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Canada’s grain backlog woes, more delay in Ardent Mills merger, moving the UK grain passport online, India wheat support hurting world market, China grain imports up

By Maggie Hennessy

- Last updated on GMT

"Is it the need for more locomotives? Is it the need for more people working in the rail system? Has there been a lot of rain when you can't load at the port, even though there are ships waiting and port capacity? It's probably all of the above complicated by something that's very positive—a record harvest," said Saskatchewan Premier Brad Wall of Canada's worsening grain backlog.
"Is it the need for more locomotives? Is it the need for more people working in the rail system? Has there been a lot of rain when you can't load at the port, even though there are ships waiting and port capacity? It's probably all of the above complicated by something that's very positive—a record harvest," said Saskatchewan Premier Brad Wall of Canada's worsening grain backlog.

Related tags: Grain, Wheat

Frustration builds over Canada’s grain backlog, more delay for Ardent Mills, five companies sign on for UK's eGrain passport pilot, India’s support program for wheat growers is hurting the global trade and China imports more grain in 2013. 

No solution for Canada’s rail backlog of grain

The effects of a rail backlog that has left a bumper crop of grain still sitting in some fields continue to reverberate throughout Canada’s agricultural industry, according to Saskatchewan Premier Brad Wall.

Last year, Canada’s grain harvest charted record numbers—up about 20 million tons compared to the prior year, which subsequently left rails clogged, as they share transportation lines with canola. Frustrated farmers have been calling on the federal government to address the backlog that became so bad that wheat and other crops were building up outside jammed grain elevators.

Indeed, oat futures continue to rise amid the rail system's ongoing issues. The March contract is at its highest level since July of 2008, according to Seeking Alpha​.

But the complicated nature of the problem makes it hard to find a solution.

“Part of the reason why this is frustrating for all the stakeholders (is that) it's very difficult for us to focus in on the problem and then just come up with a plan to fix the problem,” ​Wall told the legislature this month. “It's a combination of things. Is it the need for more locomotives? Is it the need for more people working in the rail system? Has there been a lot of rain when you can't load at the port, even though there are ships waiting and port capacity? It's probably all of the above complicated by something that's very positive—a record harvest.”

Wall says the transportation problem needs to be solved now and for the long term because it's likely that larger crop sizes will become the new normal, given new varieties, technology and farming techniques.

He said he’s asked Agriculture Minister Lyle Stewart to contact rail companies to find a way to move more grain. The issue will also be on the agenda when British Columbia, Alberta and Saskatchewan meet in March.

Moreover, the federal government and several grain producer groups—including the Grain Growers of Canada, the Canadian Canola Growers Association, the Western Grain Elevators Association and the Inland Terminals Association of Canada—are splitting the cost of a $3 million, five-year study aimed at finding solutions.

More delay in Ardent Mills merger

ConAgra is further delaying a merger of its flour milling business with Cargill Inc and CHS Inc. due to the ongoing regulatory approval process, the company said in a filing with the Securities and Exchange Commission (SEC) on Monday.

The deal, originally set to close at the beginning of this year, has now been delayed until Q2 2014. The US Justice Department's antitrust division was investigating the merger that would result in Ardent Mills controlling about a third of US flour mill capacity.

In the 8-K filing, ConAgra said the companies were prepared to divest four flour milling facilities prior to or simultaneous with the completion of the merger. Those flour mills are Horizon's facility in Los Angeles, CA; and ConAgra's facilities in Oakland, CA; Saginaw, TX; and New Prague, MN.

eGrain passport pilot participants announced

Five companies have agreed to take part in the HGCA-funded eGrain passport pilot project, which will begin live trials pre-harvest. The aim of the £250,000 ($410K) project is to determine the feasibility of moving the current paper grain passport system online.

Muntons, Gleadell and Openfield have agreed to become pilot participants for the malting barley supply chain, while Heygates and Glencore will be the pilot participants for the milling wheat supply chain. IT supplier F4F has been contracted to build the online platform.

The pilot will run for 12 months from April 2014, and will produce recommendations on whether the electronic passport should be rolled out nationally, and what modifications or enhancements might be needed. 

“The pilot will help the industry establish the real costs and benefits to all grain businesses – large and small - in adopting an electronic passport,"​ Jonathan Tipples, chair of the eGrain passport Steering Group. "It will also investigate if it will result in a better environment for the smoother flow of two way information between farmers, merchants and processors.”

The project's steering committee includes members from the Agricultural Industries Confederation, The Maltsters Association of Great Britain, the National Association of British and Irish Millers, the National Farmers Union and the National Farmers Union of Scotland and the Road Haulage Association.

ADM profits slide on failed GrainCorp bid

Fourth-quarter profits fell 27% for Archer Daniels Midland Co. due largely to a failed bid to acquire GrainCorp Ltd.

The Decatur, Illinois-based agribusiness giant had pursued the Australian grain handler for 13 months before Australia's government blocked the deal in November. ADM retains a stake of about 20% in the company and says it remains committed to expanding its global reach to satisfy Asia's fast-growing demand for food.

Indian wheat support hurting global market

India's support program for wheat growers was attacked for negatively affecting the world market amid an increasing focus on the country's growth as a producer.

US Wheat Associates, which promotes US sales of the grain, warned that 'poor government policies' were behind a rise in India's status as a wheat producer and exporter, which has prompted official forecasts of the country achieving its first 100m-ton harvest this year.

India, which offers its farmers a minimum of 13,500 rupees ($215) per ton, has "consistently ignored"​ promises made to the World Trade Organization over subsidizing exports, according to US Wheat Associated president Alan Tracy.

With transport costs of $80 per ton to get wheat from India's interior to port, sales prices of $279.52-283.60 a ton at a tender which closed on Jan. 14 imply shipments are indeed being financially supported, thus meddling with market forces.

"With most of India's storage capacity already full of an estimated 20 million tons in carryover stocks, it is not surprising that India is aggressively promoting exports​," Tracy said.

China’s grain imports inch upward

China imported 14.59 million tons of grain in 2013, an increase of 4.3% over 2012, according to the Ministry of Agriculture. The grain import value grew 6.6% over last year, to $5.1 billion.

Of total volume, corn imports fell 37.3% compared to 2012, to 3.27 million tons; rice imports slipped 4.1%, to 2.27 million tons; and barley imports dropped 7.6%, to 2.27 million tons. Wheat imports climbed 49.6%, reaching 5.54 million tons last year.

Related topics: Milling & Grains

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