An Equinox Class bulk carrier (photo courtesy CWB)
Prairie farmers can now call themselves ship owners.
The Canadian Wheat Board has announced the purchase of two 30 thousand tonne lake vessels for moving grain through the Great Lakes to eastern ports.
"Every year it costs farmers $70 to $75 million to move their grain through the Great Lakes. By owning these ships we will share in the revenue, and recoup part of those costs," explains CWB chair Allen Oberg. "It is a very strong business case and of great economic benefit to farmers."
The Chinese-made vessels will cost $65 million, to be paid by farmers over the next four crop years.
"That works out to about one dollar per tonne over the next four years. The boats have a lifespan of at least 25 years so farmers will continue to reap the financial benefits well into the future," says President and CEO Ian White.
The Board expects the vessels will contribute an estimated $10 million per year in revenue to the CWB pools.
"These vessels will be financed through CWB revenues, so in essence, all farmers who deliver grain over those four crop years will be paying for them. Because they're paying for them, they will also receive part of the revenue stream when these vessels are operational in 2013," says Oberg.
The deal is part of a larger purchase of seven new Equinox class bulk carriers together with shipping companies Algoma Central Corporation and Upper Lakes Group Inc. The vessels will be operated and managed on a day-by-day basis by Seaway Marine Transport, which is a partnership between the two shipping companies. The CWB vessels will be part of a pool of eight bulk carriers.
Oberg says the Board is looking to reduce producers' costs by getting involved in shipping.
"Anytime a farmer organization can move farmers farther up the supply chain, there are some significant savings to be had. And as the Wheat Board is currently the owner of rail hopper cars, this is just another way of exercising that, moving farmers farther up that supply chain."
So should farmers have been consulted prior to making the purchase?
"Farmers elect a Board of Directors to make decisions on their behalf, and we've always believed that if our organization has the ability to reduce farmers' costs through the involvement in logistics, such as our involvement in rail hopper cars, and this investment in lake vessels, it's just a further extension of that," says Oberg.
He says the purchase would not have been possible if the federal government had not removed a 25 percent tariff on imported vessels last fall. The strength of the Canadian dollar also helped the Board keep the costs down.
Meanwhile, White says there's no danger that this will influence the direction in which the CWB ships grain, sending grain east when it may have otherwise have moved west or in another direction.
"There's no conflict here. We are looking for the lowest and cheapest way to market, whether it goes out of the east coast, the west coast or even via Churchill," he says. "We will only be shipping grain out of the Seaway when it is logical for it to go there."
Based on the CWB Act, Oberg says the Board is allowed to invest in movable property, including rail cars and ships. It is restricted from owning real property.
Grain makes up 10.5 percent of the commodities that are shipped through the Great Lakes on Canadian carriers. Iron ore makes up 28 percent, coal 22 percent, salt 14.5 percent and limestone 14 percent.