GRAIN TRANSPORTATION PICKS UP SPEED, BUT MORE CAN BE DONE TO INCREASE THE PACE

OTTAWA, Feb. 28 /CNW/ - Canadian grain moves from farmers' fields to ports more quickly than it used to, thanks in part to regulatory changes over the past decade. Additional regulatory improvements to increase the efficiency of grain transportation would make this key Canadian export more competitive on world markets, concludes a new Conference Board of Canada report.

"The greater flexibility allowed by regulators has helped to address some of the industry concerns, with the result that performance across the entire supply chain has improved since 1999," said Len Coad, Director, Environment, Energy and Technology Policy. "There remains, however, room for improvement."

Additional regulatory improvements could include:

  • a further move towards competitive tendering for the movement of Canadian Wheat Board (CWB) grains;
  • a review of the annual grain revenue cap on railways, set by the Canadian Transportation Agency (CTA), to determine whether the cap has an impact on railway investments; and
  • continued progress to improve the flow of information between the railways and shippers, particularly about delays.

Published by the Conference Board's Centre for Transportation Infrastructure, From Earth to Berth: Improving the Efficiency of Canada's Grain Supply Chain analyzes developments in the regulatory regime and assesses the efficiency of grain logistics.

Grain is one of Canada's key export commodities - over 32 million tonnes was exported in the 2008-09 crop year.

The bulk of Canadian grain is shipped through the Western Canada grain handling and transportation system (GHTS). Transportation and logistics costs make up a significant portion of the export price, as with any bulk commodity that Canada exports. As a result, the movement of the grains through the system - from the country elevators to the port terminals for export - affects their competitiveness in world markets, and the time taken to move grain is an important indicator of efficiency.

The CWB exclusively controls and directs the movement of wheat, durum and barley for human consumption-- the "CWB grains". Commercial forces guide the movement of canola, oats, flaxseed, dry peas, rye and other commodities -- the "non-CWB grains".  The two segments are not independent of each other, because they both rely on the same rail infrastructure, elevators and port terminal infrastructure.        

Beginning in 2000, the federal government implemented reforms that included replacing the distance-based rates (a price cap) with a cap on overall railway revenue from grain.

This allowed the railways to provide rate incentives to shippers for larger movements of grain. The larger movements in turn allowed the railways to run trains with fewer stops and less switching time. The most visible impact of these reforms has been to reduce the number of country elevators from more than 1000 in 1999 to less than 400 in 2009, as well as faster rail transit times.

Since 1999, Canadian grain for export has generally experienced a decline (with significant annual fluctuations) in transit time.  This has occurred due to the reduction in time spent in country elevators and to a lesser extent, rail transit times. 

The Conference Board's analysis of transportation times finds that CWB grains have typically spent more time in the supply chain than non-CWB grains, primarily because of longer storage time in country elevators. Wheat, for example, was stored approximately 35 days on average in 2008-09; the canola average was just over 20 days. 

"The parallel systems in place may be a contributing factor to the inefficiencies that remain.  A continued move in the direction of a more commercially-oriented regime may be able to yield further benefits," said Coad.

The study also identifies varying transit times as a problem for shippers. Measures taken to better facilitate the flow of information between railways and shippers—particularly transit time delays—would allow shippers to avoid delay costs. In this case, it appears the railways are starting to make some progress.

The report recommends that policy makers should review the impact of the annual grain revenue cap, set by the CTA, on supply-chain efficiency.  As the railways reach the revenue cap each year, they have no further incentive to make investments or divert resources to grain logistics to reduce the costs in the grain supply chain.

Launched in 2008, the Centre for Transportation Infrastructure (CTI) actively engages private and public sector leaders on topics related to the development, maintenance, and efficient operation of transportation networks in Canada.

SOURCE CONFERENCE BOARD OF CANADA

For further information:

Yvonne Squires, Media Relations, Tel.: 613- 526-3090 ext. 221
E-mail: corpcomm@conferenceboard.ca

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