Churchill a Mistake?
Says this writer: “The Hudson Bay route can never he made to pay... The Churchill elevator was an unnecessary extravagance"
T. R. KIRKWOOD
Editor’s note:—In its February 15 issue, Maclean’s published an article by Gillis Purcell setting forth a Westerner’s viewpoint with regard to the future of Churchill and the Hudson Pay route. Herewith is presented a different viewpoint, that of an easterner who has had many years experience in shipping.
IN THE February 15 issue of Maclean's there appeared an article by Gillis Purcell on "Manitoba’s New Seaport." Under the heading the editor asked the question: “Will Churchill and the Hudson Bay route be a money-saver or a debt-maker?” In supplying a Westerner’s viewpoint, Mr. Purcell says:
“The dice are tumbling now in a $50,000,000 gamble... but the odds have narrowed down... A few more journeys inbound through Hudson Straits, a few more oversea cargoes of prairie grain and livestock safely delivered, a touch of good fortune here and there, bringing lower insurance rates and similar advantages, and the hopes of the West’s oldtimers will have been crystallized into experience-backed facts.”
In this article I propose to show that the Hudson Bay route can never be made to pay, and that millions of dollars of the taxpayers’ money have been spent needlessly because of the unbusinesslike activities of that part of Government which does not change with the fortunes of political warfare —bureaucracy.
There is no doubt that political expediency too frequently causes Governments to embark upon projects which necessitate large expenditures.
These undertakings are carried out under the direction of Government departments or bureaus. The responsible officials of many of these bureaus are hardworking, conscientious, and able by training and experience to render excellent service to the country. Others, unfortunately, lack even elementary business ability and are entirely unfitted for the offices they hold.
These permanent officials are the real power behind the throne, so to speak.
Upon them depend ministers nominally in charge of the several departments. New ministers—usually chosen from the ranks of lawyers, doctors, accountants, agrarians and other laymen—are, in the beginning at least, quite unfamiliar with the practical work of the departments to which they are assigned. They leave to their officers much of the responsibility and a good deal of the initiative in the development of departmental policy.
The Hudson Bay Railway is an outstanding example of the creed of political expediency. The demand for this project
was met by rather reluctant promises from both old-line political parties to build the railroad and equip a seaport. It was carried on by both Liberal and Conservative administrations and completed ; but not before the bureaucrats had wasted $6,250,000 by their selection and partial development of an unsuitable terminus—Port Nelson—later abandoned in favor of Churchill on the recommendation of Frederick Palmer, an eminent British engineer called in by the Government at considerable expense.
A minister’s dependence upon the judgment of his officers is exemplified in connection with the selection of Port Nelson as the original terminus. The late Hon. Frank Cochrane, a former Minister of Railways, said in his evidence before the Senate Committee on Hudson Bay and Strait, 1920:
“I questioned the engineer and satisfied myself. Of course, I saw both places, but my opinion as to a harbor would not amount to anything. I am not an engineer and it would only be a guess.”
Parliament votes vast sums of money without sufficient understanding of the proposals under consideration. It
seems that members do not require to be shown that a project is sound and will be productive. Many of them, as readers of Hansard will agree, prefer to talk politics. They voted the vast sums expended so far on the Hudson Bay route. There is no doubt about that. They voted also about $5,000,000 for a lesser project known as the Lower Lake Grain Terminal—a 5,500,’ 000-bushel elevator completed at Prescott in 1930.
When the outcome of these two adventures in transportation finally becomes known, it is extremely doubtful if many of those who voted funds for them will admit being fully informed when they okayed the expenditures.
There was no public agitation or sectional clamor tor the Lower Lake Grain Terminal—a costly mistake. This project was a brain child of Ottawa bureaucracy. It was destined to take the place of the 3,(XX).UOO-bushel Government elevator at Port Colborne upon the opening of the new Welland Ship Canal. A departmental report was made in camera, and to this day it has not been released for publicexamination. However, the Prescott fiasco is the subject of another article. This one concerns the Hudson Bay route.
To some the criticism of the Bay route may seem unduly severe, but it is written from honest conviction and to illustrate the folly of the authorities in spending enormous sums, on an untried route, for elaborate permanent terminal facilities on a scale which could not be justified even on a proved route. It will serve to show also the lack of careful preparation and procedure in developing such a large project.
Eastern Canada was. in the main, definitely opposed to the Hudson Bay scheme. But. when it was realized that political expediency had taken complete charge of Governmental policy, it was conceded that, although the country was very much “over-railroaded,” the proposed line might at least return some part of its cost by opening up new and perhaps valuable mineral territory.
Few, however, were hopeful of success for the project as a grain route, in spite of the large claims of its proponents. Upon near-completion of the railway to Churchill, it was realized that the only thing to do was to arrange for trial shijv ments of grain from the new seaport. This is where bureaucratic ineptitude stepped in again.
A MINISTER of railways thought a grain elevator of 1,000.000 bushels capacity should be built. He was persuaded that this was scarcely sufficient for the great port that Churchill was to be, and the projected capacity was increased to 2.500,000 bushels.
Then, someone persuaded another minister that the immense volume of grain
traffic expected to be routed via Churchill would require a fast-working elevatorprobably on account of the short season. As a consequence, the proposed capacity of machinery for receiving and shipping grain was doubled. Today, the elevator stands completed and empty, at a cost to the country of approximately $1.250.000, exclusive of elevator trackage and fill, which cost a mere quarter of a million additional. The main estimates brought down in the House of Commons recently provide $1,937,700 for Hudson Bay Railway “terminal construction and betterment.”
I^ast September the great project was ready for a working test. With fitting éclat, the good ships Warktvorth and Farnworth were loaded with 545,(XX) bushels of golden wheat and sent away to England.
These two vessels, whose cargoes were secured with considerable effort on the part of the Federal authorities, sailed with Governmental blessings and, of course, financial assistance to lower the freight and insurance charges as nearly as possible to the cost via other proved routes already provided with grain-shipping facilities.
As no other shipments loomed in the offing after the departure of the pioneer grain steamers -since grain exporters manifested a natural desire to continue shipping via the Great Lakes or Vancouver—business at the new port fell quite flat. There was Canada's newest and most expensive elevator per bushel of capacity, fully staffed and idle. However, bureaucracy made still another effort to cover up mistaken judgment and justify the elevator.
A Canadian Press dispatch from Winnipeg, September 18, 1931, reads as follows:
“Full of enthusiasm over the completion of Canada’s new ocean port in the North, Dr. Manion and his party arrived here today from Churchill after attending the loading of the first two grain boats ... ‘I have been discussing with my officers the possibility of storing, without charge, some grain in Churchill elevator this coming winter,’ said Dr. Manion, ‘and it we are offered up to 1,000,000 bushels to be delivered to Churchill before November 1, we will arrange to store it free until July 1, next. The reason the time must be limited to November 1 is that by the middle of October our complete staff at Churchill, including the elevator staff, is being withdrawn until next season, and naturally we do not wish to add to our already heavy expense by having to keep the elevator staff on beyond November 1.’ ”
Here was an opportunity open to grain exporters to save over six cents per bushel on LOCK),OCX) bushels of grain, or $60.000 in storage charges until July 1, 1932. But there was no rush of telegrams, with eager acceptances. to the Minister of Railways.
Apparently, the market-wise grain dealers much preferred to store their grain as usual in elevators tributary to Atlantic or Pacific seaboard ports. It would be worth much more than $60,000 to have the grain stored in a strategic position rather than to have it hopelessly marooned for ten months at Churchill, within 600 miles of the Arctic Circle.
Obviously, bureaucracy heeded not the sound opinion of Sir Andrew Rae Duncan, noted British economist, who was chairman of the Royal Commission responsible for the famed Duncan Report of 1926. Here is an important paragraph of that report:
“Over a series of years the merchanting of the grain crops of the West in the markets of the world has been built up on a delicate mechanism which cannot be suddenly or violently disturbed without creating chaos and even disaster. The routing has been determined not by reference to railway haul entirely, but by the need for concentrating the grain at a key position which commands a range of }x>rts where, because of the quantity and variety of ocean tonnage available, the shipper can be sure of finding cargo space within the shortest possible time for the quantity and destination of his shipment, at any given moment.”
It would be interesting to knowto what extent the Federal Government found it necessary to go in order to induce even the farmer-owned Wheat Pool to make in September the test shipment of 545,000 bushels of wheat. As late as the middle of July the Minister of Railways admitted that not one grain exporter had consented to ship via Churchill, even though important concessions had been offered. Hon. Dr. Manion, speaking in the House of Commons on July 16 last, on the possible shipping futur« of the port, said in part :
“We have already enquired of some large interests in the grain trade, and we have not succeeded in getting them interested in taking grain that way, even at a rate, insurance and everything else covered, equal to the through rate from other portions of the Western Country to Europe.”
Apparently, the policy of the departmental bureaucrats was to build the elevator first and then enquire of the grain trade whether or not export grain traffic would be available.
There were, manifestly, no actual exporters of grain numbered among the many supporters of the Hudson Bay route. The Government, seemingly, preferred the opinions of those who don’t export grain but who were bent on having it tried out as a full-fledged commercial grain route regardless of cost. Meantime, opponents of the project, unable to cope with political expediency, sLxxl by with natural misgiving to watch the outcome of the test.
Since the Government has not seen fit to publish the actual figures in connection with the test shipments, notwithstanding the wide interest in the Hudson Bay experiment, the comparative table accompanying this article is necessarily based partly upon estimates compiled from information believed to be reliable.
As the Government waived elevator and other port charges at Churchill, it is only fair to place Fort William on the same basis for the purpose of comparison. Rail rates from representative shipping points such as Saskatoon, Regina and M«x>se Jaw, being about the same to Churchill as to Fort William, it is unnecessary to include in the table the rail freight to either port.
It is doubtful if anyone expected low, or even moderate
An Ex'Soldier W an Editorial
V\7ALTER LIPPMAN, one of the besuknown and * ^ most competent journalists of the United States, has been in Geneva observing the Disarmament Conference. After several weeks of it, he wrote: “What has happened so far is that the chief delegate of each country has made a speech. He has made a speech and addressed at least nine' tenths of it to his own people back home.”
Jack Humpage is an ex'soldier, living at Biggar, Saskatchewan. This is a letter from him to Maclean's.
“Being one of Kitchener's first 100,000,1 have read with interest every article of‘Thirteen Years After,’ by Will R. Bird. I think he has got something of interest to ex'ser' vicemen, and to most other people. I for one have travelled quite a long way with friend Bird, but one thing crossed my mind while I was reading my last issue. Why couldn’t the League of Nations, the Disarmament Conference, etc., hold their meetings at the Somme, Vimy, Verdun or Ypres? I think that if they spent a few days at some of the places where W. R. B. has been ‘ thirteen years after,’ they might get some food for thought and maybe they would put on a little action.”
freight and insurance rates on the Hudson Bay route. The Minister of Railways admitted in the House of Commons as late as May 21, 1931, that he was unable to say whether or not the cost of moving a bushel of grain from any point in the Prairie Provinces to the British market via the Hudson Bay route would be less than via the routes already established.
Yet, in spite of these and other strongly adverse factors, absolutely no effort was made by officers of the department, who advise the minister, to aviad the huge expense entailed in the construction of an elaborate and extravagant grain elevator for the purpose of testing the route on a commercial basis.
Long before the contract was let for this elevator (May, 1930), the same officers were working on plans for completion of the St. 1-a wren ce deep waterway a project which is expected to reduce, and would reduce substantially,
the normal cost of moving grain via Fort William -Port Arthur. If this project is brought to completion in the near future, and rates are lowered, what will then be the position of the Hudson Bay investment? The two routes are competitive, not complementary. Logically, the Government officers can't be for both.
The amazing thing is that no effort was made to conserve public funds by avoiding constructio:, of Churchill elevator, commenced in July. 1930, when the country was in the midst of depression with revenues falling off enormously, and the grain trade stagnant.
Here is a statement of fact about the ice in Hudson Bay near Churchill, taken from the Annual Report of the Department of Railways and Canals, fiscal year ending March 31, 1930:
“In the spring of 1929 the opening of navigation along the west coast of Hudson Bay was delayed by shore winds. All through July and for a part of August an immense field of ice extended from the coast seawards beyond vision between Cape Churchill and Nelson Shoals. It was not until August 6 that it moved out sufficiently to permit of navigation. From then until August 19 a lane of water of considerable width existed, which again narrowed for the remainder of the month, rendering navigation difficult. After August this ice cleared away. North of Cape Churchill the ice cleared from the bay early in August, though present to sufficient extent to cause delay to several vessels bound for Churchill.”
The “several vessels” mentioned were probably Government craft employed on construction work at the terminal.
In view of the foregoing, one cannot justly accuse insurance underwriters of overcautiousness with respect to the season of navigation to Churchill, or of being unduly prejudiced because of the high additional premium rates demanded on vessels and cargo.
Underwriters met, in part, the requests of the Canadian Government for lower premiums because Canada had established—after expending some $3,000.000— radio directionfinding stations and other aids to navigation along the Hudson Bay route.
They agreed to reduce the rate of additional premium for vessels navigating Hudson Strait and Bay on or after August 10, and leaving the last landing port on or before September 30. The reduction was from sixty shillings to fifty shillings per 100 pounds on the insured value of vessels, plus two shillings per ton on gross register tonnage. For one more week of navigation—to October 7—the premium was to be ten per cent higher. For two more weeks—until October 15—the premium rate jumped to twenty-five per cent.
On the steamers Warkworlh and Farnworth, for instance, the minimum additional premium for navigating in Hudson Bay waters for fifty-two days—August 10 to September 30— would amount to £1,895, based upon hull and machinery valuation of £56,000 and gross register tonnage of 4,950.
Including the additional premium on disbursements, protection and indemnity, and freight insurance for each of these vessels, estimated at £500, the increased cost of insurance per ship for the voyage to Churchill was about £2,395, or $11,639.00, (Sterling was quoted at $4.86 in New York on September 19).
On the grain the additional insurance, which was not included in the freight rate of 3/9d per quarter, ll]4 cents per bushel, would amount to about 4.27 cents per bushel.
The test shipments of 545,000 bushels of wheat made from the new seaport last September cost the taxpayers of Canada over $1 per bushel for the Churchill grain elevator alone. This is about three times the amount growers received for the grain.
This estimated cost of loading the grain to steamers through the de luxe elevator is made up as follows:
Capital cost of elevator: approximately $4.250.000.
Fixed charges: interest, five per cent; depreciation, four per cent; maintenance, etc., four per cent—total thirteen per cent.
Operating staff and power: Not less than $10,000 for the season of navigation.
Total overhead, $4.250,000 at thirteen percent,$552,500; plus staff and power. $562.500.
The fixed charges will go on for many years to come. The operating charges will cease if the elevator is abandoned. Owing to the costly installation of machinery, due regard must be given to rates for depreciation and maintenance.
It was well known by the officers who planned the
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Churchill a Mistake?
Continued from page 12
Churchill elevator, or should have been, that Argentina ships the bulk of her grain in bags to seaboard ports since there is very limited elevator capacity available in that country.
Millions of bushels of wheat are shipped in bags from the State of Washington to such ports as Portland, Astoria, or Seattle. Millions of bushels have been shipped in bags from Vancouver.
Why was not this method decided upon for Churchill, at least for the first two or three years, until this economically and physically hazardous route could be given a fair trial?
Had this been done in connection with the September test shipments, the bags could have been filled at country elevators or, if necessary, the grain put through the 3,500,000-bushel Govemment-owned terminal elevator in Saskatoon, and there graded, bagged, and loaded into cars for shipment to Churchill.
The Government could have borne the extra cost of bagging the wheat and would have saved a very large sum of money, considering the size of the shipment in relation to the annual overhead at Churchill.
Various Eastern public elevators publish tariffs showing the cost of bagging grain, in lots of 20.000 bushels and over, at 1}4 cents per bushel, bags and twine extra. On the 545,000 bushels shipped the set-up would have been as follows:
Bagging, weighing and loading into cars,
545,000 bu. at 1 %c...................................S 6,812.50
272,500 new jute bags at $100 per M........ 27,250.00
Twine, 4,000 lbs. at 17c............................... 680.00
Loading, direct from cars to steamer,
16,500 tons at 50c..................................... 8,250.00
7.8 cents per bushel in new bags, or 6.1 cents in used bags.
(Bags to be loaded into steamer intact or proportion slit and wheat bulked. No addition to sale price or recovery from bags reckoned.)
TT WILL be observed that the Churchill
elevator will need to ship over 7,000,000 bushels of grain in each short season before the cost per bushel to the taxpayers, for the elevator only, could be brought down even as low as the above estimated cost of shipping in bags.
This volume is scarcely probable since the average monthly exports from all Canadian Atlantic ports during August and September approximated but 10,000,000 bushels for the five-year period 1925-1929. A large projX)rtion of this movement was exported in liners from Montreal and Quebec at low "berth” rates. Certainly, no liners are likely to be available at Churchill for parcel shipments. It is one thing to ship grain, but it is another thing to sell it.
There are those who probably would insist that Churchill needed this fine elevator liefore trial shipments could be properly made. But grain exjxjrters are not interested so much in the method of loading grain to steamers as they are in the cost of the operation.
Even were it granted that Churchill needed a grain elevator to give an air of permanency to the new route and thus seek to impress insurance underwriters and other interested persons, why was it found desirable to build an over-equipped and costlyhouse of 2.500.000 bushels capacity?
Vancouver—now Canada’s second seaport - started off as a major grain outlet in 1921 with a great deal more promise than Churchill ever had: and yet an elevator of
1.250.000 bushels capacity, which cost but $850,000, was considered adequate until the growth of traffic justified increased facilities.
Saint John, which has handled more than 30,000.000 bushels of grain in a season, managed to get along until 1914 with but
750.000 bushels of elevator capacity; and until 1920 with an additional million.
Halifax, one of the finest deep-water ports in Canada, open the year round, had, until
1925, elevator capacity of only 500,000 bushels, which was replaced in that year by a new, modern house of 1,000,000 bushels capacity. Quebec, a splendid port open more than seven months of the year, had until recently elevator capacity of but 2,000,000 bushels.
Let super-optimistic supporters of the Hudson Bay route bear in mind some fundamental factors that apply to this route. Grain must be actually sold before exporters are likely to take a chance on the Churchill outlet. Definite contracts with shipowners and underwriters would be necessary, as a guarantee against excessive freight and insurance rates, before any grain would be railed to Churchill. Vessel freights out of Churchill will not be forced down on a distress basis because of surplus tonnage at or near the port, as frequently happens in other prominent ports.
It seems highly improbable that any grain exporter would want to store and hold grain at Churchill, so far out of position, even did the Government offer permanent free storage.
Moreover, no one has yet solved the problem of keeping available at that bleak port sufficient men able to load vessels as required. Construction gangs, such as loaded the Warkworth and Farnworth, won’t be there indefinitely.
Those who lightly thrust aside the possible danger to shipping—that is, to vessels not built for navigation in ice-infested waters— from the hard, blue, Arctic ice of Hudson Bay and Strait might be wise to give serious consideration to the fact that at least ordinary marine risks would be unavoidable in these waters. No one can abolish fog, snowstorms, gales, collision, stranding, foundering, fire, machinery breakdowns and other common causes of shipping casualties.
The possibilities of accidents in Bay waters are greatly increased due to the proximity of the Magnetic North Pole, located in the Peninsula of Boothia, only about 800 miles from Hudson Strait. The ordinary ship’s compass often refuses to work properly on account of the magnetic pole. A gyro compass is reliable for Use in these waters as it is the only instrument which will indicate geographic or true north, and at the same time be immune from the magnetic disturbances inevitable in Hudson Bay and Strait.
Unfortunately, the gyroscopic compass is not used in tramp steamers, it being considered too expensive a luxury for the regular trade routes where magnetic disturbances are not prevalent. Moreover, only the better class of tramp vessels are equipped with radio direction-finding apparatus; which fact would seem to restrict the number of vessels that might be used in the Hudson Bay trade.
Since there is no dry dock closer than St. John’s, Newfoundland, or Halifax, it seems unreasonable to expect underwriters to quote premiums lower than what is warranted by the risks of loss involved. Radio direction-finding stations and other elaborate aids to navigation will not suffice to get damaged or disabled vessels to the nearest dry dock. When all these adverse factors are considered, there seems little likelilKxxl of hull and cargo insurance rates being lowered appreciably.
IT SHOULD be observed also that much more money remains in Canada as a result of routing grain via Montreal or other Eastern Canadian ports than would be the case with respect to shipments via Churchill.
It will be noted in connection with the test shipment that the whole of the freight charges, exclusive of rail freight to Churchill, was paid to non-Canadian shipowners. If shipped via Montreal, over fifty-seven per cent of the through water freight—$16,620 on one cargo alone—would have gone to
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Canadian lake shipping companies, plus $498 for wharfage to the Harbor Commission of Montreal. Is it sound economy for the Federal Government to subsidize the Hudson Bay route and thereby deprive the hard-pressed Canadian lake shipping organizations, which employ thousands of men and women, of customary traffic? Surely, proponents of thê new route would not declare that prairie grain growers need no longer depend upon the Canadian lake Heet and, therefore, it is permissible to cut substantially the normal lake traffic on eastbound export grain.
Imagine the lake fleet of Canadian grain carriers swept completely off the Great Lakes due to the competition of newfangled, Government-subsidized grain routes ! Is this the goal aimed at by the Government bureaucrats? Do they wish to throw Canada’s lake grain trade entirely into the hands of American owners of lake shipping?
In 1920 American lake vessels carried 35.3 per cent, or 47,000,000 bushels, of Canadian grain shipped from Fort William —Port Arthur. In 1928 they carried 51.6 per cent, or nearly 200,000,000 bushels.
In conclusion, to those who may think that there is not enough Government in business, or that there is sufficient business in Government, the opinion of a prominent Dominion official, of many years service, should be illuminating. From a mid-January editorial in the Montreal Herald the following lead is selected :
Governments Do Too Many Things
‘‘Dr. J. A. Ruddick, for the past forty years Dominion Dairy Commissioner, is now making valedictory addresses prior to retirement. Speaking last week in Ontario he said:
“ ‘I sometimes think that governments do too many things for the
people of this country. It tends to destroy initiative and self-reliance and to encourage an unhealthy dependence on the public purse.’ ”
‘‘And that is not the half of it,” continues the Herald. “Lots of things that governments do in the name of help are simply nothing more or less than shameful waste of money. For instance ...”
But let the reader finish the editorial in his own way.
Comparative Cost to Exporter of Shipping Wheat Via Hudson Bay Route And Via Montreal
Estimated cost per S. S. Farnworth, Churchill to London, September 18, 1931.
Churchill, elevation, delivery, wharfage,
etc., (waived by Government)................
Freight to London, 277,(XX) bu. wheat at
3/9d per q tr., or 11 Vic. per bu...................$
Cargo insurance, (65c. per bu., c.i.f.
London), $180,050 at 2 per cent............
Ship’s disbursements, (usually absorbed in freight rate but in this case paid by Government) stevedoring, fitting ship, trimming, bagging grain and bags; ship’s agent, fee; travelling expenses, etc., estimated....................................................
Total for cargo.............................................. 39,763.50
Or 14.35 cents per bushel.
Same quantity, if shipped via Montreal, September by tramp steamer, full cargo, actual rates.
Fort William, elevation, delivery, etc.,
(if on same basis as Churchill)................. free
Lake freight, Fort William to Montreal,
277,000 bu. at 6c. per bu........................... $16,620.00
Lake cargo insurance, 277,000 bu. wheat
(60c.), $166,200at 15c. per$100.............. 249.30
Elevation at Montreal, included in lake
Delivery at Montreal, included in ocean
Top wharfage at Montreal, 277,OCX) bu.,
8,300 tons at 6c. per ton................. 498.00
Stevedoring, fitting ship, trimming, bag-
?;ing grain and bags—included in ocean
Ocean freight, Montreal to London, l/6d
per qtr., or 4 He. oh 277,000 bu. 12,465.00
Ocean cargo insurance, (65c. per bu. c.i.f.
London) $180,050 at 27 He. per $100. .. 495.14
Total for cargo............................................. 30,327.44
Or 10.95 cents per bushel.
Note: If charges at Fort William (1.5 cents per bushel) be not waived, the cost via Montreal would then be 12.45 cents per bushel.