Canadian prairie farmers get into ship owning

Canadian prairie farmers will become owners of two ships that move their wheat on the Great Lakes, under an agreement reached today between the Canadian Wheat Board (CWB) and shipping companies Algoma Central Corporation and Upper Lakes Group Inc.

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

The CWB is purchasing two new Equinox class self-unloading lake vessels that will be ready for service in 2013 as part of a larger purchase by Algoma and Upper Lakes.

Back in December, Algoma Central announced that it had entered into a contract with Nantong Mingde Heavy Industries, a shipyard located in the Yangtze Delta area of China, for the construction of four new maximum St. Lawrence Seaway-sized dry bulk lake freighters that also included an option for the purchase of two additional vessels at the Corporation’s option. Algoma Central ordered the ships for charter to Seaway Marine Transport, a partnership with Upper Lakes. The total number of shipsordered looks to have grown to seven, based on a reply given at a CWB teleconference today

“As shipowners, we are moving forward to strengthen farmers’ position in our grain supply chain,” said CWB board chair Allen Oberg, a farmer from Forestburg, Alberta. “This historic step puts us at the helm. Through the CWB, farmers will share in the control and the profits of Great Lakes grain shipping. This is a value-added investment with significant net benefits for Prairie producers.”

Mr. Oberg said the purchase agreement would not have been possible without the foresight of the Government of Canada in removing a 25-per-cent tariff on imported vessels last fall, making the renewal of the Canadian domestic fleet and this purchase economically feasible.

Algoma President & CEO Greg Wight and Upper Lakes President & CEO Pat Loduca welcomed the partnership with western Canadian producers in purchasing the new, state-of-the-art Equinox class bulk carriers, which will be operated and managed by Seaway Marine Transport.

“This exciting initiative will modernize the Great Lakes fleet with larger, faster ships that consume less fuel and meet future environmental standards,” Wight said. “By working together with Prairie farmers, we have forged a relationship that will have lasting value for all.”

Mr. Wight said that the ships would each have a capacity of 30,000 tons. Compared with current lakes they will carry more, travel faster and consume less fuel.

Loduca said the timing is excellent for this partnership, given the need to replace an aging fleet on the Great Lakes. He noted that the current strength of the Canadian dollar also helps keep new-vessel costs down. “We are very pleased to be seizing this opportunity along with the CWB, which helps ensure the long-term strength of our industry.”

The CWB says its cost for the two ships is $65 million, equal to approximately $1 per tonne of transported grain, paid over the next four crop years. Prairie farmers also own a fleet of 3,400 rail hopper cars that move wheat and barley to ports and domestic customers.

Lake freight is a key element of Prairie grain producers’ supply chain, stretching from farm to overseas customer. CWB-chartered lake freight to eastern Canadian ports has increased by about one million tonnes over the past decade, hitting 3.8 million tonnes in 2009. The CWB projects the export flow of wheat to increase over the next few years as demand strengthens in Europe, Africa and Latin America  -  destinations served through eastern Canadian ports.

February 8, 2011