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Logistics Solutions

Even if producers had access to direct-sales channels, there remains another obstacle in their way -- lack of integrated logistics services to prepare and ship specialty-grains to final destinations in container-loads with product integrity intact.

 

This is the second prong of our core-mission, a domain we are imminently qualified to tackle as one of the leading logistics-companies in Western Canada, with established connections in Asia Pacific to arrange for final deliveries.

 

Aerial View of Containers

Advent of Containerization

Unlike staple-crops that lend themselves to bulk-handling in large volumes, specialty crops move in smaller lots to disparate destinations, requiring containerized shipping. More importantly, market demand for specialty-crops, and the prices they fetch, are driven by specific attributes, whether headed for final consumption or further processing. Naturally, they cannot enter the bulk-streams, and have to be shipped with crop-integrity intact from farm-gate to final-destination -- grown to particular specifications, cleaned, graded, tested, and shipped sealed for identity-preservation.

In the early days containerization was viewed as a luxury only a few very high-value crops could afford, but the container-scene has changed dramatically with advances in intermodal-systems. It was not too long ago that a 2000 TEU container-ship was considered large; now the largest class is more than 20,000 TEU, with theoretical capacity to carry 400,000 tons, about the same as the largest bulk-vessel in the world. With the construction of mega container ports and integration with inland rail and truck services, container-shipping now dominates the world-trade scene.

 

With a 40 year background in transport cost analysis, in Canada and worldwide, we have been following trends in all modes -- truck, rail, water and intermodal. Even 15-20 years ago container shipping costs were at a significant premium over bulk, but now per ton costs from the Prairies to Asian ports are comparable to bulk. For specialty-crops containerization is mostly necessary but even for staple-crops containers have become competitive with bulk-systems. Moreover, receivers realize further savings at their end, especially where extensive inland distribution is involved

In Canada, US and Australia containerized share of grain exports are still in the 10-15% range, but much higher in continental Europe, particularly within EU. In most emerging grain-regions, like across Caucasia and Central Asia where crop production is on the rise, all trades are being containerized, driven by China’s Road-and-Belt initiatives. Now almost all of China’s grain imports from its west, rapidly increasing volumes, are coming in containers, with huge distribution cost advantages across the country. Same trends are rapidly taking hold across other parts of Asia.

 

Advent of Containerization:
Supply-Chain Trends and Intermodal Systems

Based on our previous work on container-trades and intermodal-systems, in North America and around the world (particularly China), we are now compiling a report on this topic (which will be available on this portal early in 2022).  In addition to a review of global-trends, it will examine system constraints in Western Canada that hold back the region's containerized export potential.

A Crane Lifting a Container
Financial Report

Transport Cost Comparisons:
A guide to truck-rail-vessel shipping costs

The information base we are assembling will provide insights into transport costs from all major intermodal centers in the Prairies to different export markets -- from farm-gate to final delivery-points.  The guide will not only provide rates quoted by carriers but also give cost-references (based on our own analysis) on each transport-link -- truck, rail, shipping, as well as terminal-handling charges.

Loading Cargo

Integrated Solutions

Our platform initiative is predicated on the belief that there is global demand for specialty crops for our producers to turn to, alternative markets to those that sustain our current bulk-trades. Part of the reason that these alternative sales-channels do not form organically is that even if direct-sales were to materialize the logistics-channels are not in place to fulfil them. This is why we see our mission in two-tracks -- sales and logistics. In the former our role is "facilitation", connecting buyers and sellers; in the latter it is "integration", one-stop logistics service provision.

With access to agronomy-knowledge and advanced farm-equipment, farmers are capable of producing a huge variety of crops. Some crops may be ready to ship from farm-gates but most others require further handling and even processing. Farmers are masters of their own trade but do not have time or capacity to shoulder these chores through multiple service-providers. They need to turn to a lead-service-provider, what we call in the logistics-trade LSP, the role we take on to ensure that their crops are prepared to buyer-specifications, ready to ship to final destination.

 

A challenging part of this task is to secure container-supply, as close to sources of production as possible and free to be directed to delivery points in end-markets. To this end, we work closely with shipping-lines to ensure that this supply is in place in a timely manner with sufficient capacity our producers need to fulfil their orders. This may require repositioning across the Prairies with intermediate loads, to where we need them for grain-loading. Also, we need to coordinate our sales-efforts to generate sufficient volumes to utilize the containers that are diverted to us.

Our job does not end with guiding the loaded-containers to export-ports to hit the ship-sailings with the slots assigned to us. The final leg of the journey from landing-ports to delivery-points would have been cleared in advance, but typically shipping-lines do not get involved in those forwarding chores, leaving it to agents to make the arrangements. Having worked in Asia Pacific for so many years, we have established relations with reliable freight-forwarders to take on these tasks, delivering to our buyers and also repositioning the containers where shipping lines expect them.

 

Logistics Service Components

We are committed to looking after all your logistics needs in serving overseas customers, one-stop service from farm-gate to final-delivery.  We will help you reach out to importers, support you in striking sales-contracts with your customers, and take on all the logistics burden in their execution -- crop-servicing (at origin), container-supply (nearest intermodal terminal), intermodal-coordination (truck, rail, shipping), and final-delivery (at destination).

Barley Grains

Grain Handling

As a result of years of consolidation and technology-advancement, most producers are ready for a new wave of crop-specialization. Together with advances in farming-methods, many farms now have plenty of bin-capacity to store specialty-crops, in isolation to preserve their identity. Some crops will not need further cleaning or grading, thus can be loaded into containers before even leaving the farm-gates, to be shipped to final destinations through the necessary intermodal channels. But most other crops will need further preparation before they can be exported.

With the initial rush to pulses small operations were quick to emerge to get crops ready to ship to end-markets. In time larger grain-companies developed, or entered the market, with the capacity to not only clean and grade but also package pulses to be shipped in containers. Similarly, in recent years small businesses surfaced to handle other specialty crops for export purposes -- clean, grade, test, bag and containerize. These services were viable at modest scale and added little to final costs, but some went by the way side because the steady volumes could not be sustained.

Naturally, if we are successful in our mission, there will not only be large volumes but also steady flows to sustain continuous operations. Most handling functions are not terribly complex but lend themselves to automation, and by deploying advanced equipment much higher crop quality standards can be achieved. The scale does not have to be terribly large but process requirements can vary greatly by crop-type. Though we have a number of facility and equipment concepts in mind, specific plans will depend on the actual crop-mix generated by our trade-facilitation efforts.

We are open to alternative business-models to service the crop-trades we generate, contracted out to other service providers or consolidated under our own roof, to meet the required crop-quality standards and export delivery obligations. Initially we can operate in a distributed structure with third-party service providers at different locations. But eventually we will try to consolidate most services under the same roof at rail-intermodal-terminals, with functionality suitable to the crop-mix in that area -- run by our logistics-partner, with third-party service providers as necessary.

 

Grain Service Inventory:
A Catalogue of Service Providers

There are numerous small private firms servicing the grain-industry -- cleaning, grading, testing, bagging, container-loading, etc.  We are now conducting an exhaustive survey of these service providers, and inviting them to register on this portal with a brief description of their service offerings.  Soon we will develop a system to classify/categorize them with "profiles".  

A Crane Lifting a Container
Financial Report

Grain Processing Centre:
A new industrial park serving the grain-industry

Quite a few years ago (early 1990s) we conducted a study for the Saskatchewan Government to look at barriers/constraints to containerized-exports.  We had recommended the development of an inland-container-port (GTH in Regina).  It did not quite evolve into what we had in mind as a service-center.  But now we are reviving this initiative, at GTH or near another intermodal-terminal.

Containers

Container Supply

Container supply has been a perennial problem in the interior, while plenty of containers return empty from the West Coast -- enough capacity to double if not triple existing containerized grain exports. Shippers in the Prairies cannot understand why containers cannot be pulled further inland to meet their export needs to Asia. The tendency is to lean on railways for containers, but they are mere carriers -- they get what shipping-lines send their way and if cleared load empties to return across the Pacific. The solutions lie with closer cooperation and planning with shipping-lines.

 

Though often seen as vessel-operations, at the core of the shipping-line business is slot-capacity and container-flow alignment -- to fill every slot on vessels, sailing head-haul or back-haul, with containers, empty or loaded. If containers have to go inland at either end, journeys become longer, requiring more containers on that route. Containers are cheap, but the critical factor in container-allocation is predictability of return times to ports. If grain export-flows could be planned and managed from the Prairies, shipping-lines would gladly add more containers to earn more revenue.

There are no mysteries behind large numbers of containers returning empty from the West Coast. The head-haul in Pacific-trades is eastbound; container-ships come full, with every slot taken up by loaded-containers. Those ships have to return right away with the same number of containers, empty or loaded, to sustain the flow on the eastbound head-haul. To pull those containers into the Prairies to load with grains, more containers would be needed, and even more if those containers have to go further inland at destination to deliver the grains they are carrying to end-users.

The key to increasing container-supply in the Prairies is working with the shipping-lines to plan and manage grain-export-flows to fit into their vessel-movement and container-circulation patterns. Working with the shipping-lines and generating sustainable grain-flows may not be as easy as we outline here, but not an impossible mission either. We have a more detailed paper coming out on this topic, but in a nutshell if our trade-facilitation mission is successful in generating steady export-volumes, we are confident of overcoming the perennial container supply constraints.

 

Inland Container-Supply:
A perennial problem that won't go away

Despite all the promises and efforts, there has been little progress in improving container-supply across the Prairies.  For many of us involved in this domain there are no mysteries, and in this report we will layout our plans to improve this situation to pull more containers inland to serve export-trades -- mainly by working with major shipping-lines now serving our West Coast export-gateways.

A Crane Lifting a Container
Financial Report

Container Supply Updates:
Reporting on our shipping-line discussions

Once we finalize our trade-facilitation strategy, we will engage with the shipping-lines to workout practical container-supply solutions -- following an incremental and staged supply-improvement plan.  We will be posting regular updates on this portal on the progress we make, with container-supply-targets at each of the major Prairie-centers that can be routed to specific Asia-Pacific destinations.

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