Oat supply in jeopardy | Western Canada’s clogged railways have American millers on the brink of closure
Gerry Ritz’s announcement last week that Canadian railways are prioritizing grain shipments to west coast ports has set off alarm bells at U.S. oat mills, says an industry representative.
At a grain conference in Winnipeg in late February, agriculture minister Ritz said the railways are adding thousands of rail cars but the additional capacity will not be used to ship grain south.
“They’ve told the grain companies that they’re not going to entertain anything, in the next short time, that goes to the U.S. or Thunder Bay,” Ritz said.
Terry Tyson, grain procurement manager at Grain Millers Inc., which operates mills in Yorkton, Sask., Iowa and Oregon, said the oat trade has been buzzing over Ritz’s comments.
“It’s been dominating discussions within our industry since that came out, that (the West Coast) was the new focus,” he said from his Yorkton office.
“(But) even before minister Ritz’s announcement, the railroads had begun to convey that message to us in the oat trade.”
Randy Strychar, an oat industry analyst and grain trader in Vancouver, warned last week that U.S. mills are running dangerously low on oats. They can’t obtain sufficient supplies from Canada because of the railway logjam and shortage of grain cars on the Prairies.
Strychar said mills could shut down if rail cars aren’t available to transport Canadian oats to the Midwest.
Tyson confirmed that scenario is possible.
“I can speak for our mills in the U.S…. (At) one of our two U.S. facilities, I don’t know if we’d make 30 (days),” he said.
“It would come down to who is getting cars and who isn’t … (but) without Canadian supply, mills will run empty.”
Ritz said the U.S. hiatus would be short term, but Tyson said the oat industry doesn’t know what “short term” means.
“We don’t know how long this is going to persist,” he said.
“Our industry as a whole would almost put out a plea to reconsider this complete and utter focus on the West Coast and nothing else.”
The railways have told oat millers that shipping oats to the Midwest is less efficient than transporting grain to ports such as Vancouver. Shipments going west are usually 100 car trains, while oats going south are shipped in 25 car trains or fewer.
“If they head south, for most mills, they (railways) have to hand off the cars to another carrier to deliver in and bring back to switch out again,” Tyson said.
“They say that adds to their time frame. As well as, dealing with 25 car trains instead of 100.”
He said oat millers are evaluating potential solutions, such as identifying locations that could accept 100 car trains. Other oat millers would access grain from those central terminals.
“If the problem is the cars don’t turn fast enough or efficiently enough … what can we (oat millers) do to fix that?” Tyson said.
“It’s about making ourselves pretty again (to the railways).”
Tyson said oat millers are also considering the long-term implications of limited rail capacity in Western Canada.