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Grain prices and sales tumble.

Grain prices and sales tumble

It is not easy to say whether good times or bad times are on the way for the Port of Thunder Bay.

There are so many variables in the mix that the final outcome is hard to predict.

For instance, a bumper harvest on the Prairies should mean good times for the port which handles huge amounts of grain, right?

It did not.

The international market for grain was swamped this year by bumper crops everywhere, and prices tumbled.

Cy Cook, general manager and chief executive officer of the Thunder Bay Harbour Commission, says the port had been hoping for a significant increase this year in volume through the port.

In fact, in the first six months of this year there was a 40-per-cent increase, but that amount has been decreasing.

"We're quite concerned about the fall," Cook says.

As of Oct. 13, 5.7 million metric tons of grain had moved through the port, compared to 4.7 million metric tons during the same period in 1989.

The problem is declining sales of wheat and barley.

There are more than one million tons of grain in storage at Thunder Bay, and there are similar quantities elsewhere along the St. Lawrence.

That means reduced and varying levels of employment for grain handlers. When in full operation, the 13 grain elevators at Thunder Bay employ about 1,500 people and generate more than $48 million in annual wages.

Cook says, in the end, the levels of grain shipments should be the same as last year. "But last year was the worst in a generation."

The world market for grain is so bad that some Western Canadian farmers have begun to store wheat in their fields.

Despite the current problems Cook says, "I firmly believe Thunder Bay will always be a grain port."

However, he doubts if it will ever again experience the volume of grain shipped seven or eight years ago.

Nevertheless, he believes the port will remain a significant player in the city's economy.

The future of the port is currently tied to negotiations on the General Agreement of Tariffs and Trade (GATT) and the Western Grain Transportation Act (WGTA).

Cook explains that, under the WGTA, it is cheaper to ship grain through western ports for destinations almost anywhere in the world. That is because there is a subsidy of 70 per cent paid to the railways.

Cook says changes to the act would be to the long-term benefit of Thunder Bay.

As it stands now, he says there is no incentive for the port to try to be competitive, since the Canadian Wheat Board will ship west for a greater return to the farmer.

A task force report entitled Growing Together, has been released on the act and other related issues such as the safety net for farmers.

In August Canada's agriculture ministers met in Moncton, N.B. to set up a committee to study the efficiency of the WCGA and possible changes to the methods of payments.

"I see this process lasting another six months," Cook speculates.

While grain accounts for the largest share of the port's business, there are other significant commodities, as well.

Coal shipments have declined by about 500,000 tons, a drop of about 20 per cent. As of Oct. 13, the figure stood at 2.4 million tons, compared to 2.9 million tons during the same period last year.

Cook attributes the decline to the commissioning of the Darlington nuclear plant. Another factor was the cool August in southern Ontario, resulting in a decline in power consumption.

However, Cook predicts that within five years thermal coal will inch its way back to past highs as demand for power exceeds supply.

As for potash, shipments are down slightly from last year, but Cook expects a recovery by the end of the year.

He explains that the United States will need considerable amounts of potash to recharge the soil after this year's bumper crop.

In the long term Cook expects potash shipments to remain relatively stable.

Overall cargo statistics for the port are 9.8 million tons to Oct. 13, compared to 9.5 million tons during the same period last year.

Cook says the port authority has been knocking on doors trying to drum up new business. However, he admits, "We haven't been able to find anything near the volume of grain."

One potential new commodity is sulphur, but Cook notes that sulphur interests own terminals in the Port of Vancouver.

The port authority is also pursuing nitrogen fertilizer, which will be moving from a large plant being built in Saskatchewan.

Cook says there is also hope that the port can increase shipments of project cargo, such as large equipment and machinery. However, there is some cargo that the port could handle that the Canadian railway system can't deliver.

For example, an 800-ton lift had to be moved to Lloydminster, on the Alberta-Saskatchewan border, but it was too large to make railway clearances on the Canadian railway system. Instead, it went through the port of Duluth and was moved on American railways.

The port's health is affected by many events throughout the world, and Cook says, "The whole world seems to be changing."

One of the major changes, the reunification of Germany, will have an effect on Thunder Bay.

Now-defunct East Germany was a major market for Canadian barley, purchasing a million tons or more per year, notes Cook. However, that requirement will probably be filled by the European Economic Community, of which the reunited Germany is a member.

Some of the East Germany-bound barley was shipped through Thunder Bay.

Cook notes that the whole world has had a bumper grain crop this year, including the Soviet Union, Argentina and Australia. Prices and markets have consequently lessened for the Canadian product.

"It's difficult to know what's going to happen over the next year or so," says Cook.

Thunder Bay could also be negatively affected by events in the Middle East.

Now-blockaded Iraq purchased 25 per cent of its grain from Canada, and much of it went through Thunder Bay.

Cook said most of the grain destined for Iraq had been shipped prior to the Persian Gulf crisis.

Between 250,000 to 300,000 tons of grain could be lost to the system next year if the Iraq stand-off is not resolved.

"However, our biggest customer in the Middle East is Saudi Arabia," notes Cook.

Meanwhile, Cook believes there is no short-term advantage for Canadian grain exports and Thunder Bay, from the political changes in Eastern Europe.

Cook thinks that, if Eastern Europe becomes wealthier, the consumption of meat could increase and the region could become a customer for Canadian grain for feed.

Cook also speculates that Western Europe wheat output could be affected by the environmental movement, which may create a backlash against the high level of fertilizer used.

If the amount of fertilizer is reduced, he says the yield will reduce. That, in turn, could remove some Western European wheat from international markets and make the region less of a competitor.

Cook is not aware of any benefit to the port from the discounts introduced this summer by the St. Lawrence Seaway.

The discounts only apply to new shipments out of the Seaway. and none have originated from Thunder Bay.

However, he says, "It benefits us indirectly."

Cook explains that the more ships use the Seaway system, the better it will be for all ports.

PHOTO : Lumber is loaded for the international market at the Keefer Terminal in Thunder Bay.
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Title Annotation:Thunder Bay Report
Author:Bickford, Paul
Publication:Northern Ontario Business
Date:Nov 1, 1990
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