Grain industry frustration with Canada’s two national railways is boiling over as stored grain doesn’t move as fast as many had hoped.
Canadian Pacific Railway and Canadian National Railway are hauling more grain than ever but it’s not good enough, say elevator companies and farmers.
“Simply saying that you’re moving more cars than ever is an unacceptable response,” said Doug Chorney, president of Manitoba’s Keystone Agricultural Producers.
“That’s like a firefighter telling you they’re putting out more fires than ever but when you’re calling from the second floor of your burning house ,it really doesn’t matter what they’re doing everywhere else. They have to get to you.”
Chorney finally got a call on the weekend that he can start moving soybeans to his local elevator.
“It’s December and we’re beginning our harvest delivery program,” he said. “That tells me (the railways) were not properly prepared in ad-vance of the season starting.”
Each railway is consistently providing 5,000 and 5,500 rail cars a week to haul grain in 2013-14.
It is much higher than previous years. CP supplied an average of 4,200 cars per week last year.
“That’s good, but the problem is that it’s nowhere near the demand,” said Wade Sobkowich, executive director of the Western Grain Elevator Association.
Grain shippers had ordered 9,925 more rail cars than CN was able to supply through Week 18 of the 2013-14 crop year. CP didn’t have Week 18 statistics at publishing time, but it had 7,953 unfilled car orders through Week 17.
“We’re just not getting enough,” said Sobkowich.
The unmet demand is resulting in contract penalties, demurrage costs, lost sales, plugged elevators and reduced grain prices for farmers.
“What we’re asking for is for the railways to consider a higher amount of investment in surge capacity,” said Sobkowich.
It means putting more rail cars into service during peak demand periods, such as post-harvest and when grain prices are high.
CN spokesperson Jim Feeny said the solution isn’t that simple.
“It’s not just a rail car issue, it’s a supply chain issue, and the supply chain has a certain capacity,” he said.
CN spent $100 million last year adding capacity to its western rail network, such as longer sidings. It is also working more closely with grain companies to better co-ordinate grain movement.
Feeny used a rush hour traffic analogy to explain why adding more rail cars into the system won’t necessarily increase the amount of grain arriving at port position.
“If you throw more automobiles onto a freeway at rush hour than the freeway is able to handle, what you end up with is congestion,” he said.
“It’s going to take longer to move the same amount of grain, and that’s what we want to avoid.”
Feeny said he has seen it happen before. He believes grain companies have unrealistic expectations, given the record volume of grain being moved this year.
“I don’t think the supply chain will ever be in a position where it can handle the entire crop in three months, which seems to be what we’re being asked to do right now,” he said.
CP spokesperson Ed Greenberg said the railway shipped more grain than ever in September and October with grain loadings 22 percent higher than the five-year average. Vancouver volumes are up 16 percent from last year.
“CP has been moving record amounts of Canadian grain for our customers, and we’re going to continue to target moving record volumes throughout the entire crop year,” he said.
“Grain is our railway’s single largest commodity and it’s very important and we’re responding as quickly and efficiently as possible to our grain customers at a time when the de-mand is very strong.”
Chorney said CP recently shed 450 locomotives and 10,000 rail cars from its fleet.
“That is not responding to the demands of the marketplace.”
He worries that farmers are missing out on a prime shipping period for northern hemisphere grain at a time when the weather has been unusually co-operative.
“It is critical to get our deliveries made because after the southern hemisphere crop starts to be harvested, we are in a whole new logistical disadvantage to key customers,” said Chorney.
The railways say this year’s bumper crops have magnified the problems, but Sobkowich contends that this is not a one-off situation. Grain companies have been complaining about poor service for five years.
He said there has been a paradigm shift in Canada’s grain industry where growers are consistently producing bigger crops, and Canada needs to figure out how to permanently reduce the bottlenecks in the transportation system.
Sobkowich said farmers and grain companies invest in bin space and equipment that they don’t use year-round.
“The question is, are the railways motivated to invest in equipment and capacity that they don’t use year round?” he said.
“We don’t think so. We think that they’re more motivated to flat-line that movement so that they can keep their costs constant.”
The railways know most of the grain piled on farms and stored in elevators will eventually make its way down their tracks.
In the meantime, elevators are plugged and basis levels are unattractive.
“We’re at 92 percent capacity right now,” said Sobkowich, which is pretty much full capacity because of segregation issues.
“We’re not clamouring to bring in farmer grain because we don’t have the space for it,” he said.
Chorney believes the permanent fix is to revisit the newly adopted level of service legislation, which has no teeth because the federal government failed to adopt vital shipper amendments.
“We have to look at consequences for the railways when they fail to meet service obligations because there are consequences for shippers and there are consequences for farmers,” he said.
Sobkowich isn’t buying the railway response that they are maxed out.
“There have been years in the past where the railways have provided 4,000 cars a week and they said that was near the top of what they could provide. But they found a way to provide more,” he said. “We do think it’s good that they are providing more capacity and they are moving more. We just need more still.”