January 26, 2009 Moving Against the Grain

Volume 12 | Issue 1

A unique grain handling operation, Great Northern Grain Terminals LTD boasts small-town elevator service with big-terminal performance. Make

Principals in Canada’s grain industry segregate into two factions: the industry majors (including companies such as Cargill LTD, James Richardson International, Parrish and Heimbecker LTD, and Viterra Inc.) and the smaller, independent operators.

Great Northern Grain Terminals LTD (GNGT) assumes a starring role in that second group of players. Headquartered in Edmonton, Alberta, GNGT is one of the largest – if not the largest – independently owned and operated grain companies. “We have multiple locations and we are owned by two shareholders, whereas other independents tend to be owned by farmer co-ops,” describes GNGT Chief Financial Officer Alan Ewasiuk.

As such, GNGT can offer a higher level of service compared to other independents. But the company also represents an alternative to the big players. “The larger companies will try and tie customers into all elements of their business,” Ewasiuk points out.

That is, the major companies typically try and dictate purchases related to seeds, chemicals and input services. “Essentially, they’re telling farmers how to run their business,” says Ewasiuk. “But producers don’t like being told what to do. We provide an option, as we partner with the customers based on their needs related to pricing and service. That’s why we have been around for 23 years.”

COMPREHENSIVE SERVICES
Company owner Allan Roberts established the business in 1986 as a small, single grain terminal. Today, the company, which has about 22 full-time employees and another 20 contract or agent employees, operates two leading independent grain terminals within Canada’s Peace River and Killam regions. The sites provide a range of capabilities (i.e., grain handling, drying, cleaning, merchandising services) to both individual farmers and businesses. In addition, GNGT owns 10 producer car-loading locations throughout Alberta and Saskatchewan. The company can handle about 350,000 tons of grain a year.

Roberts describes the comprehensive nature of the business: “Essentially, terminal operators purchase grain from the producers, or farmers, and market the commodity. But they do much more than buy, store and sell it. They also clean the grain, then dry and bag it. When producers deliver grain to our terminals, we’ll take it in and if it requires drying, we will dry it; if it requires cleaning, we will clean it. Then we will blend the grain to required grades and arrange for sale.”

Once sales are arranged, GNGT provides rail cars for shipment. “When the cars come into the terminals, we’ll load the grain and see that it is shipped to where it needs to go,” adds Ewasiuk. “Often, that’s Vancouver or Prince Albert. From there, it’s loaded into cargo ships for transportation to destinations such as China, Japan or Pakistan.”

TWO-TERMINAL OPERATION
The company’s position as a large independent operator is attributable to a multi-stage growth strategy that has increased company size and capacity. Initially, GNGT operated a single, 4,200-
ton capacity grain terminal in Nampa, just south of Peace River. “But we began expanding and increased the size and, in turn, the tonnage capacity of the terminal,” says Ewasiuk.

As a result, the inland grain terminal became a high-throughput site with a holding capacity of 17,300 tons. Today, with a 75-car rail spot, the terminal can load 50 car units within a 24-hour period and is presently capable of processing up to 200,000 tons a year.

Moving forward, in 2004, GNGT purchased a 7,920-ton capacity terminal in Killam, just south of Edmonton. Located on a Canadian Pacific Railroad mainline, the terminal has a 30-car rail spot.

“We added a new dryer and cleaners to our Killam plant in 2007 and 2008 and in August of 2008 we started construction of a new, cleaner operation at our Nampa plant,” informs Ewasiuk. “Our existing cleaners were 22 years old and a bit antiquated, so we upgraded our cleaning capabilities from 20 tons an hour to 140 tons an hour. This is part and parcel with future expansions to clean at a higher rate.”

Beyond these upgrades, the company is seeking to increase its first-storage capacity by another 50,000 tons, adds Ewasiuk. “That would bring us up to 70,000 tons of storage. Further, the increased capacity would be coincidental with our plans to build a canola crushing plant that would help generate biodiesel fuel.”

SUCCESS STRATEGY
The company’s success is based on three factors, according to Ewasiuk. These include the two state-of-the-art grain facilities and their cleaning, drying and bagging capabilities; an experienced, service-oriented terminal operations team, and aggressive sales and marketing efforts.

Also, GNGT has achieved Canadian Wheat Board (CWB) agent status, offering the handling of wheat board grains for producers throughout Western Canada. Its two terminals are licensed as primary elevators with the Canadian Grain Commission (CGC). “As CWB agents with CGC licensing, we operate in the same fashion as a Cargill or Viterra or any other large Canadian grain company. The only difference is that we’re independent,” says Ewasiuk.

GNGT also provides regional producer and dealer car-marketing services for the origination of CWB and non-Board grain. In addition, it offers a malt barley program, special crop pricing, competitive pricing options and future pricing options.

2007 LITIGATION
Lest anyone think success has come easy, independent operators such as GNGT have struggled to move grain out of its terminals. “Congestion has always been a significant problem,” says Ewasiuk. “Producers may want to deliver, but terminals don’t always have the space, or they wait for rail cars to come in and free up space to take in new grain.”

The problem led the company into litigation leveled at the Canadian National Railway (CN). In March 2007, GNGT filed a level-of-service complaint with the Canadian Transportation Agency (CTA) against CN to forestall serious economic consequences for the region’s shippers and producers resulting from lack of adequate CN rail transportation. The company was supported in its suit by 10 other grain industry businesses. GNGT’s main concerns focused on efficiencies, costs and equitable delivery opportunities for farmers, and it alleged that CN failed to fulfill its level-of-service obligations under the Canada Transportation Act. Specifically, at issue was a change to CN’s advance-product program that hindered smaller grain companies and single-point shippers from securing enough rail capacity to stay viable and competitive.

GNGT eventually prevailed. In July 2007, the CTA ruled that CN indeed failed to fulfill level-of-service obligations. As a result of the ruling, the CTA ordered CN to restore its 50-car block advance program to GNGT; to stop restricting GNGT from trading general distribution cars and to advise GNGT how it determines allocation of rail cars. “Since then, the number of rail cars we receive has increased, which allows us to better service our customers,” says Ewasiuk.

“Essentially, that’s what we’re all about – providing the highest level of service possible to the region’s producers,” adds Roberts.

As GNGT continues expanding its physical operations and its Western Canada customer coverage, the company is committed to maintaining its reputation for business integrity and enhancing its ability to help producers maximize their return on investments. Further, to remain competitive in an active marketplace, GNGT assiduously monitors other companies as far as price, freight premiums and drying and cleaning charges. Indeed, attractive pricing coupled with optimal service lends GNGT a strong presence on the Western Canadian landscape.

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