The Role of Policy in the Efficiency of Supply Chains

From a supply chain perspective, what do international companies look for when investing in a foreign country?

It starts with what makes sense from a strategic standpoint and what the size of the opportunity is—that is what gets you through the first layer. Beyond that, companies are looking at the efficiency and infrastructure available in a country. Is it a place that we can go and operate effectively and efficiently? Perhaps the most important thing is what the environment is in that country: whether it is a law-abiding culture, a rules-based society, what dispute resolution is like, what the work ethic is of people in that country, and if it is a place that is consistent with our values as a company.

We have a significant amount of operations in Canada. Canada is a country that is rich with commodity resources so it is very well-suited for our industry and the things that we are doing. While you read a lot of press about Canadian railroads and some of the criticisms about it, Canada is actually quite efficient when it comes to the movement of goods out to the coast and outside the country. It certainly is when you compare it to other countries around the world, so that is something that is in Canada’s favour.

While you read a lot of press about Canadian railroads and some of the criticisms about it, Canada is actually quite efficient when it comes to the movement of goods out to the coast and outside the country.

Generally, Canada is consistent in its policies and it is a predictable economy and environment and so it lends itself well for investment. Lastly, Canada has a rules-based economy and a strong work ethic. We have a lot of business in Western Canada and have experienced that people who operate in that environment are very committed individuals. It is not an easy place to work and live at times given the weather, but it is a very resilient society and so Canada lends itself very well to that sort of thing.

You mentioned your investment in Western Canada, made during the pandemic in Saskatchewan. Can you tell us more?

That is correct. We had an opportunity to acquire an elevator from Cargill up in Northern Saskatchewan. It is a facility that is in the heart of oat country and oats are a very important product line for Ceres Global and we were able to execute that transaction in Northern Saskatchewan through the pandemic. The counterparty we were dealing with was professional and organized and it worked out quite well.

What are some of the logistical challenges of cross-border trade?

Typically, when you are dealing with cross-border trade, you encounter additional modes of logistics, whether that is vessels or different kinds of trains, so those are things to consider. They are certainly not obstacles that cannot be overcome and they can be opportunities, quite frankly.

The other thing to consider is there is quite a lot in the form of administration and trade considerations such as sanitary permits, tariffs, and the consistency of the rules and practices depending on the relationship that governments have with each other. There are also counterparty risks. There are many things to consider that add complexity to an international supply chain, but they can be opportunities as well.

The thing that global companies can do to make those things easier to deal with is to be organized as an industry and be represented as an industry in front of those governments. North American Export Grain Association (NAEGA), Grain and Feed Trade Association (GAFTA), and these types of associations allow us to come together as an industry and partner with government so that we can minimize the challenges we have in moving products across borders.

How do trade agreements impact Canada’s cross-border supply chain?

The longer these agreements are in place, the easier and better they are. There are a few reasons. There is a level of predictability and certainty that comes when an agreement is in place for a long time, such as the North American Free Trade Agreement (NAFTA). There is a tremendous amount of comfort in that area when it comes to investing in infrastructure and making the supply chain more efficient.

This does not get talked about much, but there is familiarity amongst government officials in the countries where trade agreements are in place. Their ability to resolve differences or get aligned on policy that is more impactful and better for industry is enhanced over time. Whether it is the Canadian-United States-Mexico Agreement (CUSMA) or whatever we want to call it, they have been around for a long time and they have had a very positive impact on trade flows. There are still a lot of things that are not developed yet in our industry as far as trade between the US and Canada goes, but the things that are developed are quite efficient as a result of that agreement.

How resilient is the Canada-US supply chain?

It is extremely resilient. However, in our industry, the grain and oilseed trade, that supply chain is pretty underdeveloped. The Canadian Wheat Board era lasted a long time and we are still very much living in a paradigm from the Canadian Wheat Board era. If you look at the way our industries are structured from a railroad, policies and practices, and company and infrastructure perspective, we have a separation between Canadian and American companies in the industry. Ceres Global is an exception to that rule because we are broadly invested on both sides of the border, and that is one of the core aspects of our strategy. There is this idea to move product into the US from Canada. Some products move that way such as oats and rye, but these are smaller, more boutique-type products. The bigger, larger volume products move out to the coast in Canada and they are not as competitive moving into the US. The structure of the rail industry is one of the reasons for that. From a relationship standpoint, it is extremely resilient, but from an industry, trade flow, and economic sense standpoint, there are still opportunities to develop that further.

It is not very efficient to move product from the US into Canada. There could be opportunities to export US products out of Canadian ports. That is something that is underdeveloped and that is changing now.

It is not very efficient to move product from the US into Canada. There could be opportunities to export US products out of Canadian ports. That is something that is underdeveloped and that is changing now. There is an entrant in the Canadian market that has developed large supply chain infrastructure that is opening up new capacity, so some of these trade flows have an opportunity to develop and become more resilient over time. That is where we stand, so there are some really interesting opportunities ahead.

I am talking about G3 and others too. GrainsConnect, which is a joint venture between GrainCorp in Australia and Zen-Noh Grain Corporation, has a joint venture with Parrish and Heimbecker (P&H) in the Port of Vancouver. There is some added capacity that coming on that opens up new trade flow opportunities.

What can the Canadian government do to strengthen Canadian supply chains?

The Canadian government has an opportunity to be more proactive than it is today with trade rules and regulations as they relate to Canada and other countries. The government can help negotiate changes in practices to make it more possible for private industry to move more Canadian products out of Canada or American products through Canada. Where it gets challenging is most countries do not allow a company like Ceres to comingle products of US and Canadian origin, even if it is a product of the same quality. The products would perform extremely well if we were allowed to do this. Some countries do allow this and those that do are doing so as a result of a significant amount of work from private industry or associations like NAEGA. The Canadian government could be more proactive to understand which trade flows would benefit if certain countries were to change their rules and regulations around those types of things and how that can be done. They may consider providing a Canadian Grain Commission (CGC) certification in US ports so that we can have a greater flow of Canadian products out of Canada and create more markets for farmers and other suppliers in Canada.

What is the role of industry to help strengthen Canada’s supply chains?

There are obvious things like investing in infrastructure and providing consistent service to our customers to make sure they keep coming back for more. However, it is industry’s obligation to bring creative ideas to the market and government so government can see what is possible and what the benefit would be if they are proactive. We try really hard to do that and interface with the Canadian government whether it is at the provincial or federal level, so they can have a vision we can share and they can recognize that opportunity and take the action they need to take, which would allow us to take our action. From our standpoint, industry needs to respond positively to government’s efforts to make the economy more efficient, and we can do that by investing and by running an excellent business to make our customers satisfied, but we also have a role to play in helping government see what we see.