Prairie farmers will become owners of ships that move their wheat on the Great Lakes, under an agreement reached today between the Canadian Wheat Board (CWB) and shipping companies Algoma Central Corporation and Upper Lakes Group Inc.
The CWB is purchasing two new lake vessels that will be ready for service in 2013 as part of a larger purchase by Algoma and Upper Lakes. Farmers will benefit from contributions that are expected to average at least $10 million per year to the CWB pools when the ships are in operation. They will also benefit from more efficient grain movement through a renewed fleet.
“As ship owners, we are moving forward to strengthen farmers’ position in our grain supply chain,” said CWB board chair Allen Oberg, a farmer from Forestburg, Alberta. “This historic step puts us at the helm. Through the CWB, farmers will share in the control and the profits of Great Lakes grain shipping. This is a value-added investment with significant net benefits for Prairie producers.”
Oberg said the purchase agreement would not have been possible without the foresight of the Government of Canada in removing a 25-per-cent tariff on imported vessels last fall, making the renewal of the Canadian domestic fleet and this purchase economically feasible.
Algoma President & CEO Greg Wight and Upper Lakes President & CEO Pat Loduca welcomed the partnership with western Canadian producers in purchasing the new, state-of-the-art Equinox class bulk carriers, to be operated and managed by Seaway Marine Transport, which is a partnership of the two companies.
“This exciting initiative will modernize the Great Lakes fleet with larger, faster ships that consume less fuel and meet future environmental standards,” Wight said. “By working together with Prairie farmers, we have forged a relationship that will have lasting value for all.”
Loduca said the timing is excellent for this partnership, given the need to replace an aging fleet on the Great Lakes. He noted that the current strength of the Canadian dollar also helps keep new-vessel costs down. “We are very pleased to be seizing this opportunity along with the CWB, which helps ensure the long-term strength of our industry.”
The CWB’s cost for the two ships is $65 million, equal to approximately $1 per tonne, paid over the next four crop years. Prairie farmers also own a fleet of 3,400 rail hopper cars that move wheat and barley to ports and domestic customers.
Lake freight is a key element of Prairie grain producers’ supply chain, stretching from farm to overseas customer. CWB-chartered lake freight to eastern Canadian ports has increased by about one million tonnes over the past decade, hitting 3.8 million tonnes in 2009. The CWB projects the export flow of wheat to increase over the next few years as demand strengthens in Europe, Africa and Latin America – destinations served through eastern Canadian ports.
