An Overview of Grain Segregation Issues

Executive Summary

Two questions concerning grain segregations that were raised in the Phase I report of the Estey transportation review were:

Can the returns from many grades and protein segregations offset the cost of maintaining these segregations from farm gate to export position? ...and
Can the grain handling and transportation system accommodate the increase in the number of new specialized products being offered to importers abroad?

While this study addresses some of the elements concerning these two questions, it is not an attempt to give a complete and quantitative analysis. However, it does provide an overview of the effects of increasing segregations on the grain handling and transportation system in western Canada.

The first section of this study provides an insight into the Canadian grain grading system including such concepts as test weight, varietal purity, vitreous kernels and soundness. Other important concepts such as protein content and identity preserved shipments also are discussed.

The background section highlights some of the more prominent issues concerning grain segregation. The number of segregations in store, elevator consolidation and CWB contract calls all play a role in the discussion of how grain segregations affect the grain handling and transportation system.

The benefits section identifies some of the qualitative benefits of grain segregation to the stakeholders in the Canadian grain industry and quantifies some of the benefits of grain segregation to producers. These results were limited to an analysis of CWRS and CWAD wheat. The results show that significant revenue increases in producer returns for CWRS wheat are due to protein segregations. For #1 CWRS, the increase was estimated to be $11.07 per tonne in 1996/97.

The discussion concerning the costs associated with segregations of grain focuses on factors that contribute to additional operating costs. Concepts such as storage capacity, turnover ratios, and logistics are integral to this analysis. The difficulty in providing any kind of quantitative analysis lies in identifying the lower costs that the system would have had if fewer segregations existed. Where possible, cost data from other sources is presented for analysis and discussion.

If customers are willing to pay premiums on the basis of high quality or distinctive characteristics, additional segregations may be beneficial in the Canadian grain handling and transportation system. However, the most desirable and efficient number of grain quality segregations depends on the benefits and costs associated with additional segregations beyond the base grades.

Three related areas that warrant attention are: identity preservation, CWB contract calls and additional CWB protein segregation.

Given that the study's analysis was limited to CWRS and CWAD segregations, it would be beneficial to conduct further quantitative analysis of the costs and benefits on the other major crops to determine the net impact of additional segregations as well as to determine the optimal number of segregations. Each additional segregation may result in diminishing marginal returns and increasing marginal costs. Increasing (decreasing) the number of segregations impacts all aspects of grain handling, transportation and marketing.

To receive a hard copy of this report or for additional information, please contact:

Denis Tully (tullyd@agr.gc.ca),
Chief, Policy Analysis
500-303 Main Street; Winnipeg, Manitoba; Canada R3C 3G7
Telephone: 204-983-0569; Fax: 204-983-5300