CANADIAN GRAIN SALES TO SOVIETS HOLD KEY

CANADIAN GRAIN SALES TO SOVIETS HOLD KEY

Grain is the great question mark, as Great Lakes carriers struggle to rebound

from last year's traffic decline in the new shipping season, which starts today.

The key uncertainty is the level of Canada's grain shipments to the Soviet Union."Iron ore and coal look strong, but we are not getting good vibes about the opening months for Canadian grain," said Norman Hall, president of the Canadian Shipowners Association.

Canadian shipping lines are the chief users of the Seaway system of locks between Montreal and Lake Erie. U.S. Great Lakes carriers confine themselves to domestic trades within the lakes.

Duncan Maxwell, president of ULS International, a Toronto shipping firm, said the long-term trend points to "considerable fluctuations in world transportation demand for grain."

Planning ahead, he said, has become very difficult. Among the factors affecting demand for vessel space are hard currency problems in East Bloc countries and what Mr. Maxwell calls the "very erratic weather conditions in the past five years in North America."

Glendon Stewart, who recently succeeded William O'Neil as president of the Ottawa-based St. Lawrence Seaway Authority, a Canadian government agency, was very prudent in assessing the outlook for the new season.

"We are hoping for an increase in total traffic, but it is difficult to

put a figure on it," Mr. Stewart said.

Hazem Ghonima, a transportation analyst and former Seaway economist, estimates total cargo movements through the Seaway will increase by about 5 percent in 1990. His estimate is based on a certain pickup in Canadian grain traffic as well as fairly brisk U.S. grain activity via the Seaway.

Such volume would still, however, fail to recapture all the ground lost last year.

In 1989, total cargo on the Montreal-Lake Ontario section declined by 8.6 percent to 37.1 million metric tons, with a small increase in iron ore shipments failing to offset a 26 percent drop in grain traffic to 11.5 million tons.

The numbers were similar on the Welland Canal section, where total traffic fell by 8.3 percent to 39.3 million tons.

For the first time since the Seaway was established in 1959, U.S. grain movements, totaling 5.7 million tons last year, matched Canadian grain volume.

While U.S. grain traffic rose by 4 percent, Canadian grain traffic dropped dramatically by 42.6 percent.

The Soviet Union did not place its usual large order for Canadian grain last fall. That, together with severe early winter conditions and a five-week strike by the Canadian Coast Guard, had a significant impact on the overall season.

For its part, the Canadian Wheat Board, the Winnipeg-based agency that markets Canada's wheat sales abroad, stressed that last week's U.S.-Soviet grain deal does not affect an existing agreement between Canada and the Soviet Union.

"If the Soviets maintain usual international purchases, there will be room for Canada," said Brian Stacey, a Wheat Board spokesman.

Under the present agreement, which expires in August 1991, Canada is to provide a minimum 25 million tons of wheat and feed grains to the Soviet Union. There are no annual quotas and about 18 million tons have been shipped so far.

There is a possibility some of the grain from the Soviet-U.S. deal will be shipped via the Seaway, Mr. Hall said. Low water levels on the Mississippi should also help to bring overflow U.S. grain business into the Seaway, he added.

The Canadian Wheat Board recently announced, without giving details, a major grain sale to China.

All of Canada's Pacific Rim grain exports are shipped via West Coast ports, while the shipments to Europe of grain from the prairie provinces are moved by rail to the Port of Thunder Bay, at the tip of Lake Superior. For the months of April, May and June, these rail movements are expected to be well below average.

In terms of grain activity, last year was the worst in 20 years for Thunder Bay, with grain traffic declining to 7 million tons, from 11.1 million in 1988.