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Australian Government
Wheat Exports Australia
RECEIVED
11 APR 2012
Submission to the Standing Committee on
Agriculture, Resources, Fisheries and Forestry
Inquiry into the Wheat Export Marketing Amendment Bill 2012
27 April 2012
SUBMISSION NO. 11 Wheat Export Marketing Amendment Bill 2012
Background
Wheat Exports Australia (WEA) was established on 1 July 2008 under the Wheat ExportMarketing Act 2008 (WEMA). WEA's role is to accredit fit and proper exporters of bulk wheat,monitor those exporters and ensure continuous disclosure of the shipping stem by the portterminal service. WEA has no role in storage and handling, transport, marketing, publishing•statist"ifesi(other than in its Annual Report and its annual Report for Growers), setting receivalstandards or classifying wheat varieties.
Export Statistics
From 1 October 2011 (start of the current marketing year) to 31 March 2012, more than 10.0million tonnes of bulk wheat was exported via 18 accredited exporters to 31 countries. This is a28% increase compared with the same period in 2010/11, when 7.8 million tonnes of bulk wheatwas shipped.
Asia continues to be the dominant destination for Australian bulk wheat, with seven of the top tencountries in the Asian region. Indonesia remains the primary destination for Australian bulkwheat, purchasing 16.2% of bulk wheat exports over the six month period.
Figure 1: Percentage of Australian bulk wheat exports by market destination for the periodOctober 2011 to 31 March 2012
Other' r f-n \
SaudiArabia2.4%
Sudan.3.3%
Thailand ,5.4%
Yemen5.6%
Indonesia
Vietnam12.6%
Jap.in
Philippines10.2%
Korea11.2%
China10.5%
Figure 2 graphs the total (bulk and non-bulk) wheat exports by State for the period 1 October2011 to 31 March 2012. This graph is based on ABS and WEA data and shows substantial exportsfrom Western Australia in January and February and strong exports for the marketing year to datefrom Victoria and Queensland.
Figure 2: Total wheat tonnage (bulk and non-bulk) exported by State for the period 1 October2011 to 31 March 2012
1 900^000 " ™ ~
; 800,000
| 700,000
I 600,000
w 500,000
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November December JanuaruNSW . iQLD ISA
mary February'VIC M W A
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Note: The above graph is based on ABS and WEA data and is indicative only
Figure 3 shows State and National cumulative total (bulk and non-bulk) wheat exports for theperiod 1 October 2011 to 31 March 2012. This graph is based on ABS data and shows a strongstart to the marketing year for Western Australia and South Australia.
Figure 3: State and National cumulative wheat export totals for the period 1 October 2011 to 31March 2012
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Figure 4 presents the percentage of Australian bulk wheat exports for each State for the period 1October 2011 to 31 March 2012 compared to the 2010/11 marketing year. Western Australia hasincreased its share from 30% in 2010/11 to 37% in 2011/12, while South Australia had the biggestdecline, from 34% in 2010/11 to 25% in 2011/12.
Figure 4: Percentage of total Australian bulk wheat exports by State of origin for the fullmarketing year 2010/11 (left) compared to the period 1 October 2011 to 31 March 2012 (right)
%VA37%
NSW16%
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13% ' SA34%
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Figure 5: State APW wheat prices, CBOT futures prices and AUD/USD exchange rate for theperiod 1 October 2011 to 31 March 2012
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Figure 5 provides comparative State wheat prices and the Chicago Board of Trade futures price aswell as the AUD/USD exchange rate since 1 October 2011. The wheat prices display a downwardtrend. Factors influencing this include:• higher global and local wheat stocks. This has led to an increased stocks to use ratio and
placed downward pressure on wheat prices, with lower price volatility.• improving weather and growing conditions in the northern hemisphere, resulting in an
improved crop forecast and production for the season.
The high Australian dollar has further lowered Australian prices.
The key areas of outstanding industry issues observed by WEA
a. Unequal access to wheat stocks information
Upcountry wheat stocks information is not currently published in sufficient detail nor in aconsistent and timely manner to be useful to industry. Industry requires detailed and timelyinformation to facilitate accurate pricing and competitive tendering for international contracts.
This topic has been discussed in detail in the recent report on 'Operational Issues in Export GrainNetworks' by the Senate Rural and Regional Affairs and Transport References Committee (GrainNetworks Report).
b. Port Access
Port access is an essential service on which exporters are completely dependent to facilitate trade.Any restriction or inability for exporters to secure shipping slots on a fair and equitable basis willdiscourage them from participating in the export market, thereby reducing competition in theindustry.
WEA has observed and been informed by industry of the following:
• The Co-operative Bulk Handling Limited (CBH) shipping slot auction process apparentlybeing manipulated in the 2011/12 season. This resulted in very high, uneconomicalpremiums being paid for access to low demand shipping slots.
» The ACCC requiring Viterra Limited to move to an auction system for allocating shippingslots after its marketing arm and one other exporter dominated the stem during the highvalue January to April 2011 shipping period.
« On 11 April 2012 the ACCC issued an objection notice to Viterra's proposed auctionsystem. This is because of potential problems with the design of the system, which havebecome apparent in recent WA auctions.
As a result of the WEMA, all three Bulk Handling Companies (BHCs) have an ACCC acceptedaccess undertaking in place until 30 September 2014. It should be noted however that after30 September 2012, these voluntary undertakings will not be linked to WEMA accreditation, thusremoving a direct enforcement mechanism. Part IIIA of the Australian Competition andConsumer Act 2010 (CCA) (formerly the Trade Practices Act 1974) does not provide for anyACCC enforcement power in respect of access undertakings. Enforcement action can instead betaken in the Federal Court.
Attachment A provides a breakdown of bulk wheat exports by port and the top three exportersfor each port. This information clearly indicates that for the 2010/11 marketing year, for 13 of the16 port terminals the accredited exporter which is associated with the relevant port terminalservice provider has the largest exports from that port.
Further for the 2011/12 marketing year to 23 April 2012, for 10 of the port terminals theaccredited exporter which is associated with the relevant port terminal service provider has thelargest exports from that port.
WEA also questions whether the voluntary Industry Code of Conduct to be introduced (subject toacceptance by the Minister for Agriculture, Fisheries and Forestry) from 1 October 2014 would besufficient to retain even the limited protection against BHC monopolistic behaviour afforded bythe access undertakings in place until then. In this regard WEA notes the alternative option ofenforceable obligations arising from the relevant port terminal services being designated 'declaredservices' under Part IIIA of the CCA.
c. Management of the supply chain and port capacity information
Based on substantial feedback from exporters, also echoed in submissions to other recentenquiries, WEA is of the view that in order for industry to capture all the benefits of a deregulatedmarket, the supply chain needs to be transparent and equitable to all players in the market. Thisincludes the following:
• uniform and transparent booking of shipping slots; and• the publication of comprehensive port capacity tables.
Inherent information asymmetry exists as the BHCs control information. In the case of PortTerminal Service providers with associated marketing arms, the knowledge of port capacity andactivity as well as up-country wheat stocks information allows BHCs to plan their shipping task.This information is not readily available to the general trade.
Since the inception of its enabling legislation, WEA has encouraged BHCs to publish uniform andtransparent port capacity and shipping slot information tables.
In protecting their regional monopolies and associated competitive advantage, BHCs wereinitially reluctant to provide this uniform information. WEA eventually mandated the nature andformat of required shipping stem information as part of each BHCs (or related entity's) exportaccreditation.
To preserve this level of market information, mechanisms should remain in place to ensure thatBHCs publish on each business day:
• comprehensive port capacity tables; and• uniform and transparent shipping stem information.
The nature and form of this information should be specified in any ACCC accepted accessundertakings and/or any new legislation relating to bulk wheat port access. The informationshould be based on industry information requirements, not suggestions put forward by the BHCsalone.
d. Integrity of Australian grain exports
Varietal integrity is currently a key issue for the Australian wheat industry. It will be noted fromAttachment B, a report on WEA's recent trip to South East Asia, Australia's biggest market forexport wheat, that millers consistently indicated that the preservation of Australian wheatclassification was essential and that the integrity of varietal classification was particularlyimportant. Further, wheat exporting countries with official wheat export standards are preferred
by millers over those without such standards. Australia has no official wheat export standards.WEA understands that both the USA and Canada check for varietal integrity on export, thusensuring consistent performance of the resulting wheat flour.
While there have been some issues with grain quality in South East Asia, these have mostly comefrom the container trade. Some tests currently used, such as falling number, are not as repeatableas would be desirable. However there is no better test available at the moment.
The Canadian Grain Commission website (http://www.grainscanada.gc.ca/cgc-ccg/cgc-ccg-eng.htm) states:
"The Canadian Grain Commission is a federal government agency. It is the regulator ofCanada's grain handling industry. It is the official certifier of Canadian grain. TheCanadian Grain Commission is Canada's scientific research organization on grain quality.
The Canadian Grain Commission certifies the quality, safety and weight of Canadian grainthat is delivered to domestic and export markets. To do this, it:
« Regulates all aspects of grain handling in Canada through grain quality andquantity assurance programs
« Carries out scientific research to understand all aspects of grain quality and grainsafety and to support the grain grading system
The Canadian Grain Commission protects the rights of Canadian grain producers whenthey deliver their grain to licensed grain handling companies and grain dealers.
Through its activities, the Canadian Grain Commission supports a competitive, efficientgrain sector and upholds Canada's international reputation for consistent and reliable grainquality."
Attachment C is an article on the Canadian Grain Commission, from Grainews, an agriculturalnewspaper based in Winnipeg, Canada. It provides an overview of the Commissions functionsand its 100th anniversary.http://agcanada.com/issue/grainews-10/
The US Federal Grain Inspection Service website (http://www.gipsa.usda.gov/fgismain.html)states:
"U.S. grain, rice, and other commodities flow from farm to elevator to destinations aroundthe world. GIPSA's Federal Grain Inspection Service (FGIS) helps move our Nation'sharvest into the marketplace by providing farmers, handlers, processors, exporters, andinternational buyers with sampling, inspection, process verification, weighing and stowageexamination services that accurately and consistently describe the quality and quantity ofthe commodities being bought and sold.
We facilitate the marketing of U.S. grain and related agricultural products by establishingstandards for quality assessments, regulating handling practices, and managing a networkof Federal, State, and private laboratories that provide impartial, user fee funded officialinspection and weighing services."
Attachment D is from the US Federal Grain Inspection Service (FGIS) and summarises thisorganisation's quality assessment, inspection and weighing services, which are aimed atfacilitating the marketing of US grain.http://www.gipsa.usda.gov/fgis.main.html
The United States Department of Agriculture (USD A) also publishes a weekly export sales report.Reporting under the Export Sales Reporting Program is mandatory.
The report is described as follows on the USDA website:
"Weekly export sales reports serve as a timely early warning system on the possibleimpact of agricultural obligations on U.S. supplies and prices. The data can be used, forexample, to assess the level of export demand, to determine where markets exist, and toassess the relative position of different commodities in those markets.
The majority of the principal agricultural exports are monitored on both a daily andweekly basis by the U.S. Department of Agriculture (USDA) through its export salesreporting system. This monitoring system provides a constant stream of up-to-dateinformation on the quantity of U.S. agricultural commodities that are sold abroad."
This and other information is available from:
The U.S Wheat Associates is a partially government funded organisation; its website indicatesthat it assists buyers, influences trade policy and speaks for producers.
One of the services provided by the U.S. Wheat Associates to buyers is a crop quality report.Found at htt|i^ywjwwjjswj]^^
U.S. Wheat Associates describe this report as:"The Wheat You Want
U.S. Wheat Associates (USW) publishes a comprehensive annual Crop Quality Report.During harvest, updates on crop quality by class are posted in Harvest Reports.
The annual Crop Quality Report includes data on all six U.S. wheat classes compiled fromcrop quality surveys conducted during and after harvest. The report provides informationthat can be very helpful to buyers as they specify their needs to get the best value in theirpurchase contracts. USW shares the data with its customers in person or at a series ofannual Crop Quality Seminars around the world from September through December."
e. Upcountry road and rail limitations
The Australasian Railway Association in its recent submission (Attachment E) to the SenateStanding Committee on Rural Affairs and Transport Enquiry into Operational Issues in ExportGrain Networks estimates that Australia's "antiquated" grain handling facilities and "substandard"freight lines are costing farmers $97 a tonne in transport, port storage and handling for shipmentof wheat to export markets. This represents approximately 50 per cent of the final market price ofgrain, compared to the situation in Canada, where these costs are about half as much even thoughdistances are longer.
This topic has been discussed in detail in the Grain Networks Report.
f. Any other related matters.
Since July 2008 WEA has been monitoring compliance of accredited exporters with the newwheat export marketing regulatory requirements. This process has identified to exporters andWEA a number of beneficial outcomes for both the wheat export industry in general andindividual exporters in particular.Bulk exporters have indicated to WEA that:
• the accreditation process has led to enhanced governance and risk management processesfor their businesses
® accreditation from a government agency has proved a useful marketing tool for exportersin their engagement with growers and international customers
• the accreditation process has heightened awareness of the importance of End PointRoyalties in supporting market oriented breeding of wheat varieties
From WEA's perspective, the implementation of the Scheme is assisting the achievement of theobjectives of the Act through the accreditation of multiple exporters now competing for a share ofAustralian bulk wheat exports.
WEA considers that the transition from the previous highly regulated bulk wheat exportarrangement to a more competitive environment has occurred relatively smoothly.
WEA has been rigorous in implementing the provisions of the Scheme to ensure compliance withthe eligibility criteria and that accredited exporters meet the 'fit and proper' test. WEA continuesto monitor accredited exporters within the terms of the Scheme.
Pleasingly, there have been no cases of financial failure of/ by the companies involved or anyknown incidents where accredited exporters have failed to meet their contractual obligations togrowers or buyers.
WEA recognises that the transition to a more deregulated marketing environment has involvedsubstantial structural change, which is impacting on the whole supply chain. This adjustment isexpected to continue as the Australian export wheat industry develops its competitiveness,improves its efficiency and advances the needs of wheat growers and the bulk wheat exportmarketing industry generally, as envisaged by the Act.
If you have any questions regarding this submission, please contact Peter Woods on
Yours sincerely
Peter WoodsChief Executive Officer
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Attachment B
Wheat Exports Australia
South East Asian Trip Report
September 2011
Kim Halbert and Peter Woods
ISSUES THAT AFFECT AUSTRALIA'SWHEAT INDUSTRY
Summary of Observations
• Asian millers want Australian wheat, they know it and they trust it.• Every country has different wheat flour requirements to suit the local products.
Indonesia wants higher protein wheat for their breads, while Vietnam uses lower proteinwheat for its bread and noodles. Different buyers also target different priced wheataccording to the ability of the market to price discriminate.
• The features of Australian wheat that Vietnam mills like are the whiteness, low ashcontent, and the smell. For the Vietnamese the smell of their bread rolls is veryimportant.
• Prior to deregulation AWB provided information to buyers on the quality profile of theAustralian crop. The market now is described as "hectic" with millers having toactively manage both quality and logistics.
• Australian port loading and logistical issues are causing problems for millers.
• Wheat exporting countries with official Wheat Export Standards are preferred overcountries without such standards. Millers were concerned that Australia does not have aGovernment body checking the integrity of Australian wheat.
• The US has a model that is respected by international buyers. The Federal GrainInspection Service checks the quality of all grain as it is being loaded on shipsand there are severe penalties for substandard grain or grain that has varietymisquoted. This is strictly a user pays system.
• Canada DNA tests varieties to make sure there is no misquotation of variety.This is an extremely expensive system and probably a case of going too far.
• Asian millers indicated the need for:
• an Australian crop quality report
• more technical support for millers and end users of Australian wheat
• complete transparency of stocks and classification information
• blending only along varietal grades not across varietal grades.
• The need for interaction (at least annually) between Australian industry and end users toensure a continuous flow of information between customers and sellers.
• Users need to be more specific in their wheat specifications.
Attachment B
Quotes"Everything must be done to protect the integrity of the name APW. Once the brand is damagedit will be gone forever."
"The USA is the greatest free marketer of all yet they still require quality testing of all wheatleaving the US."
"Need to maintain inspection standards, vessel surveys and AQIS inspections, as this is anintegral part of quality profile in Australia."
"U.S wheat would need to be at a $20 discount to APW before I would consider purchasing theU.S wheat."
Prior to deregulation there was very little uncertainty. Now it's hectic - because of shippingbottlenecks in Western Australia, too many variables."
Figure 1: Types of Noodles made by Uni President, Vietnamese bread rolls and flour all madefrom Australian wheat.
Attachment B
Discussion
The millers visited and met by WEA were using between 60 per cent and 100 per cent ofAustralian wheat in their mills. Many of the mills were undergoing expansion of some sort,either by increasing milling capacity two or three fold or constructing new facilities. They likedAustralian wheat for its whiteness, high yield, dryness and low ash content.
In Indonesia, Australian wheat is good for noodles but needs to be mixed with American orCanadian wheat for bread. APW and APH are the main classifications used.
In Vietnam, Australian wheat is used for noodles and bread. Bread in Vietnam is more a Frenchstyle baguette bread.
Logistics
Millers indicated logistical issues in Australia are a major problem. Sailing times of seven to 15days from Australia to Indonesia and southern Vietnam should allow timely delivery of wheat.As many buyers are running just-in-time systems, shipping delays can cause severe problemswith mills running low on stocks. This has been exacerbated with delays caused by issuesrelated to shipping stems.
Millers indicated that there had been delays in excess of 30 days to get vessels loaded inAustralia. This has caused many problems for the mills which at times were in danger ofrunning out of wheat.
One issue raised is to do with laycan times, particularly in Western Australia. They areextremely restrictive running from the 1st to the 15th of the month or from the 16l to the30th.Millers cannot understand why laycans cannot fall within any 14 day period.
Millers are appreciative of the fact that AQIS are strict on the survey of ships. They view this asone of the methods used to maintain the cleanliness and quality of Australian wheat, although itis viewed as a problem that AQIS does not inspect ships at anchor as this would help to reduceloading and queuing problems. The same applies to onboard fumigation, which would saveconsiderable time and money.
There have been situations where ships have arrived within laycan and have either had to waitat anchor or have failed survey, meaning the ship is eventually loaded outside of laycan,incurring significant extra charges.
Mills have a finite amount of storage and with the specification changes (detailed below) theynow find that they have more classifications of wheat to store and are constantly modifying theblending ratios of the wheat to achieve correct flour quality and performance.
Millers indicated consistently that the issues were:• slot availability and its tonnage size
• short lead time
• increased charges, port and BHC
® non transparent charges
These markets are generally price sensitive, timely delivery is increasingly important andmillers are now considering purchasing from those exporters that hold shipping slots.
Attachment B
Specification
Traditional countries (Australia, Argentina, Canada, USA ) with Official Wheat ExportStandards are preferred over non-traditional countries (India, Pakistan, Ukraine etc) withoutofficial Wheat Export Standards.
Specification of Australian wheat varies depending on the exporter. Millers indicated thatexporters could only offer wheat they held in stock as there was no access to stocks and qualityinformation (Australian Crop Quality Report). Millers were concerned that Australia did nothave a government body like US Federal Grain Inspection Service checking the quality ofexported wheat.
Millers would prefer a full quality profile so they know what is on the shipment. At present, it isnot until the wheat arrives at the destination that they know what the actual specifications(protein levels falling number etc) are. There is presently a tendency to provide grain to aminimum classification standard.
As blending normally occurs at port while loading, there is no prior opportunity to test thewheat sample and determine flour and dough performance.
As there is no crop quality report for the whole of Australia nor the current ability to determinegrain quality and performance prior to delivery, millers now sample every hatch and containerupon receival and run a full set of quality tests (test mill and bake) to determine end useproperties. This is a significant cost to the miller.
Figure 2 Grain testing laboratories at Cerestar and Bogassari
V
The tests enable the miller to determine flour performance and thus blending needed to achieveconstant product performance. Millers believe the reason that they need to test to these levelshas been caused by blending. Millers understand that blending occurs to meet a price point andto have grain meet but not exceed the contract specification. The issue is when classificationswith different varietal acceptance are blended. The reason classifications only allow certainvarieties to be received into the classification is that it provides consistency in flour and doughperformance. When other varieties from different classifications are blended with say APW orAPH, the flour and dough performance is affected. Millers are able to be more specific in thecontract specifications but there is no cost effective way of testing for varieties.
Attachment B
Wheat blending is a common practice among the supply chain to achieve the official or contractspecifications. There are concerns that some of the blending of Australian wheat will adverselyaffect flour and dough performance. This is seen to reduce the value of the Australian wheatvariety brand.
APW is very highly regarded in Asia as top quality wheat. The problem is that non APWvarieties are being blended with APW which is downgrading flour and dough performance.Even though the quality specifications are strictly according to the grade standard of thecontract, the performance of the wheat is not up to scratch.
Millers that were purchasing grain based on the Australian classification (APW, ASW andAPH) acknowledged that they probably need to tighten their specifications in the purchasecontracts. This included stating that for APW, only APW approved varieties should be used inany blending.
Millers consistently expressed that preservation of the integrity of all Australian classificationsof wheat was essential. Integrity of varietal classification is critical particularly with regard toAPH and APW, the two flagship Australian classifications in SE Asia.
Some buyers think that there should be a penalty system for incorrect blending.
Variability of quality in containers both within shipments and between shipments is an issue.We were shown test result sheets where the certified falling numbers for the entire shipmentwere 329 however the real average when unloaded was less than 270, with some containersbeing as low as 211 seconds.
While variability in bulk is less of an issue, it was still mentioned by several buyers and millers.
Some mills indicated there was an increase in the amount of foreign material in wheatshipments for example stones from bunkers built at up country silos. While visiting a mill inJakarta we viewed this issue first hand, as is clearly seen in figure 3.
Attachment B
Millers believe quality problems with Australian wheat result largely from seasonal issues andnot a general deterioration in quality as indicated in figure 4.
Information
WEA was surprised by the issues users are having with specifications and timing of delivery ofAustralian wheat and the general absence of support provided by Australian exporters,particularly when compared with the marketing and customer support provided by the U.S.Wheat Associates, the U.S. Grains Council and the Canadian Grain Commission.
The US Wheat Associates has a representative based in Bangkok who provides technical adviceand helps with trouble shooting milling issues. This service is also provided for issues withAustralian wheat. It is obvious that provision of this resource to Asian millers is aimed atassisting the US to increase its market share.
There is a significant need for more information to be easily accessible to buyers of Australianwheat. Millers all indicated a lack of both stocks and technical information from Australia.
Currently the millers would like to have crop quality reports that provide technical informationon wheat flour characteristics by port zone. This information would include:
• what varieties are available at what ports• quantity of wheat» quality specifications• functionality traits of available wheat.
There needs to be interaction of technical experts with customers using flour made fromAustralian wheat. Millers and bakers are crying out for more direct contact with Australianindustry. When news of WEA's visit got around, Austrade were flooded with callers wishing tomeet with us.
Attachment B
The need for training is so great that some mills are now starting to undertake this themselves.Figure 5 shows a group of Vietnamese bakers inspecting bread rolls they made during a trainingsession at Vima flour. Vima flour uses 80% Australian wheat. These rolls were made withASW.
/ •?:There is a need for classifications to have geographic diversity to enable supply in periods ofdrought. APH is a relevant example and it is currently only approved for Northern NSW andSouthern Queensland. In the 2010/11 marketing year there was little supply because of floodingand continued rain during harvest.
24 jrainews.ca APRIL 2, 2012
Attachment C
HUARICIMG A CENTURY OF SERVICE
O n April 1,2012, the CanadianGrain Commission cel-ebrates its 100th anniver-sary, The employees of the
Canadian Grain Commission join withme in thanking the hardworking staff atGrainews for producing this publicationto commemorate a century of service,
'Co survive a century is quite anachievement. But our longevity is notwhat is noteworthy, as you will see asyou read about our past. No, our trueachievernent is our role in the growthof the Canadian grain industry. For100 years, we have collaborated withCanadian grain producers and othermembers of an industry that hasshaped Canada's society, economyand landscape.
The Canada Grain Act, which guidesus in delivering our mandate, waspassed by the Canadian governmentto meet the needs of grain producers,Through the Act, we work to establishand maintain standards of quality forCanada's grain, regulate grain handlingin Canada, and to ensure that Canada'sgrain is a dependable commodity fordomestic and export markets.
Grain producers still have eights thatwere Initially granted to them under theAct in 1912, Producers can dispute thegrade &nd dockage received at a licensedprimary elevator and ask our inspectorsto provide a binding decision. Producersare also guaranteed the right to shiptheir grain using producer cars, in 2011,producers loaded over 12,700 cars with
grain, demonstrating how valuable a rightthis is to them, Finally, producers are stilloffered payment protection for. deliveriesto licensed primary elevators.
While we celebrate our past, we alsolook to the future., We are a vibrantorganization, ready to take on newchallenges. We draw strength from aproud past while we evolve to meetchanging demands,
Along with the dedicated employees:of the Canadian Grain Commission,I look forward to another century ofcollaboration with our stakeholdersto assure to the continued success ofCanada's grain indi^Uv.,
Bluin lChief '• • •i
CGC guarantees Canadiangrain quality worldwideQuality assurance makes Canadian grain superiorBY RON-FRIESEN
T he owner of Singapore'slargest bakery chainsits in a high-rise officeLower gazing out over the
world's busiest ocean port. Anyday now, a ship carrying wheatfrom Canada is scheduled to activeand unload its cargo for milling.
The baker Is already planninghis production and quality-controlprogram for months ahead, basedon grain from halfway around theworld he has never laid eyes on,much less inspected.
Bui. he isn't worried. He knowshe will almost certainly get exactlythe right kind of wheat with theprecise specifications he requested,lie also knows that, if there's aproblem with the bread when itemerges from the oven, Canadianofficials will step In to providetechnical assistance. Canada is oneof the only countries in the worldable to provide wheat sight unseento an overseas buyer with theassurance that it's what he paid lorand will perform the way he wants.That fact is due in large part tothe Canadian Grain Commission,a federal agency responsible forreguialing the country's grainhandiing system.
Mow the CGC provides cus-tomers with what the industrycalls "the best wheat in theworld" is a story spanning 100years this month.
PURPOSE REMAINS
The world was a very differentplace in 1912 when the Board ofGrain Commissioners; the CGC'sforerunner, was formed with amandate to administer the newCanada Grain Act and enforce reg-ulations for grain inspection,
But then, as now, the pur-pose was the same. 'Hie Board ofCommissioners would see thatfarmers would be guaranteed fairtreatment for the grain they deliv-ered. They would receive the cor-rect grade with the correct bushelweight. If there was any disagree-ment, the CGC could investigateand, if warranted, uphold the. farm-er's complaint.
" T h e C a n a d i a n G r a i nCommission is an unbiased thirdparty that ensures that all play-ers who have a stake in the grainare treated fairly. That balance
would not exist if (here were noGrain Commission/11 says HI winHermanson, chief commissioner ofthe Canadian Grain Commission.
"You have a disciplined systemfor putting grain into the marketand you don't have to deal as oftenwith bad outcomes,"
Implicitly, that means end-usecustomers are treated fairly, too.A regulated, co-ordinated systeminvolving farmers, the CGC, grainhandlers and marketers ensures it,farmers produce the grain, grainhandlers market the grain andestablish the price; the CGC certi-fies grades and quality and pro-vides technical expertise and sup-port to overseas customers.
"A customer in tiie U.K., forexample, can have confidencethat when he buys No. 1 CanadianWestern Red Spring wheat with13 per cent protein, when it isshipped, that the Canadian GrainCommission will certify thateverything loaded on this boatconstitutes No. 1 CWRS 13,0,"explains Hermanson,
Satisfying customers at the endof the supply chain may not havebeen uppermost in the minds ofthe Board of Grain Commissionerswhen they first set about theirwork a century ago. Protectingfarmers from unfair treatment byrailways, grain dealers and mill-ing companies by enforcing regula-tions was the main emphasis (seerelated story).
But as Canada's grain exportsexpanded, especially alter WorldWar II, customers began to demandthat, if they were buying wheatfrom so far away, it had better bewhat they ordered.
Of course, European millers buy-ing wheat from Western Canadacould (and did) come over toobserve the harvest. But they stillneeded to know for certain thatwhat was in those vessels leavingMontreal was what they had pur-chased.
QUALITY GUARANTEE
Thus was born the "certificatefinal" — a document signed by theCGC's chief grain inspector certify-ing that the vessel was loaded withgrain equal to the customer's order.It is, in effect, a guarantee by theGovernment of Canada that whatyou buy is what you get.
Guaranteeing a specific qual-
Eity for each load is a remark-able achievement, considering thegrain is grown over a vast areaunder varying conditions that canrange from flooding in one part ofthe Prairies to drought in anotherand delivered to over 300 coun-try elevators owned by competinggrain companies.
That's because the sysum woiksco-operatively to produce theright product: Any grain evportedthrough a terminal elevatoi inCanada must be inspected by theCGC as it goes into the terminaland as it's loaded on to the vessel,
To ensure the grain going intothe cargo hold is what the customerrequested, samples are taken con-tinuously during loading, A qual-ity check occurs for every 2,000tonnes, so a load to fill a 20,000-tonne vessel would be tested 10times as the grain goes in,
What if, for example, nine sam-ples are of the right stuff but. one isnot? The certificate final will say so.
"We cannot order the vesselunloaded/' says Daryl Bcswitherick,the CGC's program manager forquality assurance standards. "Butwhat we will tell the grain com-pany is that 2,000 tonnes that wenton did not meet specifications. Ifthey remove it, and continue toload grain that meets the qualitythat was sold, we will certify thewhole lot as making spec. If theychoose not to remove it, we willcertify that 2,000 tonnes did notmeet specification,
"The vessel would be able losail. But what, the customer wouldknow when they receive their cer-tificate final is that there are twodifferent qualities within the holdof that, vessel.
"if you're loading wheat or barkyor peas, the procedure is the same."
How often is a vessel loaded withthe wrong grain? "It's fairly rarethat instances like this occur," saysBcswitherick.
If it does happen, it's up to theshipper and the customer to cometo an agreement prior to the vesselleaving the port. Sending it backisn't practical because the cost foroffloading the vessel would beprohibitive. The cost of having anunsold cargo afloat is not practicaleither. The customer Is not left highand dry. 'Hie checks and balances ofthe Canadian grain system extendall the way from the Prairie grainfields to the end user's bakery.
A prize-winning Board of Grain Commissioners display in Italy in 1932.
COMPLAINTS INVESTIGATED
1 f, fo r e x a m pie, a c u s to m e rfeels the protein strength of thewheat in his shipment is not.as expected, he lodges what'scalled a cargo complaint, TheCGC retains a sample from eachshipment, for six months, It willtake part of the sample in ques-tion and test it in the CGC'sGrain Research Laboratory inWinnipeg to determine if thegrading was correct. The. com-mission can also mill and bakethat sample in its lab to sec ifthere really is a protein problem,as the customer alleges.
If the sample performs as expectedin the lab, the problem may be atthe customer's end. Perhaps there'ssomething wrong with his flourmil] or the baking process,
But if a cargo complaint turns out.to be justified, the system works totry and correct it.
[t may be that the grade and con-tent of the shipment are right but,for some reason, the protein isn'tperforming as it should. Perhapsthe reason h an agronomic one,because soil and weather condi-tions under which wheat is growncan affect protein functionality.
In that case, the CGC may go overand help the customer work withthe grain to produce the desiredquality in the final product.
As a result, if an Indonesianbuyer blends No, 2 CWRS 13.0with Australian soft white wheatand Turkish flour to producesteamed buns or noodles, he canrely on the wheat from Canadaeven though he's using otherproducts In the mix,
"So that buyer in Indonesia cansay. 'When I buy this, I know I'mgoing to be able to use il in sucha manner in my plant to upgradethe other ingredients I'm buying'/'Hermanson says.
The above process — inspecting,
grading, certifying and providingcustomer support • holds truefor any of the 21 official grainslisted by the Canada Grain Act,whether cereals, oilseeds, pulses,mixed grains or other crops.
FARMER INPUT
It's important to note that farm-ers, who grow those crops in thefirst place, are directly Involved inhelping to shape Canada's graingrading system.
Every spring and fall, theWestern Standards Committee, a26-mernber industry committee,which includes 12 grain produc-ers as well as processors andexporters, meets to discuss grad-ing issues and make recommen-dations to the Commission aboutgrain grades and standards.
According to a recent CGC state-ment, the committee works to"make sure changes to the grad-ing system reflect the interestsand concerns of ail stakeholdersin Canada's grain sector, includingproducers,"
The committee "constantlyreview(s) Canada's grading sys-tem so that it continues to berelevant to the grain sector andto buyers of Canada's grain," saysthe statement.
The committee employs sub-committees to collect information,about grading issues for specificcrops. There arc four subcommit-tees for wheat, barley and othercereals, oilseeds and pulses.
Chuck Fossay, who farms atStarbuck, Manitoba, sits on thewheat subcommittee. He says thegroup looks at. all grading factorsto distinguish one class of wheatfrom another. Those can includebushel weight, protein levels,allowable levels for fusarium headblight, or dockage.
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Attachment C
2 6 / grainews.ca APRIL 2, 2012
Fair treatment for Western farmersbegan 100 years agoFederal agency brought peace to the Prairie grain warBY RON FRIESEN
I I was more than & century agobut bitter conflict betweenfanners and t.he early west-ern Canadian grain indus-
try still resonates in the child-hood memories of old-timers likeHarvey English.
"It was highway robbery. That'swhat it was in those days," saysEnglish, 94. "They were just steal-ing everything off the tanner thatthey could possibly steal,"
English, whose uncle home-steaded the family farm nearRivers, Manitoba, remembers hisfather once talking about a pro-ducer who delivered a load ofwheat to the local elevator andreceived 88 cents s bushel. A weeklater, English's dad took wheat tothe same elevator and learned theprice was now 44 cents a bushel,
Like other grain growers, he felt atthe mevcy of grain companies andtheir f.ake~it-or-!eave it attitude.
"Nobody seemed to have anybackbone to get out and do some-thing for the farmers at that particu-lar time," says English, who farmeduntil 90 and was still out on thecombine last fall, "ft was terrible."
Western Canadian farmers, whoeither applaud or chafe at govern-ment regulations in today's grain
sector, can little appreciate whattheir ancestors experienced inthe early days of settlement. Thegrain trade, if not exactly WildWest, wasn't far removed. Buying,grading and inspecting grain werelargely unregulated, farmers feltexploited and emotions often ranat a boiling point.
The mood among Westerngrain farmers at the close of the19th Century was one of "out-rage, indignation and frustra-tion," according to Jim Blanchard,a University of Manitoba librarianand local historian.
"There was no doubt in theirminds that the CPR, the grain deal-ers and the milling companies wereformed into a monopoly designedto cheat them/ ' wrote Blanchardin his 1987 book The History of theCanadiait Grain Commission.
"There can be no doubt thatthere were abuses in WesternCanada -— Shis was inevitable ina situation where the railroad aridthe grain trade held all the cardsand the farmer held none."
The tumultuous days of the early20th century gave rise to the farmmovement arid the formation ofproducer organizations with polit-ical clout. But what really madethe difference was the eventualresponse by the federal govern-
ment to demands by Westernfarmers for fair treatment.
"MAGNA CARTA"
That response culminated exactly100 years ago with the passage onApril I, 1912 of the Canada GrainAct — sometimes called the MagnaCarta of the Western grain grower• and the creation of what is nowthe Canadian Grain Commission, afederal agency, to administer it.
It was a watershed in the historyof agriculture in Western Canada.In the words of former CGC chiefcommissioner G,G, Leith: "liien, asnow, the Commission's purpose wasto protect farmers' interests and,through the Canada Grain Ad, toprovide a legislative framework for afast-growing grain industry."
Of course, grievances betweenPrairie farmers and the grainindustry are as old as agriculture inthe West, But it's hard to overstatethe anger producers felt in thosedays at what they saw as unequaltreatment by grain companies andthe railways, if was, as Blanchardputs it, "a state of undeclared warbetween the two factions involvedin the grain industry/'
Complaints were niany butthey generally centred aroundfour main ones: prices, dockage,
weights and the ability of produc-ers to ship their own rail cars.
There were actually three prices:the "street price" (offered by the ele-vator on delivery), the "track price"(received after loading a rail car andthen selling it), and the "spot price"(the one at the terminal where grainwas sold on the world market),
What angered farmers most,according to former University ofManitoba history professor GeraldFriesen in his book The CanaditviPrairies: A History, was the spreadin prices between street and trackprices, probably three to fourcents a bushel. Farmers were usu-ally forced to accept street pricesbecause, as Friesen says, "theycould not fill a boxcar withina particular variety and grade ofgrain within the limited time per-mitted by the rail companies."
EXCESSIVE DOCKAGE
Tliere were other legitimategrievances, as a Royal Commissionappointed in 1899 to investigatethe industry discovered.
'Hie Commission found that "avendor of grain is at present sub-jected to an unfair and excessivedockage for his grain at the timeof sale." It also determined that"doubts exist as to the fairness of
t.he weights allowed or used bythe owners of elevators," Finally,it said elevator companies enjoyedan unfair monopoly "by refusingto permit the erection of flat, ware-houses where standard elevators aresituated" and thus being able "tokeep ihe price of grain below Us truemarket value to their own benefit."
The only solution was legis-lation to regulate the industry,"(here being no rules laid downfor the regulations of the graintrade other than those made bythe railway companies and the ele-vator owners," the commission'sreport concluded.
The result was a federal stat-ute in 1900 titled the ManitobaGrain Act.
The act was well intentionedand pushed all the right buttons,it created the post of WarehouseC o m m i s s i o n e r to a d m i n i s t e rthe statute. It established rulesfor handling grain, it set stand-ards for weights and measures, itrequired grain-handing facilitiesto be licensed, And it enshrined inlaw a grain producer's right to loadand ship his own rail car.
The problem, as farmers learned,was in getting the cars they werelegally entitled to. H soon became
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» CONTINUED FROIVt PAGE 24
LEVEL PLAYING FIELD
By setting such standards, theCGC creates a level playing field forfarmers when marketing their grainto different, buyers, Fossay says.
Say, for example, the minimum
weight for No. 1 CWRS is 60pounds per bushel. A buyer look-in? fui a heaviu u t igh t mightdt mand 6S pounds pi i bushelIn that case, the producer couldsay ' snrn the c GC s<i\ s theminimum wtight toi thai s^uidcis hO pounds ind it \ou w wtmoK \ou II l i iut to pa\ a pu
WIiDER¥EEi OOMMODIWSEftYIGE LTD.
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Licensed & Bonded Grain Buyers• Heated • Flax
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rnium." And the CGC will backup the farmer,
So vou'ic not dealing with fourdtifwuit buyeis who have rout diffuuit slanddids ioi tht gram vou'icshov\inj t han vivs lossa\ \ouma> be dialing with loui dilftitnibintis but t h a i s OIK standaid sitb\ a thud put>
t)i iding and inspection IK nnl\one pait oi tin. pu//U (oi tnsunngqiam qualiU Anoliu i importantpiut. is tht \aiKt) rcgrsluhoii svsti m ni which tin (Gl plays V|unl ia l iok
lh( Canadian Food InspectionAgcmy administers the varietyiLgistiation system, and the CGCIs Kspomibfe for evaluating new\ am lies tiom a quality perspec-tive coming foiward out of co-optrials for registration. Once a year,In Saskatoon, Ban!'!' or Winnipeg,the Prairie Grain DevelopmentCommittee (PGDC) meets to receivedata from the Grain Commissionon those varieties and assesswhether they are good enough tobe registered, based on quality fac-tors, Other committee memberswill study other factors such asdisease and insect, resistance andagronomics. (The committee alsomeets in Eastern Canada, with theCGC playing the same role.)
With spring wheat, for exam-ple, the quality of a variety hasr.o meet a certain end-use speci-fication. Therefore, as producersmake their seeding choices, theyknow that each variety has cer-tain attributes from a quality, dis-ease and insect resistance, andagronomic perspective, For theirpart, buyers can expect that a newvariety within that class will per-form in a certain manner.
Bcswitherick says the system hasvery rigid requirements. If a varietyis to bo registered, it has to be equalto or better than a certain standardset by the PGDC,
•V
Grain Commission reinspection staff provide independent, third-partyanalysis of grain grades and quality,
"So a customer who buys reg-istered varieties in a CWRS classknows that, if there are new varie-ties in there, they're supposed tobe at least equal to what he's usedto getting, or better than he usedto get."
Although the registration proc-ess is the same for all crops, qualityparameters can vary. Beswethericknotes, that, criteria for canola, forexample, are not a.s stringent as forsome of the wheat classes.
CHANGE CONTINUES
Right now, ail this is happeningagainst Ihe backdrop of one of themost significant developments inthe recent history of the Canadiangrain industry: the impendingremoval oi the Canadian WheatBoard's single sales desk for wheatand barley.
How a post-monopoly envi-ronment will affect the CanadianGrain Commission is uncertain.
Some believe business will con-tinue more or less as usual, onlywithout a CWB monopoly. Others
have serious doubts because theCWB and the Commission areclosely linked.
In the meantime, the CGC itselfis under the microscope, Suggestedchanges to the Canada GrainAct would eliminate mandatoryrequirements for inward inspectionand weighing at licensed termi-nals and transfer elevators. Grainhandlers themselves would reportinward grain grades and weights.
Some worry the changes, if imple-mented, would limit the CGC'srole as an independent arbiter andcompromise assurance of fair pay-ment to fanners — the very reasonihe Commission was formed in thefirst place.
"Regardless of changes proposed,we remain committed to the CanadaGrain Act," explains Hermanson."That means thai, through grainquality and quantity assurance aswell as grain safety assurance, wewill continue to ensure a depend-able commodity both domesticallyand internationally, for the benefitof producers and the grain industryas a whole."
Attachment C
APRIL 2, 2012 grainews.ca / 2 7
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evident the i.ulways' practic wasto allocate tass to giaui compa-nies before granting them to indi-vidual farmers.
LANDMARK CASE
It wasn't until 1902 that a land-mark court case upheld the rightof farmers to access producer cars.Brought by the newly formedTerritorial Grain Growers, it accusedthe station agent at Sintaluta,Saskatchewan of not complyingwith the law by giving cars out ofturn to elevators. The court ruled infavour of the farmers,
'Ihe railways may have had tosupply producer cars but theydidn't have to like it, Glen Franklin,who fa cms at Delorainc, Manitoba,says his grandfather once shippeda producer car around 191 i whichmysteriously disappeared from lh<system. Tracked down alki morethan a year, the car was finallyunloaded, l-'ranklin'x giandfathetgot paid, but he never did receivean explanation.
Did the car vanish on purpose?"it was certainly a possibility, Isuppose," Franklin says,
Part of the problem with con-tinuing inequities iay with theManitoba Grain Ad itself. !;orone thing, it applied only to "theInspection District of Manitoba,"since Saskatchewan and Albertawere not yet. part of Confederation.By the time those jurisdictionsachieved full provincial status In1905, they were producing morewheat than all of Manitoba, thoughtechnically not under the statute,
But <s greater problem was thaithe railways and grain companies,the Slntaiuta case notwithstand-ing, paid little attention to theAct, says James Zastre, a CanadianGrain Commission communityrelations officer.
"There were these rights thatwere given to producers underthe Manitoba Grain Act butmost, felt that the grain compa-nies and railways ignored them.Many producers felt they had novoice, they had no organizationat I.he time and mosf. of themprobably didn't even know theywere being denied any rights,"Zastre says.
It was a critical period in the his-tory of Western Canada. Althoughthe Liberal government of WilfredLaurier had a strong interest insettling the West, large chunks ofit were still virgin territory. Manyimmigrants, lured by the promiseof cheap land, came from politicallyoppressed countries and harboureda deep suspicion of elevator com-panies telling them the grade oftheir grain. How could you encour-age people to come to Canada andhomestead in a remote corner ofSaskatchewan if you couldn't guar-antee them fair treatment for thecrops they grew?
THE CANADA GRAIN ACT
Worse still, there appeared to beno avenue for complaint. You tooka wagonload of grain to an eleva-tor and Immediately felt at theagent's mercy. If you didn't like hisdecision, you could take the grainback home. You didn't know whatyour rights were because nobodyhad loid you. Communicationwas sometimes difficult because ofcultural differences and a languagebarrier. The very sociology ot thePrairies in those days cried out for3 solution.
That so!u 11 on came in theform of the Canada Grain Act of1912. It built on its predecessor,
An early scere at vVoht-le-y, Saskatchewan. Farmers in the early deys of grain production believed they were at the mercy of elevator agents forgrade ar?d price,
the Manitoba Grain Act, onlywith teeth.
Zastre says the pre-1912 approachto solving problems was piece-meal — single-Issue approaches forresolving multi-faceted grievances.Different authorities had differentresponsibilities. There was no sin-gle message to give to producerswho felt they were being wronged.
The Canada Grain Act changedthat. All matters regarding grainindustry regulation were com-bined under one umbrella.
Now you had a package dealsimultaneously looking after a lotof things related io the industry,You also had a federal governmenttelling farmers they had a right tofair treatment under the law. Andii sou Uil \oi still Aer ni buns,trt ittd faidv in mdepodtnt tnHaul served n tn irbitcr
In short tin C in uh ( nm Actsciud two piuposes /astro says.It pio\id(d solutions to problems\nd it kt people know, throughtheir farm organizations oi otlurwise, lhat they had rights b u h dby the law of the land.
"It was an avenue of communication," says Zastre, "I don t si)the Commission was out their,spreading the word. But. Ihuc wisomebody that people knew the)could talk to,"
Adds Doug Langrcll, C G( IOIporate development ad\isoi I hecommission, as a federal organi/ation founded by an act of Padnmuitgave a kind of sanction to the rightsof farmers In a way that UGG oi anvof the Pools could not,"
Indirectly, this helped imniigrition because it drew on the roleof government that appokd {(people coming to Canadi in thefirst place, says Zastre. It cniblcdgovernment to say, here arc rightsyou didn't have back home Gmncompanies had less leeway in rn iking decisions because now therewas oversight.
PRODUCER CAR PROTECTION
Producer cars were one example,Episodes such as the railway losingfranklin's grandfather's producercar were not. uncommon. But theBoard of Commissioners, as theCGC was originally called, put astop to that, says Zastre.
The Commission ensured thatcars were properly numbered andrecorded by an independent body,ff producer cars were not distrib-uted the way they were supposedto be, someone was watching andsomething would happen.
Another change occurred whenthe government began buildinginland grain terminals. Facilities atMoose Jaw, Saskatoon and Calgarywere constructed soon after 1912.Suddenly, there was less shippingpressure after the harvest seasonbecause more grain could be storedon the Prairies. There was lessurgency for farmers to sell theirgrain Immediately for fear priceswould be lower if they waited,
Mow did grain companies andother major players accept all thisregulation?
Zastre says the industry struggledagainst some provisions, especiallythose in the Manitoba Grain Act.But the 1912 legislation brought akind of peace to the sector, It wasno longt r in unregulated marketin which anything went. That was >A blessing for farmers.
But in a strange sort of way,it was a double-edged swordalso benefiting grain companiesbecause it helped case the cut-throat environment which pre-vailed before, says Langretl.
"Companies were not alwaysin fair competition for farmers'grain," he says, "While they cer-tainly wanted to get the grainfor the best price from farmers sothey could pass it on for the bestmargin or pro tit, they couldn'trisk significantly undercutting thecompetition,"
Having standardized proceduresalso helped. Sampling was a goodexample, hi the old days., a compa-ny couki take a pail of grain fromthe back of a farmer's wagon andthai was the sample, like ii or not.Now the commission set a proce-dure for sampling grain. You took
a probe into a boxcar or truck andextracted samples at five points —one in the middle and four fromeach of the corners, two feet in.
That was an advantage to boththe farmer and the company, saysZastre, The1 farmer knew his grainwould be sampled consistentlyin a certain way, It was also anadvantage to companies because Itmeant there was one less thing toargue about and they could get onwith Ihe business of buying andselling grain.
"It helped pour oil on thewaters/' Zastre says, "There wasless disruption. Producers could besure they were getting a fair deal,\i they felt they weren't, they hadsome avenues for appeal. And thegrain companies knew the otherguy had to do the same as theywere doing/'
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Attachment C2 8 / grainews.ca APRIL 2, 2012
Quality assurance through world-classresearch stands the test of timeThe Canadian Grain Commission's Grain Research Laboratory has been assessingand improving the quality of Canadian crops for more than nine decadesBY VAL OMIPJSKI
T he bright blue paint on theAllis Chalmers roil standslooks conspicuously out ofplace among the gleam-
ing modern metal in the pilot-scaleflour mill on the 16th floor of theCGC Grain Research Lab,
Miller Dave Tit mock thinks theyarc about BO years old and havealso seen duty at the lab's formerlocation in the Grain ExchangeBuilding. They may even havebeen housed in the very first GrainResearch Lab, located in a postalstation on Main Street and MagnusAvenue in Winnipeg's North End.
The CGC Grain Research Labis that kind of place — wherenew research and technologies aie
building upon past efforts in orderto provide quality assurance forCanada's evolving grain industry.
THE GRL'S EARLY DAYS
When the Board of GrainCommissioners (now the CGC)wa.s formally established in 1912,a becfed-up inspection and grad-ing system was introduced. Theboard-wanted a research lab tooversee moisture testing, to testwheat quality through milling andbread baking activities, and to lestflax for oii content
By June 1914, the Grain ResearchLab was up and running with astai'f of five.
I | Birchard, the first director(chief chemist), w n a uus t \ and
A.E, Birchard, the Board of Grain Commissioners first chief chemistpushed for a scientific method of evaluating grain quality.
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determined individual who beganby setting acceptable levels formoisture in grain, thus helpingproducers get more reasonableprices for damp grain,
He also expressed concerns aboutthe grading system, and questionedwhether grade prices actuallyreflected the value of the grain.
'ITiis was good news for farmers —taut not so for the rest of the indus-try, Birchard's research was caughtup in ongoing disputes between thegrain trade and producers, with theresult thai (he federal governmentshut the GRL down in 1923.
A stubborn Birchard continuedte) work in the empty lab, until-— as a result of lobbying fromfarmer groups and members otPaihament -- (he GRI leopem-dIt coincided closely with the moveto the Gram Exchange Builelmg inMay ul lc>27, where the lab |oinedthe ( GC's Winnipeg otfucs
Once back in business, Biuhaidundertook a number of programsthat would help c stablish the qual-ilv of Canadian wheat and definethe GRI
• CKtenshe ptotein testing ofred spnng wheat, beginningin 192/
• quality testing of samplesfrom all grains and oilseedsmoving to market;
• monitoring of moisture, testsdone by inspectors
• limited quality testing ofnew varietn s
• participation in onain-di>ingi ese ai ch w 1 th ihre e Pi as i kuniversities
Biahaid also began sendin? thelesulls ot the GKIN quality listingpiogiam to Canadian anel loieignmillers, and pushed ioi enhanceduse o! these publications in a vanelyot ianguagi s t his maskt ting tool isstiii a cornerstone, ot the C Gt qualit\ JSSUKUH-C program tnda;
Birehaid s h m i eontutnitionwas a tup in 19 52 to It ih in oide itu Ucmonstute the lab's cjualit)assurance work, promote the useof ( anadian wheat and gathermaiket inte'iligenee
As the 1930s unfolded, theGRL continued to gain promi-m m e undc i the leadership olits new dUeetoi, W I Ceddesit acquired the Durum Researchlab and its durum milling andpasta testing equipment tiomthe University of Manitoba —including <i spec t mphotom etc ifoi studying pasta colout
11 began woik, in eon| unctionwith the Associate ( ummlUee onGram Reseasch, to lest piomismgnew vanities ot wheat und bailey!t also began working with othelnational intl uiti imtional oigaiwalions to icseauh niit resistance mdte it new <. aiudian rust lesislanuvarieties atnemq olhu pioje'Us
I he tJRI playi d an important10k in ndping tu (stablrsh tinnew wheat winety ihatehei m tinin irkttplaee
THE WAR YEARS AND BEYOND
During World War II the labcontinued its protein sur\e\ moislure measurement and qualit) lesting functions, although due to hmited resources and staff, little newresearch could be undertaken,
!t was, however, able to studythe effects of long-term storageon grain sitting in terminals stfidbins due1 to a lack of customers.An entomologist was added to theteam, insecticides were used, andfor the first time, the GRL begantesting for chemical residues,
In 1942, the GRL acquiredthe Malting Barley Lab from theNational Research Council,
After the war, with J. A, Andersonat the helm, staffing was broughtback to its full contingent andresearch flourished once again.Work was done on dough quali-ties, reactions that cause durumcolour to fade during processing,and compounds that increase theviscosity of barley.
Work continued also on grain-drying research, and in 1951,when the harvest was wet andlarge numbers of farmers driedtheir grain for the first time, theGRL tested all farm-dried grainfor milling and baking qualities, Italso provided a free sample-testingservice that helped farmers adjusttheir grain dryers,
in 1954, Anderson spelled outthe five priorities for the lab as itmoved into the second half of the20th Century;
• assessing the quality of eachnew crop and informingdomestic/foreign customers;
• recording the quality of allgrades of grain at port provid-ing lab services to the inspec-tion branch;
• i ollaborating with plantbreeders in the developmentand testing of new grain vari-eties;
• serving as the main centre forK'search into the quality ofcereal grains,
He noted that research was mostimportant, because "the improve-ment of all other services dependsupon progress in research,"
loUay, almost 60 years later,
those priorities still continue todefine the Grain Research Lab,
Another major contribution ofAnderson's was his yearly overseastravel with the Canadian WheatBoard to promote Canadian grainsand oilseeds, both to existing cus-tomers and to potential ones suchas China.
G. N. Irvine, who would even-tually succeed Anderson, workedwith the CWB to train the graintechnical officers in the CanadianWheat Board's newly created tech-nical services and marketing depart-ment. When he became director in1963, he increased the amount oftime he and other staff members•-••- spent overseas providing techni-cal support to the CWB,
As well, to further bolster mar-ket development, Irvine estab-lished a technical services sectionwithin the GRL to study problemsor potential problems in millingand baking of Canadian wheat inforeign countries,
As the 60s moved toward the70s, the GRL's work in the testingof new varieties, an essential stepprior to licensing, gained interna-tional respect — so much so thatit collaborated with the U.S. CropQuality Council to test the qualityof American varieties.
A NEW ERA
A move in 1973, along withthe rest of the GCG head office,into a modern building near thefamed corner of Portage and Mainheralded a new era of research,technology, achievements, andexpansions for the GRL.
Keith Tipples, who became direc-tor in 1979, was a vital part of theseexciting times. His work included apioneering study of wheat proteinstrength, which enabled the lab todo more meaningful evaluations of
» CONTINUED ON NEXT PAGE
Aliis Chalmers roll stands in the CGC lab have been in use for atleast 80 years,
Attachment C
APRIL 2, 2012 grainews.ca / 2 9
» CONTINUED FROM PREVIOUS PAGE
bread-baking qualities and poten-tial new varieties.
Tippies also showed how thelevel of alpha-amylase enzymefound in wheaf can affect quality-— depending on the end productsand specific baking methods used.Some markets such as japan requiresound top-grade wheat with a verylow enzyme activity, whereas forother; markets such as China, themocierate enzyme activity of No,3 CWRS v\hca( mav hi perfect!;,satistactos\ toi then end uses
In a I* cnt interview, Iippltssaid that this anel oth< r researchmeant r diffaeni appioaeh tolooking at quality tn wheat,
"We developed new areas of exper-tise, which allowed us to developmore sophisticated techniques ofmeasuring quality," he said.
With the overhaul of the grad-ing system in the early 70s, the labworked with inspectors to relateihe physical appearance of wheatto the quality required for its enduse. If a particular type of damagedid not negatively affect end use,there could be more tolerance tothis damage.
"In this way, we maximizedthe amount going into the topgrade, while protecting top qual-ity," he said.
Another important highlight dur-ing this time were the achievementsof the residue analysis section.
"This was a new, state-of-the-artlab that could provide detailedreports of toxic residues in parts perbillion," Tipples said, "it assuredbuyers and users that Canadiangrain was free from unacceptablelevels of heavy metals, pesticidesand mycotoxim."
D u r i n g t h i s e r a , n e wmomentum and equipment wereadded to the GRL's flour mill,so that it could replicate, on apilot scale, mHling techniquesof customer countries. Thise n a b led t h e e v a I u a IS o n o fCanadian wheat in foreign pasU,noodle and bread making.
Also during the '/Os, a newoilseeds section •••-••• which had beencreated in response to (he growthin rapeseed production — hadalmost immediate success when
it developed A i&pk! procedurelor estimating erueic acid. Thisallowed for segregation of new,low crude acid varieties.
Shortly after, Jim Daun, whoworked in rapeseed and canolaresearch at the GRL for 31 years,established .specifications for glu-cosinolates and erueic acid there-by helping to create the officialdefinition of canola. I le also devel-oped a method of gluccninolat.pmeasurement; he was recently rec-ognizeel by \hv Canoia Council ofCinadt to! Sm <v 4
are doing extensive work in ONAidentification, and have become aworld leader in this aiea "
in 2009, the GUI used its DNAe> pir+i^e to mitigate a c 11sis inthe C median flax industry Thetiiminalict GMO vanity iilflldhad s imcnow made i!s way intoi itiop' an ^hif meats and the torn*modit w^quicklv shutout of ihe! ! J mnkc pi, c
' We worh o v ith mdmti / 'o< e i.n) , f u f t -1 h r h N ' t' tint, if i n't tter ' f w < i-1- KidI irncH ' i h I u.if r i <\> tt< ii to
During the Second World War, the labcontinued its protein survey, moisturemeasurement and quality testing functions,although due to limited resources and staff,little new research could be undertaken.
The development of near-infraredtechnology for reliable rapid pro-tein analysis in wheat was anotherworld first, said Tipples. Protein seg-regation had been introduced alongwith the new grading system, andthis technology revolutionized theprocess. (See related article.)
When Tipples retired in 1998,Bill Scowcroft led the GRL into the21st Century.
THE GRL TODAY
Blue Altis-Chalmers stands aside,if Birchard and some of his imme-diate successors were to visit theGrain Research Lab today, most of itwould be unrecognizable to them.
For example, wheat and barleyvariety identification Is no longerdone on a visual basis. Both DNAidentification and polyacrylamidegel electrophoresis, a technologythat uses electric currents to createprotein profiles for comparisonpurposes, are being used to moni-tor varieties as they move throughthe system, said Peter Burnett, cur-rent GRL director.
At port, it means variety segre-gation can take place, and cargoescan be certified for classes of wheatand varieties of barley,
"We developed the technologyto do this," Burnett said. "We
Canadian flax, and we can assurethat all flax going to Europe isGMO free."
Another industry-responsedevelopment at the GRL Is a tiewpulse section, created as a result ofthe recent increase in pulse acre-age, Burnett rioted. One aspect ofits research, the measurement andcomparison of the cooking qual-ity of peas from different samples,has led to the invention of theMattson cooker, which can cookindividual kernels.
This invention is now beingused by research labs aroundthe world,
Also in pulse research, imageanalysis is being investigated asa way to provide accurate pho-tographs as reference for lentilgrading. It is anticipated that thistechnology will address the prob-lem of colour fading that occursover time in actual samples.
Image analysis is also being usedto count the undesirable colourspecks in noodles and pasta.
Grain-safety testing and moni-toring at the GRL is more impor-tant that ever as a result of chang-ing world standards, but now inaddition to pesticide, mycotoxinand heavy metal testing, the GRLregularly tests for fallout fromnuclear accidents — something
Carlot inspections taking place at the CGC's original inspection room atthe Winnipeg Grain Exchange building.
that would have had early GRLresearchers scratching their headsin puzzlement.
Another recent GRL achieve-ment, said Burnett, has been itswork with breeders to develop lowcadmium-accumulating varieties ofdurum wheat in order to meet inter-national food safety standards.
Differentiating protein in wheatis now routine work, as a result ofthe 20 near infrared machines inuse at the GRL. In addition, thistechnology Is now being used todifferentiate chlorophyll in canolato protect oil quality.
In the area of barley research,Maria Izydorczyk and her teamare using a rapid visco analyzer topredict how long malting barleywill retain its ability to germinate.
'['his in turn predicts how quicklyit must be used after harvest andhow long it can be stored.
These wide-ranging researchactivities all contribute to the GRt/smandate, as set out In 1954, of sur-veying the annual harvest for qual-ity, monitoring export shipments,and assisting in variety evaluation.
While so much has changedin ihe way this is done, the basicpremise of providing qualityassurance has remained the same.Like the blue roll stands, theGrain Research Lab has servedthe CGC and the Canadian grainindustry solidly and consistentlyover the years, helping toenhance and maintain Canada'sreputation in the internationalgrain marketplace.
Nancy Edwards: keen for thechallenges of wheat researchHer career path has focused on better understandingprocessing qualities in wheat and durum
Aorjj
BY VAL OMINSKI
w hen Nancy Edw-ards, a biologicaltechnology gradfrom Red River
Community College, joined theGrain Research Lab as a techni-cian in 1976, little did she knowthat one day she would be. thescientist responsible for the lab'sbread wheat research group.
Edwards went on to achieveher PhD In 1-ood Science in2002, thanks to the support andencouragement of now-retiredGRL scientist Jim Dexter andother lab colleagues.
She built upon a decades-old tradition that started afterthe Second World War, whenstaff with potential and inloscst wen e.ncouraq<d to iuithu their education ilie ditle tu iu Is that thc> were all
men; Edwards became one ofthe first female scientists atthe GRL — and she did it while;holding down her job.
In 2005, she was promoted toher current position, where sheis responsible, for quality evalu-ation of wheat, as part of the:GRL's annual harvest survey. Inaddition, she monitors CWRScargoes leaving from the Hast,West or Churchill terminals andproduces class profiles for mar-keting support.
Edwards has done ground-breaking work identifying bak-ing and dough-mixing charac-teristics of durum wheat — notfoi ti adit tonal pasta making, b itten bttuid making She looked atdurum lines from 14 differentcnuntins, in oidei to Identitywhich protein1, could make availttv suitable foi hi cad baking quality.
I IK did itAt'H u jld he newmaikrt'- Mi C in dV*. d itumwheat not
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t i n t 1 dv\ irds *• aei h t fcx ivj it, 'In trad b,iki"g i t *LIH C
of CM ' a m \\-cR not \hut It \ t ) i t . t Ci d'ld I iitedtei t )?sk vh\ '
\dxc u!s J<-> "•wsst.s r< \\>n niw h a t lint1- foi qualm thJtaUuKtit> ^ % mtnrjft of the wheat,tiltic rU !IK1 i c q'tiiitv cv*k rtit itu.n that i* i ar! of the 11 meC lain O ' v i c p n v n 1 i OPT mi tt/<She his i cuMh created d newmethod lor pnscntmn dot** thaimikrs hCf lorn* |ohT c iei
Mr i nt xt big preset t"ight n< tbe 11 !•!«. v* n, but it < mid im >Kabs< iuul* an>thing *nat £Lathe pr< a v^ns* quality o* he »t
ihu<- c aiwavs a nev ebal-le t^i in und the corner, vatimt;te be « h e d , ' she says
i
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Attachment C3 0 / grainews.ca APRIL 2, 2012
Breaking into grain inspection wastough, but the rewards were worth itWomen have risen through the ranks In grain-inspection fieldBV VAL OMINSKi
D ebbie Pankcwich hascome a long way sinceshe walked the decksof ships at Thunder
Bay and sampled outgoing graincargoes by hand.
Hired in 1979 by the CanadianGrain Commission to work in theweighing program, by 1982 she wasone of a small group of female "pio-neers" working in the inspectionprogram. Tradition ally, both disci-plines had been a man's domain— and Pankewich knew she was onground-breaking territory.
"The microscope was on youand you had to prove yourself toother staff and to management,"she said. "For me, it was a moti-vating factor."
Over the next 30 years, thatmotivation took her up the cor-porate ladder, first in ThunderBay, then on to Winnipeg whereshe eventually established thenational monitoring programthat reviews the work of graininspectors across the country.
When Pankcwich moved on toMontreal, and then to Vancouveras manager of inspection serv-ices lor the eastern and westernregions respectively, it was fit-ting that her replacement wasalso a woman whose early daysincluded hand-sampling in theinspection program before work-ing her way up. Laurie Campbellwas the first female grain inspec-tor on the Prairies.
"\ was a rarity in what somemight consider a man's world— I was in the last part of anera," Campbell .said, "it was toughwalking into an elevator, but oncethey learned I was a farmer myself,it was much easier."
Initially hired in 1986, by 1998Campbell had become managerof inspection Services for the prai-rie region, and in 2009, whenthe region was amalgamated intowhat is currently the central andwestern regions, she moved intoher present position as manager ofthe national monitoring program.
She is adamant about the impor-tance of inspection and grading,and the way they are done.
"You either have an aptitude forit or you don't," she said. "But youalso have to develop a very uniqueskill set that needs to be constantlyhoned, to be sure you stay sharp.
"You look at a kernel of wheatand you have be able to distinguishbetween degree of damage and thedirect correlation to qualities formilling and baking, Because ofCanada's reputation for producingtop quality, we can export grain tocustomers based on a simple docu-ment attesting to this quality —something that a lot of countriescurrently can't do."
The inspection process startswhen automatic grain-samplingsystems take representative sam-ples from each rail car goinginto a given port. Samples arefirst cleaned to assess dockage,and preliminarily inspected for
Laurie Campbell, the CGC's first female inspector on the Prsiries, was hired in 1986.
moisture and protein. ' Then agrain inspector visually assesand assigns the sample a g•vhich the asis of p.ment to the. producer. Graiexported using a similar proo
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jhave already gained a proven record of successon farms across Manitoba.
and all information is storedelectronically.
Gone are the days of inland(primary) elevator inspectionon grain destined to port —and in the very early days, ofbreaking the seal on rail cars,climbing in overtop the grain,(i n d thrusting a probe d o w nto acquire samples. Gone, too,are the days of hand-samplingaboard ships,
According to Pankewich, notjust the physical work of the job,but also the health and safetyi emulations have evolved. Back inher day, she said, "only ihe titteslwould survive." Many moved on.
She stayed, and today she manages an inspection program with
"The microscope wason you and you hadto prove yourself toother staff andto managementFor me, it was amotivating factor."— Debbie Pankewich
over 175 employees who grade allgrain moving in and out of westtost port facilities, and at servicecentres in Calgary and Saskatoonwhere farmers can bring or sendsamples for personalized gradingat a nominal cost,
Campbell, meanwhile , runsthe lab that checks the work ofthese and all other CGC graininspectors from across Canada,She and her staff select gradedsamples from approximatelythree per cent ot all raikarsthat go into polls, and a largerpercentage from export cargoes,icwewmg the guiding that hasbeen done in older to make cer-
tain current grain standards andguide's have been met.
This process helps ensure thatgrain is consistently graded thesame way, regardless of whereacross Canada it is being done,and also helps identify any train-ing needs that may be required byinspectors, Campbell said.
"The process is not to point fin-gers, but to ensure our inspectorshave the training and skill theyneed in order to provide consistentgrading and analysis," she said.
To maintain consistency Inthe lab, equipment is precision-checked each day before use —including the machine that exact-ingly divides down all compo-nents of samples, the screens usedto separate dockage, the proteintesters and the moisture meters,Precision scales are calibrate everyday, and even the grading lightshave an expiry date because theyaffect how the grain will be seen.
Despite1 her obvious passionfor her job, there is a downside,said Campbell and it's thatshe no longer deals directly withproducers.
"I really miss having that face-to-face contact and assisting themIn understanding the grading sys-tem," she said.
Campbell is still farming herselfnear Teuton, Manitoba, and saidshe is grateful to the CGC forallowing her to work her vacationschedule around her farm work.
Pankewich, too, is appreciativeof ihe opportunities afforded herby the CGC, During her vari-ous capacities, she has travelleddomestically and internationallyto promote the quality assuranceprograms that make Canadiangrains so reputable worldwide,
"The CGC has allowed forgrowth, development and move-ment," she said. "I've loved theopportunities and the challenges
and I've taken them and ranwith them,"
Attachment D
Federal Grain Inspection Service (FGIS)
U.S. grain, rice, and other commodities flow from farm to elevator to destinations around theworld. GIPSA's Federal Grain Inspection Service (FGIS) helps move our Nation's harvest intothe marketplace by providing farmers, handlers, processors, exporters, and international buyerswith sampling, inspection, process verification, weighing and stowage examination servicesthat accurately and consistently describe the quality and quantity of the commodities beingbought and sold.
We facilitate the marketing of U.S. grain and related agricultural products by establishingstandards for quality assessments, regulating handling practices, and managing a network ofFederal, State, and private laboratories that provide impartial, user fee funded officialinspection and weighing services.
FGIS Customers
GIPSA offers a variety of programs and services that help market U.S. grain.
We provide farmers, handlers, processors, exporters, and international buyers with informationand tools that accurately and consistently describe the quality and quantity of the grain andcommodities being bought and sold.
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« Provide traditional and innovative lM£M!klDJM}AMMEhiB&lMli£^ to the traditionalbulk and specialty commodity markets.
» Manage the nationalJn^ectiojnLan^yejghingjyjt^ni, a unique network of Federal,State, and private laboratories that provide impartial, user fee funded official inspectionand weighing services.
» Provide internatjojrtfdjsej^/icjsj^ that keep America's grain flowingto our international customers.
• Protect the integrity of the official inspection system and the market at large to ensuremarkets for grain and related products are fair, transparent, and free from deceptive andfraudulent practices.
You can rely on GIPSA's programs and services. We are committed to continuously improvingcustomer service to all segments of the market, from farmers, grain handlers, processors, andexporters to international buyers, to best facilitate the marketing of U.S. grain.
Attachment E
Grain production
Australia's grain output varies greatly between seasons and between the east coast and west coast.
In 2010/11, Australian grain production exceeded 22 million tonnes, and the coming grain harvest is
set to be larger. Most of this output will come from the eastern seaboard states, with droughts in
Western Australia severely reducing grain output. In preceding years, the situation was reversed,
where Western Australia provided the bulk of grain output. The graph below demonstrates the
variability of grain production between seasons and states.
Attachment E
New SouthWales
-WesternAustralia
• Victoria
The Grain Freight Task
Typically, rail is the dominant mode for grain transport from the point of grain consolidation, usually
at a regional silo, to market. Heavy road vehicles handle the majority of movements from farms to
consolidation points.
However, recent developments in grain production and transportation have significantly changed
the operation of the grain freight supply chain. State government programs have deliberately
diverted investment away from regional grain lines, imposing an effective road freight monopoly for
movements from farms to consolidation points. While regional roads have been provided, through
significant subsidies by local and state governments, the principle of cost recovery and privatisation
has dictated investment in grain lines
In recent years, there has been an increasing incidence of on-farm storage, as farmers have
increased their silo capacities to maximise the price they receive for their crops. This has reduced
the need for grain consolidation points, and combined with the de-prioritisation of grain lines, has
further increased producer's reliance on road freight for the transportation of grain.
Road transport can accommodate some of the variability in grain production. Road freight can more
easily transfer operations to meet demand. However, the over-reliance on road transport has the
potential to cause significant freight capacity constraints for regional Australia. While road transport
can easily shift operations to follow demand, there is not sufficient road capacity to handle a large
grain harvest on the east coast. Rail is the only mode of transport that has the capacity to handle a
large grain harvest. Rail provides the base line grain freight capacity.
Attachment E
Most grain that is transported to port are consolidated at silos at various points along the supply
chain. Most of these silos are controlled by GrainCorp. Silos found on main lines tend to be newer
and can load and unload train consists in under two hours. Grain lines have much older silos that
require significantly longer times for loading and loading, often with additional staff.GrainCorp has
little or no competition in the provision of storage infrastructure. Given GrainCorp's virtual
monopoly of storage infrastructure, it has control over the grain rail freight supply chain.
The three main export ports on the east coast for grain are Brisbane, Newcastle and Port Kembla.
All the grain terminals at these ports are owned by GrainCorp. These terminals are owned by
GrainCorp who sets charges with oversight by the Australian Consumer and Competition
Commission. Grain from Queensland and Northern NSW predominantly are sued for feedstock
domestically, while the remainder is sent through to Brisbane for export. The remainder of grain
from NSW is sent to Newcastle and Port Kembla.
Grain can be exported from Port Botany; however it would require the containerisation of the grain.
To date this has not occurred. Victorian and South Australian ports also handle substantial amounts
of grain.
The variability of grain production makes it extremely difficult to provide cost effective rail
infrastructure for the provision of reliable freight services for grain commodities. Due to severe
under-investment and under-use of grain lines, the capacity of grain lines has been significantly
reduced. Many lines have been closed, or have only been maintained to carry minimal freight loads.
Since the privatisation of regional rail infrastructure, the maintenance and upgrading of many lines
have been deemed financially unviable. As a result, regional rail infrastructure has severely
deteriorated and left operations in a suboptimal state. The financial imperatives for the provision of
rail infrastructure stands in stark contradiction to regional road infrastructure, where road are
provided through significant subsidies by local and state governments.
The state of some regional rail lines can be likened to that of dirt roads. Underfunding has led to the
use of wooden sleepers and poor maintenance regimes, which have severely restricted the loads
and maximum speeds on the rail lines, as demonstrated on the maps below. Grain lines on the east
coast generally have axle load of less than 20 tonnes.
A k v
n i w -».$ o u r n ,v ^ i E S
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vv •• / )*•» ^ V n O I O H ! ANi' l ' l l S. * " ' IMittho , ,,,
Attachment E
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Similarly, given rail's capital intensive operations, and signals from state governments on the de-
prioritisation of regional rail infrastructure, rail operators are increasingly reluctant to lock
investments on services that are only marginally profitable and have highly unpredictable demand,
as demonstrated in the graph below.
Attachment E
4.744.37
4,163.8
2005/6
0
2006/7 2007/8 2008/9 2009/10
Subsequently rail operators have either divested from such operations, or moved their least
productive capital equipment to service these lines. This is evidenced by the average age of regional
rail locomotives, which is approaching fifty to sixty years. This further erodes the efficiency and
reliability of regional rail services. There are currently less than 20 locomotives tasked with the east
coast grain freight task, mostly servicing GrainCorp.
' 5 ye«,
Average Ase of US Meet =8 years
This under-use and under-investment in rail has come about by consistently below average grain
production caused by bad weather, and due to deliberate programs by the New South Wales and
Western Australian governments to divert investments away from grain lines. The privatisation of
rail infrastructure and the increasing importance of financial cost recovery have diverted significant
funds away from rail infrastructure. Regional roads on the other hand are provided and maintained
on government subsidies.
Attachment E
There is increasing constraints on landside access to major ports that handle grain. The Brisbane port
has limited train paths for grain operators, especially given the increased demand by coal freight
operations. The grain facilities at Newcastle Port are running well below capacity, however rail
operations to the port are severely restricted due to noise issues, where operations can only run
during the day. Unfortunately, most train paths to the port are available at night, making it
extremely difficult to utilise the spare capacity at the port.
Port Kembla has increasingly utilised the use of heavy road vehicles, recently increasing the quota
for truck movements by 200 000 tonnes above previous limits. This translates to more b-double and
b-triple trucks using already congested and unsafe roads, such as Mt Ousley drive.
The de-prioritisation of grain rail freight by governments will lead to a permanent loss of freight
capacity for our farmers. Grain freight competes directly with other bulk freight movements, such as
iron ore and coal, for rail services, rail paths and access to ports. With the de-prioritisation of grain
freight, investment, rail paths and port access will be diverted to the more lucrative mining bulk
freight task.
The mining bulk freight task is a much more lucrative market, benefiting from significant economies
of scale and constant and growing demand for services. The sheer size and importance of the mining
freight task cannot be underestimated. Of the 853 million tonnes of bulk freight moved by rail in
2009-10, 96-97% was mining related. Grain only accounted for 3-4% of the total task.
The proposed carbon price package will further deteriorate the role of rail in the grain freight task.Of most concern to the rail industry is the impact of the two year exemption for heavy road vehicles,with no similar exemption for competing rail freight operators. This places rail at a significantcompetitive disadvantage. It is counterintuitive carbon price policy to attach additional charges tothe more emissions friendly mode of transport, especially when the modes compete in the samemarket,
As discussed, grain rail freight operations are becoming increasingly financially marginal businesses.
Operators run these services either to provide a full service to national clients or as a community
service obligation. Any further deterioration of market conditions could encourage rail operators to
leave the grain freight markets completely, and focus on the lucrative bulk freight market.
The reliance on road freight for the movement of grain produce seems a logical fit given variability of
grain harvests, and the flexibility of road freight. However, road freight does not have sufficient
capacity to carry grain freight during large grain harvests. Rail is the only mode that has sufficient
capacity to carry the bulk of grain produce to market.
Attachment E
The deliberate de-prioritisation of regional rail freight services, the over-reliance on road freight and
the resulting concentration of market control by one service provider will combine with the
expected large east coast grain harvest will significantly increase supply chain bottlenecks and
increase logistics costs for farmers.
There is not enough road capacity to handle the forecast large grain harvest in eastern Australia.
Similarly regional rail infrastructure has been de-prioritised and left to deteriorate, restricting the
efficiency and reliability of rail grain freight services. Given the lack of supply and reliability of
freight services, and the market power of GrainCorp, farmers will have to pay more for freighting
their produce, and the reliability and timeliness of the service will be compromised.
The de-prioritisation of rail freight will also reduce modal competition and increase the overall cost
of grain freight. This is a significant issue, given that grain producers already pays more than 50% of
the market price of their products for the transportation and handling of the commodity to market.
Out loading = $7p.t.$10-$20 per ton (p.t.) Rail Freight = $46 p.t.
IReceive at Silo = $7 p.t. Port Storage Handling
Mthly Storage=$.2.25 p.t. = $20p.t.Title Transfer = $0.33 p.t.
3i"oxiriiately 50% ($97 p.t) of the sale price of grain goes towards transportationThis is not acceptable!
loes this at nearly half the price despite longer distances
The over-reliance on road freight will also place significant pressures on regional road infrastructure,
These roads have not been built to withstand the forces of heavy road vehicles and will deteriorate
quickly under constant use. This will either lead to significantly higher road maintenance costs for
already financially constrained local governments, or road users will have to accept poorer quality
regional roads.
Around 1500 lives are lost on Australia's roads every year, a further 30000 people are injured. This
tragic toll costs the Australian economy around $31 billion every year. The increased presence of
Attachment E
heavy vehicles on our regional roads, along with the road damage they cause, will have adverse
effects on regional road safety.
socic ii rail services
The lack of government investment and the increasing push for the commercialisation of regional
rail infrastructure neglects the social, environmental and community service benefits of rail. The
notion that regional transport infrastructure can and must provide a return on investment does not
stand to reason. Indeed regional road infrastructure is provided through significant local and state
government subsidies. If the cost recovery imperative was applied to all transport infrastructure,
regional Australia would have severe transport infrastructure shortfall. Transport infrastructure in
regional Australia must be provided based on community service obligations (CSO). The provision of
rail would provide the greatest economic, social and environmental benefits for this CSO.
Rail is the only mode that has the baseline capacity to handle a large grain harvest. It also provides
greater social and environmental benefits. By way of example, shifting a container of freight off
roads and onto rail between Melbourne to Brisbane provides an additional $150 of economic, social
and environmental benefits.
Cojllii !l!l|i s a t ion. of ,,glliQ.,I, Dlig h t
The most significant operational reform in the grain freight supply chain would be the movement
towards the containerisation of grain. The potential to move NSW grain in containers to Port Botany
is large. There are many benefits to the containerisation of grain freight including:
- The utilisation of container freight capacity at east coast ports;
- Economies of scale and greater operational efficiency by combining grain freight with the
larger intermodal freight market;
- Circumventing some of the antiquated storage infrastructure that services grain rail freight;
- decrease the centrality of storage infrastructure in controlling the grain freight supply
change and subsequently increase competition in the provision of logistics and transport
services for grain;
- Increase rail operator's capacity to service grain freight, allowing them greater flexibility in
the utilisation of their assets; and
- Greater access to Asian markets that have ports that cannot handle bulk commodities.
There are some challenges to the containerisation of grain freight including the provision of produce
quality containers and the improvement of the quality track infrastructure to a level that grain lines
can effectively interact with mainline services. These challenges should not be a significant barrier
and international experience suggests that the containerisation of grain freight is viable. In Canada
around 25% of grain is freighted in containers.
Attachment E
Given the variability of the grain harvest, the provision of grain freight services is a low priority for
most freight operators. The mining and intermodal freight tasks provide a more reliable and
constant stream of demand. This variability is a contributing factor for the dominant position
GrainCorp has gained in the grain freight market, where the barriers to entering the market are
extremely high.
Local governments and grain producers are in the best position to provide competition on grain
lines. This would also benefit grain producers and farmers by:
- Significantly reducing costs associated with grain freight through the provision of rail
services when required and through increased competition for grain freight; and
- Cost savings in terms of significant road maintenance (cheaper to maintain grain lines than
upgrade and maintain regional roads to handle b-doubles and b-triples.).
In Canada local governments and producer cooperatives own many of the grain lines and associated
infrastructure. This benefits producers through significantly lower logistics costs and greater
reliability and flexibility in terms of grain transport.