The Canadian Wheat Board

The Canadian Wheat Board

February 08, 2011 14:02 ET

Farmers to Own Ships: Historic CWB Announcement a Major Step Forward

WINNIPEG, MANITOBA--(Marketwire - Feb. 8, 2011) -

Editors Note: Two photos for this release will be available via Marketwire on the picture wire of The Canadian Press.

Note: a telephone news conference for media will be held at 3 p.m. CT with CWB chair Allen Oberg, President & CEO Ian White, and Chief Operating Officer Ward Weisensel. Media only are invited to participate by calling 1-800-319-4610. The teleconference will also be Webcast live on www.cwb.ca, and retained on the site for 90 days.

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.

Controlled by western Canadian farmers, the CWB is the largest wheat and barley marketer in the world. One of Canada's biggest exporters, the Winnipeg-based organization sells grain to more than 70 countries and returns all revenue, less marketing costs, to farmers.

A video explaining the features of the new Equinox Class of bulk carriers can be found at http://www.seawaymarinetransport-new.com/index.php?title=Equinox_Class.

Backgrounder

- Great Lakes freight is a key element of the CWB's grain supply chain. It costs farmers $70 to $75 million each year. The distance to eastern Canadian ports from Saskatoon is about 3,400 miles – the longest distance in the world between growing region and port. This creates an immense logistical challenge for western Canadian farmers as competitors in the world grain marketplace.

- The CWB conservatively estimates the contribution to its pools from owning the lake vessels (after costs of operation and maintenance) at $10 million per year. The cost of purchasing the two ships will be about $65 million, spread over four crop years. This equates to approximately $1 per tonne over the payment period.

- Renewal of the Great Lakes fleet is critical to ensure efficient, low-cost transportation of western Canadian grain to market. Aging vessels, as well as changes to ballast-water regulations and fuel-usage restrictions, could make a large part of the lake fleet obsolete.

- A strong Canadian dollar and the removal of a 25-per-cent tariff on new vessel imports have created an attractive capital point of entry.

- The new Equinox Class lakers will be able to carry significantly more cargo and move faster than conventional vessels now running on the Great Lakes. Newer engine technology will result in reduced fuel consumption, which means lower fuel costs and lower emissions. The new ships will emit 60 per cent less emission than the oldest steamships still transporting grain on the Great Lakes and about 40 per cent lower emissions than existing motor vessels. In addition, the news ships are designed to accommodate engine-exhaust gas scrubbers to further reduce emissions and accommodate ballast-water treatment solutions. This equipment will be installed once these technologies are fully developed to meet pending and anticipated new environmental standards.

- Over 80 per cent of the wheat and barley marketed by farmers through the CWB is exported. The vast majority of grain destined for east-bound export is shipped through the Great Lakes. Smaller amounts are transported by rail directly to eastern ports (primarily during winter) or exported through Churchill (July to November only). Prairie grain is also exported through Vancouver or Prince Rupert on the West Coast, or shipped by rail to (or through) the United States.

- Grain constitutes 10.5 per cent of the commodities transported on the Great lakes by Canadian-flagged carriers. Iron ore makes up 28 per cent of the commodity traffic, coal 22 per cent, salt 14.5 per cent and limestone 14 per cent.

About the companies

Algoma Central Corporation owns Canada's largest domestic fleet of vessels operating on the Great Lakes-St. Lawrence Waterway. This fleet consists of 12 self-unloading and seven gearless bulk carriers, along with seven product tankers. The Corporation also has interests in ocean dry-bulk and product tanker vessels operation in international markets. It owns a diversified ship repair and fabricating facility active in the Great Lakes and St. Lawrence regions. Algoma announced in December 2010 that it had signed contracts for one Equinox Class gearless bulk carrier and three Equinox Class self-unloading bulk freighters, plus it has options for two additional Equinox Class vessels.

Upper Lakes Group Inc. operates one of the largest fleets on the Great Lakes and St. Lawrence Seaway. It provides services ranging from ship repair and shipbuilding to fuel bunkering and industrial repair, inside and outside of the marine industry. Its integrated group of companies moves, handles and stores wet and dry bulk commodities and containerized cargoes in the Great lakes, across Canada and around the world.

- Seaway Marine Transport is a vessel marketing and management company operating and maintaining the largest fleet of Canadian registered dry bulk carriers within the Great Lakes, St. Lawrence River and Canadian East Coast regions. Its diversified fleet of both standard-design gearless bulk carriers as well as its conveyor-style self-unloading vessels offers marine shippers an unmatched level of choice and scheduling flexibility. SMT is a partnership of Algoma Central Corporation and Upper Lakes Shipping Inc.

- Controlled by western Canadian farmers, the Canadian Wheat Board is the largest wheat and barley marketer in the world. One of Canada's biggest exporters, the Winnipeg-based organization sells grain to more than 70 countries and returns all revenue, less marketing costs, to farmers.

Contact Information

  • The Canadian Wheat Board
    Maureen Fitzhenry
    CWB media relations manager
    (204) 983-3101 or Cell: (204) 227-6927
    maureen_fitzhenry@cwb.ca