Railways need crop forecasting assistance to plan service

Railways


No one in the prairie grain industry relies on government departments and agencies to give them the true size of a crop.

However, that’s something Canadian National Railway admits doing.

I was surprised — shocked, actually — when I heard this from CN executive vice-president and chief marketing officer Jean-Jacques Ruest in both a speech and an interview at the Canadian Global Crops Symposium April 15.

I mean, everybody takes Agriculture Canada and Statistics Canada’s best guesses seriously, but only as a starting point, a base line. They then do a lot of work coming up with refined estimates that are much more likely to be accurate.

Except, apparently, for railways such as CN, which happen to be the single most important link in the supply chain that takes crops from prairie farms to customers on the other side of the planet.

I’m not mentioning this as a way of trashing people like Ruest or CN, who were honest and open at the grain symposium, but as an introduction to three things I think are necessary to prevent this present logistics nightmare from recurring:

  • To the railways: get into the business of producing your own crop production estimates.
  • To government: don’t you dare cut back on the quality or quantity of official estimates.
  • To industry: get much more proactive in helping the railways, ports and others figure out what’s coming their way now and in coming years.

Here’s what I mean:

I was surprised to hear how reliant companies such as CN are on government crop estimates.

Grain companies, marketing agencies and others have staff and put lots of resources into formulating their own concrete estimates of crop size and quality.

The CWB, for excellent example, has long had a sophisticated internal crop surveillance program that gives the grain industry much needed up-to-date information.

Farm marketing advisories such as FarmLink Marketing and Agri-Trend develop a pretty good sense of what their prairie-wide farmer base is likely to produce, as do analytical companies such as Informa Economics.

Railways, which are far bigger than any Canadian grain company or marketing company, can do as well, and should do better.

If organizations such as CN are utterly reliant upon Agriculture Canada and Statistics Canada to develop their sense of what capacity and planning they will need, then the government has a moral obligation, at least for now, to supply it.

We have a vibrant private sector grain industry, but it relies far more than I imagined on the crucial estimates issued by Agriculture Canada’s production and market outlooks and by Statistics Canada’s crop production and stockpile surveys.

The government has cut some funding from agencies such as Statistics Canada, and that has already outraged the analysts who rely upon it for establishing their baseline estimates.

With CN highlighting how it relies even more than the independent analysts on those numbers, the government had better not reduce the amount or quality of data coming from those sources.

I was glad to hear that Canada’s grain companies are providing internal estimates and information to companies such as CN. That’s a sacrifice for them because internal numbers are often prized proprietary secrets and they’re not easy to share.

It shows that the grain companies are trying to do what they can to help.

However, I think the overall industry needs to go well beyond that.

The Canola Council of Canada is an excellent example of a sector getting together to provide concrete numbers and targets, years out into the future, so that that all its constituent elements can get their acts together.

However, Ruest told me and the grain symposium that companies such as CN need things made simpler. CN has to carry a dozen crops at least, plus potash, coal, lumber and manufacturer goods.

“We need this whole discussion to be translated into what it means in the world we’re in, which is the world of tonnage,” said Ruest in the interview. “When we take one crop at a time, we don’t get the full picture of the capacity needed, so we need a kind of grain export forecast.”

Well, there you have it, I say to grain industry people from farmers to exporters: CN wants better information so it can do a better job for you. Get together and provide it.

The grain symposium showed that the Canada Grains Council is serious about trying to expand its role to fill in for the loss of the CWB’s central place in grain organization. I can’t think of a more ideal organization than the council to take on that role of organizing information flow from the industry to CN and Canadian Pacific Railway. It should be considering doing that

This nightmare winter shows that everyone needs to do a better job communicating, so it’s now up to the railways, government and industry to do it.