Thank you very much.
I had a couple of photos that I was hoping to have distributed amongst the members, if that's possible.
To begin with, I would like to thank you for inviting me to speak to your committee today. Today I want to talk to you about producer cars, West Central Road & Rail, and the Canadian Wheat Board.
What are producer cars, and how did they come to be? A producer car is a railcar loaded with a producer's grain. It enables a producer to bypass the primary elevator system and ship the grain directly to destination, typically a port terminal.
How and why did the producers get the legislated right to load producer cars? Over a century ago, from the late 1800s to the early 1900s, producers were becoming increasingly discontented with the market power abuses of the grain companies and railways that were working together to dictate when, where, and how producers would deliver their grain. At that time, producers were able to influence the government of the day to draft legislation to address the market power and balance that existed. This led to the creation of the Canada Grain Act, which included provision for the right to load producer cars.
Producer cars were intended to serve as a competitive safety valve for producers. However, even with producers having the legislated right to load producer cars, grain companies and railways quickly found ways to stifle the practical application of that right.
Fast forward to the mid-1990s. As much as things had changed from the previous century, they remained the same. Once again, the railways and grain companies began working together to design a grain handling and transportation system that suited their best interests, at the expense of producers. This exercise by the railways and grain companies became known as rationalization and consolidation, which in the vernacular meant branch lines would be ripped up and elevators torn down. Enter West Central Road & Rail, a progressive group of producers in communities who in 1997 formed with the objective of retaining rail service to the region.
Initially, we watched helplessly as rail service dried up and elevators were razed to the ground. Finally, we decided enough was enough, so we went to the railway and told them that since they didn't want to service the line, West Central Road & Rail would buy it and operate it ourselves. The railway told us flatly to get lost—and I have the vernacular for that as well, but I won't share that with you. Why? Because according to them, they had already made agreements with the grain companies to abandon our line so that our area could serve as a catchment for high through-put elevators built on the line north of us.
Angered and dejected, we approached the Canadian Wheat Board for help. The Canadian Wheat Board informed us that they would need railcar orders before they could press the railway for service. That was when the idea struck us. We decided we were going to blow the dust off a century-old piece of legislation that gave us the right to load producer cars. Not only were we going to load producer cars, we were going to load a producer car train: one hundred producer cars in one day. In two weeks, we had one hundred producer car applications in hand.
Armed with railcar orders, we now had the leverage to enable the Canadian Wheat Board to press for rail service. But even with that leverage, it still took nearly three months of haggling and a formal complaint to the Canadian Transportation Agency before the railway begrudgingly provided rail service. It was that single event that launched West Central Road & Rail, an event that would never have taken place without the Canadian Wheat Board.
I have provided you with photos. You'll get to see how that event unfolded in the dead of winter, and why it was important.
What began as a one-time exercise to send a message to the railways and grain companies that we were not prepared to stand idly by while they demarketed our rail line into de facto abandonment became the catalyst that led to producer cars becoming a real, competitive alternative to the traditional grain handling system. West Central Road & Rail began offering producer car loading on an ongoing basis along our rail network, which generated orders and in turn gave the Canadian Wheat Board leverage to push for rail service.
Next, West Central Road & Rail went beyond our network and offered our producer car program across Saskatchewan. The success did not go unnoticed, and eventually several other entities imitated our model, and producer car numbers continued to rise. Never content with the status quo, West Central Road & Rail continued to grow and evolve. In 2001, West Central Road & Rail implemented a truly unique and innovative grain gathering system for the new millennium, based on producer cars. This included the construction of producer car loading facilities designed to support this new process.
One of my favourite pictures here is of one of the facilities. These facilities are capable of loading and unloading grain at a rate of 500 metric tonnes per hour. That means this facility can load 25 car blocks in less than six hours, while at the same time providing identity preservation to a high degree of segregation and quality control.
West Central Road & Rail's producer car system has moved producer cars beyond the competitive safety valve to a generator of intense competition. I will explain by citing a specific example. Trucking incentives across Saskatchewan average approximately $4.50 per metric tonne. In the West Central Road & Rail region, we are continually targeted with trucking incentives ranging from $10 to $14 per metric tonne. Why? Because West Central Road & Rail exists. And that's where the Canadian Wheat Board comes in.
Without the Canadian Wheat Board, it is unlikely that West Central Road & Rail would have ever come into existence. Think about the forces that were marshalled against us. Matched against the railways and major grain companies, what chance would you have given us to succeed? If your answer exceed 0%, I can tell you matter of factly that you answered incorrectly.
The Canadian Wheat Board brings balance to what would otherwise be an imbalanced system. The Canadian Wheat Board's ability to exert influence on the grain handling and transportation system is a direct benefit of the Canadian Wheat Board's single-desk marketing. It is a benefit that is often overlooked and undervalued. As an example, who in the grain industry has ever formally challenged the railways head-on? The grain companies? No. They're too afraid, rightly or wrongly, of railway reprisals. Only the Canadian Wheat Board, at least successfully, has been willing to challenge the railways head on. Ultimately, the Canadian Wheat Board allows for fair access to the grain handling and transportation system, and that fosters a healthy and competitive environment.
Going back to producer cars by way of example, in the absence of the Canadian Wheat Board, what real opportunity would an individual producer have to load a producer car? First, he or she would have to find a buyer for the grain, someone willing to accept it on the basis that it would be shipped as a producer car. That in itself would be no easy task. What incentive would a vertically integrated grain company with a prairie delivery point only twenty miles from the producer's loading site have in accepting that grain? I would suggest very little.
Let's assume, though, that the producer is an incredibly skilled marketer and locks up a direct sale to a mill out east for a single- or even a ten-car block of grain. As a condition of sale, it is immediate shipment upon three weeks, pre-advice. If such a condition is not met, discounts will apply.
What influence do you think a single producer will have in exerting influence with the railway to get his car spotted and lifted in a timely manner in order to stay within the shipping terms of his or her contract? The answer is none. And even if the producer has a legitimate complaint against the railway, it is unlikely that he or she will have the finances or resources to act upon it. In the absence of the Canadian Wheat Board, a producer could very easily be priced out of or serviced out of the practical ability to load a producer car.
You can have a neon sign flashing in every community and farmyard across the prairies, displaying the message that producers have the legislated right to load producer cars, but what good is it? Legislated or not, if you cannot practically utilize a right, then the right is of no value. That will become a very real scenario in the absence of the Canadian Wheat Board. Additionally, it is not only producer cars that will be in jeopardy if the Canadian Wheat Board is dismantled. It will also adversely affect independent and producer-owned terminals, whether inland or at port, and short-line railways.
In closing, I would like you to look at the last picture I have provided for you. You will notice that there is a very thin line that separates those two realities. The outcome of what happens to the Canadian Wheat Board will determine which side of that line we, as producers, will follow.
Thank you.