way.”
It’s rumoured some American millers, who get most of their oats from Canadian growers, are close to running out of supplies, and that jives with what Mathieson has heard.
“I’m getting calls from millers and calls from growers — growers asking how to get (oats) down there, and millers asking if I can do anything,” she said.
“Many oat mills won’t even give you a bid and if they will, there’s no delivery spot in sight because they don’t know when they can take them.”
From the Manitoba Co-operator website: Poor rail service blamed for some Canadian mills closing temporarily after running out of grain
She said she knows producers in Saskatchewan who had contracts for October delivery, but are still waiting for a call from their elevators.
Oat prices have soared in recent weeks, but that’s been driven by tight supply and so it’s of no use to growers who can’t deliver oats, said Tracy Bush, director of sales and marketing with Canadian Oats Milling in Edmonton.
“My understanding is that this problem could go into 2015,” said Bush. “Oat supplies are large and demand is limited due to rail movement. So the futures are inverted. But there will be demand going forward. That’s a positive.”
But there’s also a negative — American mills may turn to Europe, where there’s a large surplus of oats and declining prices.
Trucking oats to U.S. millers is normally too expensive, but this year’s grim situation is prompting a rethink.
“From Saskatchewan, you could probably truck it down to Minneapolis and have money in your pocket,” said Dennis Galbraith, milling oat specialist with Viterra.
“But there are logistical issues about trucking it down there… you can only run two-axle trailers and maximum 23.5 tonnes per truck. The volume you can move and the supply of configurations of those trucks is fairly limited on this side of the 49th.
“There has been a lot of talk, nothing firm yet, that some of the companies are trying to get state government down there to give permission to move Canadian trucks to Minneapolis.”
Canadian oat processors are running full out, and are unable to adequately supply the American marketplace with processed oats. Bush has been using intermodal shipping, also known as piggyback, to get her oats to her customers.
“I’m about three months behind in getting car spots in any bulk rail car that I’m trying to get into right now,” said Bush.
Her company sells oat groats, steel-cut oats, large-flake oats and oat flour, mainly purchased from Alberta growers. Oat hulls and oat chips, processing byproducts, are sold for animal feed.
Canadian Oats Milling has customers in Taiwan, Korea, Mexico, Costa Rica, Venezuela, Jamaica and the Dominican Republic, and has been able to service them, she said.
“I was actually selling a lot of oats to Venezuela and other places in South America, but that has dried up because Chile’s crop came off and prices dropped about $175 a tonne,” she said.
“Hopefully, with the U.S. dollar remaining strong and the harvest pressure coming off in Chile, we might be competitive in those markets again. It’s just that the ocean freight just kills us, from Vancouver to get down into those areas, compared with Chile.”