Some Canadian crops might remain in storage until August, when 2014 product supposed to start shipping
OTTAWA—At a world grain summit two weeks ago in Singapore, Gary Stanford was startled by what he heard.
Before the president of the Grain Growers of Canada had his turn at the podium, speaker after speaker from at least 10 countries stood up to raise serious questions about Canada’s ability to ship grain.
It was a rude awakening, he said—and a clear indication to him that Canada’s international reputation as a reliable grain producer was on the line.
“It was really surprising to me that, in Singapore, where you’re so far away from Canada, that everyone was talking about it,” Stanford said in an interview last week.
Canada is the world’s third largest exporter of grain, and known for its high-quality product.
But the fact Canada’s reputation as a trading nation could be damaged so badly—and so quickly—emphasized the importance in Stanford’s mind of federal legislation expected this week to address serious flaws in the country’s grain transportation system.
“We’re increasing our grain shipments by around four per cent a year,” he said, noting that 2013’s bumper crop was an “anomaly.”
“If we can’t handle it now, how are we going to handle it in 10 years?”
Shipments have increased exponentially in the past two weeks, ever since Transport Minister Lisa Raitt announced an order-in-council that gave Canada’s major rail companies four weeks—until April 7—to haul significantly more western grain.
Canadian National Railway CO. (CN) reports that over the past two weeks, the number of grain hopper cars seen at elevators across the country has exceeded 4,300 a week, up from an average of fewer than 3,000 per week last month.
But farm groups and Raitt herself have acknowledged that even with that order, some crops might remain in storage until August, when this year’s product is supposed to begin shipping out.
Agriculture Minister Gerry Ritz has been tight-lipped about the details of the legislation, saying only that it will provide “clear and achievable solutions” to Canada’s grain logistics issues.
“The facts show that the current rail service being provided to farmers is not keeping pace with demand,” Ritz said in an email.
“Our government continues to stand with our farmers and will introduce legislation to address the current level of service on the resumption of Parliament.”
Raitt’s order-in-council would impose daily fines of up to $100,000 on CN and rival Canadian Pacific Railway Ltd. (CP) should they fail to double the volume of grain shipments.
Similar penalties are needed in legislation to give performance contracts between shippers and the railways some teeth, said Rick White, general manager at the Canadian Canola Growers Association.
“Right now there are no financial implications for no performance,” White said. “Anything would be better than what we’ve got right now.”
Heavy-handed legislation would be the wrong approach, the railways warn.
Ottawa should be looking at the entire supply chain, they say.
“CP’s position remains that moving grain from the farm to the port is a complex pipeline involving many parties and requires all participants of the Canadian grain handling and transportation system to work together, which requires a 24/7 commitment similar to the railways,” CP spokesperson Ed Greenberg said in a statement.
Both CP and CN blame abnormally cold weather for much of the slowdown in shipments.
For safety reasons, the railways reduce the number of cars their locomotives pull in winter to 70 per cent of what they move during warmer months.
CN also says grain elevator companies acted too slowly at the beginning of last year’s harvest to get products to market.
Elevator operators failed to take advantage of around 10,000 carloads of available rail capacity on the Prairies when the bumper crop started coming in during August, said CN.
By mid-September last year, the company said it was moving a record volume, averaging more than 5,000 cars per week—22 per cent higher than its historical average—until early December when the harsh winter started.
That’s roughly the number of cars that the federal government wants the railways to be moving by two weeks from now.
Farmers, however, say the railways were cutting capacity as winter set in—laying off workers and leasing locomotives to companies in the United States—when they should have been ramping up in preparation to move a bumper crop.
“There was a large crop this year but the railways have failed to respond to the increase in demand for the movement of grain in any significant way,” said White.
“The railways should have been better prepared to accommodate the larger crop and the cold weather, both of which they knew about back in September.”
Besides enacting financial penalties in the Transportation Act to make the railways more accountable, farmers hope the proposed legislation includes: