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An Economic Analysis of Western Canadian Grain Export Capacity

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  • Mohammad Torshizi
  • Richard Gray

Abstract

Record grain supplies combined with insufficient grain export capacity in the 2013–14 and 2014–15 crop years resulted in depressed Western Canadian grain prices costing producers several billion dollars. The exceptional size of the crop and the harsh winter weather contributing to this costly event raise an important question as to whether additional investment in export capacity is warranted. This study systematically assesses the need for additional grain export capacity in Western Canada. Somewhat conservative grain production forecasts and rational expectations storage are used within a spatial mathematical programming model to simulate a competitive market, moving grain to export positions. We find in the absence of additional export capacity there will be increasingly frequent periods of costly congestion. A 10 million tonnes (Mt) (5 Mt) improvement in both rail and West Coast capacity implies $9.2 billion ($6.0 billion) of cost†saving benefits for the producers over the 2016–25 period. While these estimates are sensitive to future realized production levels, their magnitude suggests that innovation to increase export capacity is economically important for grain producers in Western Canada. Des approvisionnements records de grains combinés à une capacité exportatrice insuffisante de ces derniers en 2013–14 et en 2014–15 ont engendré le bas prix du grain de l'Ouest canadien représentant une perte de milliards de dollars pour les producteurs. La production exceptionnelle et l'hiver particulièrement rude ont contribué à cet événement coûteux et soulèvent une question importante concernant le besoin pour des investissements additionnels en capacité exportatrice. Cette étude évalue systématiquement le besoin pour une capacité exportatrice accrue des céréales provenant de l'Ouest canadien. Les prévisions relativement prudentes de production de grains et l'anticipation rationnelle de stockage servent dans le cadre d'un modèle de programmation mathématique spatiale pour simuler un marché compétitif, transportant le grain vers les points d'exportation. Les trouvailles indiquent qu'en l'absence de capacité supplémentaire exportatrice, surviendront des périodes de plus en plus fréquentes de congestion coûteuse. Une amélioration de 10 Mt (5 Mt) à la capacité ferroviaire et de la Côte Ouest suppose des réductions de coûts à la hauteur de 9,2 milliards de dollars (6 milliards de dollars) pour les producteurs pour la période entre 2016 et 2025. Ces estimations étant liées à l'atteinte de futurs niveaux de production, leur importance suggère que l'innovation en vue d'accroître la capacité exportatrice s'avère économiquement essentielle pour les producteurs céréaliers de l'ouest du Canada.

Suggested Citation

  • Mohammad Torshizi & Richard Gray, 2018. "An Economic Analysis of Western Canadian Grain Export Capacity," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 66(2), pages 255-282, June.
  • Handle: RePEc:bla:canjag:v:66:y:2018:i:2:p:255-282
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    File URL: https://doi.org/10.1111/cjag.12148
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