Polar Bear Blog – Grain and Oil Don’t Mix

An interesting take on Canada’s rail crisis came out this week… no, I am not talking about the excess of derailments and explosions – enough folks have covered that – this is more about the unforeseen backlog of rail cars and the massive delays in getting grain to market.

Basically, the incredible increase in oil shipments by rail in Canada has created a ripple effect that has delayed grain shipments, essentially turning a record year for Canadian farm companies (I will no longer use the term ‘farmer’…) into a bit of a schmozzle. Without the Canadian Wheat Board to oversee the ‘big picture’, scheduling grain shipments is more of a crapshoot than anything. It could be growing pains or could be a sign of things to come.

So, amidst all these problems for the grain industry, there is a huge opportunity for the Port of Churchill. The Port had a great season last year, around 600,000 tonnes. Yes, this is likely helped by a $2 per tonne subsidy from the federal government but it does seem that the Port will not simply fade away any time soon.

Omnitrax owns the line from The Pas to Churchill and, aside from the VIA Rail passenger train – which evidently is pretty low priority – this is an open line. As in, not much other than bureaucratic screw-ups, can mess with the arrival of grain cars. Okay, maybe an occasional derailment… ahem, but that’s not the point.

The point is that Omnitrax has an opportunity to position the Port of Churchill as a ‘safe and reliable’ grain destination. I mean, I’m a bear guy but this seems doable. The Port has a short season – August to early November – maybe twenty ships at best? It will never be a major player in the shipping industry – so you need to carve a niche. Store grain over the winter, be ready for the early season and have the line open for early shipments after the harvest. I know they were proposing a grain handling/loading facility in The Pas a while back, not sure if it ever happened. Producers can get grain to The Pas from Saskatchewan and Manitoba by truck fairly easily…

Instead, we seem to be hooked on another ‘big time’ project where we’re diversifying shipments to include oil. This, despite the fact that Churchill does not have functional infrastructure for oil shipments and that Omnitrax needs a few million to make this happen (hello, government funding…). Churchill needs imports not diversified exports – for ten years now, grain shipments range between 400,000 and 650,000 tonnes – this is the market, make it work.

Aside from the well discussed threat to the environment, both along the rail line and in the bay, oil presents a threat to the Port itself. The Port already has scheduling complications with grain delivery now they plan to add ten ships’ worth of oil to the mix… the math just doesn’t add up. Not to mention, the likelihood of a complete scheduling disaster (like maybe a ship freezing into port – which we narrowly averted this year… or a derailment prematurely ending the rail shipping season) would seal the fate of the Port – scaring away oil producers and grain producers alike. The Port could easily go from a meager existence to financial ruin in only one season. The stakes are just too high, no matter how you look at it.

I mean, what appeal does the Port of Churchill have if oil cars are clogging up this rail line as well? Are they not watching CN Rail implode and wondering, hmm, maybe this isn’t our best option? A delay in shipping to Churchill is much more costly than to other ports… now add the fact that the Port of Churchill managers have no real experience with large oil shipments – although ‘large’ shipments for Churchill hardly make a blip in the industry… Its hard to see what real benefits Churchill can offer to an oil company’s bottom line… These shipments are basically just for ‘show’ as far as I can tell. Risking so much for so little… so strange.

However you look at it – Churchill oil shipments don’t make much sense. One can only hope its yet another flavour of the month… Its been many years of Omnitrax now and there is a pattern. Instead of focusing on grain operations and finding efficiencies there, their top dogs pick a new ‘pie in the sky’ dream to pour money into… First, they promised a million tonnes before even learning the grain industry. Then it was Arctic Bridge, then Centreport, now oil… all of them hinged on government investment, naturally.

Like I said, I’m a bear guide so I don’t really know the ‘ins and outs’ of this but the optics sure seem to show that instead of oil securing Churchill’s future, it is putting it at a greater risk than ever… So forget the bears for now, worry about the Port itself.

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