Ritz Says Grain Backlog Had No Economic Impact on Canada’s Farm Incomes

Contradicting a recent study published by University of Saskatchewan agricultural economist, Richard Gray that concluded that the grain shipment backlogs experienced during the winters of 2013/14 and 2014/15 cost western Canada’s farmer between $6.4 billion and $8.2 billion, Agriculture Minister, Gerry Ritz said on October 13 that the backlogs had ‘no negative dollar impact’ on the country’s Prairie grain farmers.

“(I)f there had been that type of loss coming out of the grain sector in Western Canada AgriStability would’ve paid out huge money,” Minister Ritz said in an interview October 13. “And the other thing to point to is, we have the net incomes for those farmers for those years before, during and after it, and they keep climbing so there is no negative dollar impact on grain farmers in Western Canada through that glitch.”

Richard Gray stands behind his findings, stating that even though it is true that the drought in the U.S. bolstered grain prices giving Western producers a good year, the backlog prevented those farmers from having an even better one.

In 2013 Western Canada harvested a record 76 million tons of grain causing a shipping bottleneck that was compounded by the coldest winter in 100 years. By March 2014 the situation was so bad that the government stepped in and ordered railways to move a minimum volume of grain per week or face fines of up to $100,000 per day. Another effect of the backlog was the widening of the basis between country elevators and f.o.b. Vancouver price.

In 2012/13 when grain was moving on pace, the basis averaged $72 per ton, but by February 2014 the wheat basis was more than $250 per tons and the combined canola basis and crush margins exceeded $270 per ton according to Gray. In addition, Gray also asserts that wheat shipped from Vancouver sold at a discount to U.S. wheat because the backlog gave the impression to foreign buyers that Canada was an unreliable supplier, causing an estimated loss to Canadian farmers of $1.4 billion.

Taken as a whole, Gray concluded that conservatively, Canada’s western farmers lost an average of $63 per tons over the two crop years.

Both Ritz and Gray agree that expanding Vancouver’s capacity would be beneficial, however Ritz states that “He (Gray) took a worse-case scenario and then he read into it ‘this is what happened’ — and it didn’t.”

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