The backlog of grain shipments that has left sellers with unfilled orders and stuffed storage bins has many Western farmers facing a cash shortfall just weeks ahead of planting season.
The number of farmers seeking cash advances through a federal government program has risen by 35 to 40 per cent as growers look for ways to pay for seed and fertilizer, while much of last year’s record crop sits unsold in grain bins amid a shortage of rail cars.
“Farmers are really cash-strapped this year because of the transportation backlog that they’re facing,” said Rick White, head of the Canadian Canola Growers Association, which administers the Department of Agriculture’s $1.5-billion advance payments program for western growers of wheat, oil seeds, pulses and livestock.
Under the program, growers can borrow up to $400,000 – the first $100,000 interest free – secured by the value of crops they have seeded or stored and guaranteed by Ottawa. More than 12,000 farmers this year have applied for an average of $130,000, an increase of 30 per cent over last year in cash terms.
There are about 5.5 million tonnes of grain – enough to fill 60,000 rail cars – sitting in prairie elevators and farmers’ storage bins awaiting delivery to customers, said Wade Sobkowich of the Western Grain Elevator Association, which represents six grain companies including Viterra Inc.
Growers’ associations are telling farmers who can’t sell their grain to talk to their banks or credit unions about loan extensions, such as the one offered by Farm Credit Canada, a Crown corporation which has offered to extend yearly payments by a month.
“We were concerned about the timing of the [grain] movements and the payments,” said Rémi Lemoine, chief operating officer of Farm Credit Canada.
It costs $150 to $200 to plant an acre, including the price of seeds, fertilizers, fuel and labour, Mr. White said. So a grower with 1,300 acres needs $200,000 to get started in the spring, but won’t see any cash flow until the crop is sold.
“There is a lot of urgency,” said Mr. White, who farms in southeastern Saskatchewan. “They’ve got to get seeding in April and May, and they’ve got to go out and buy all new inputs for the new crop, and they’ve got the old crop still in the bin and haven’t cashed it in yet.”
Doug Chorney is head of Keystone Agricultural Producers, which represents Manitoba farmers. He said he gets calls every day from growers who can’t sell their grain. “They don’t know what they’re going to do. They don’t know how they’re going to pay their bills,” said Mr. Chorney, who estimates about half of last year’s crop is in storage and at risk of spoiling due to insects, weather and wildlife.
Wheat prices in Chicago have fallen by 15 per cent over the past 12 months, and much more at elevators in the Canadian Prairies, where the shipping backlog has caused a glut.
Like a growing number of farmers, Mr. Chorney didn’t wait for the local elevators to make room for his grain. He ordered five so-called producer rail cars from the Canadian Grain Commission and sold 17,000 barrels of wheat to a grain company in the United States that paid him 32-per-cent more ($19,000) than the price offered at local elevators.
Canadian National Railway Co. and Canadian Pacific Railway Ltd. say they have responded well to the record grain crop, which is about 30 per cent bigger than the previous year’s. But the harsh winter caused them to run shorter trains at lower speeds for safety reasons, and backlogs have been inevitable, the railways say.
“From August to December, CN grain-car unloads at port terminal elevators were 9.5 per cent higher than the five-year average at the West Coast, and 22 per cent higher at Prince Rupert [B.C.],” said CN spokesman Mark Hallman.
Mr. Sobkowich said traders are losing sales from international buyers wary of sending ships that will sit at anchor in West Coast harbours waiting for grain.
“Companies are holding back on tendering to anywhere until we see this backlog clear,” said Mr. Sobkowich, who said that blaming weather for rail delays is like building a house without insulation, then blaming winter when the house gets cold.
“The railways are blaming the weather, but it’s because they didn’t invest in advance to account for the weather,” he said.