The biggest issue in grain biz – Opinion

Sobkowich is the executive director of the Western Grain Elevator Association, which represents eight farmer-owned public and private grain businesses in Canada.

In recent weeks the Western Producer has thrown a welcomed light onto ongoing concerns over deteriorating rail service. This is one of the most important issues facing the western Canadian grain industry today.

Farmers and grain companies have invested heavily in the western Canadian grain handling system in the last 20 years. In response to railway demands for consolidated shipping points, grain companies constructed high-throughput elevators capable of rapidly loading unit trains. Smaller country elevators across the Prairies were closed in this drive to lower system costs.

This was done with the promise of greater efficiency in the system and better rail service to the elevators. Unfortunately, more than ever, grain companies are struggling to meet contractual commitments due to railway shortfalls, inefficiencies and failures. Transportation service failures result in extra costs. Companies face this at elevators when extra staff is brought on to load cars that don’t arrive; something that occurs quite regularly on weekends.

The industry sees increased export terminal costs due to lack of reliability of arrival times of rail cars. Vessel demurrage and contract penalties mount when the grain does not move into port in time to meet contractual commitments.

There is also a cost that comes from lost sales opportunities or sales delayed beyond premium price periods. This cost is exacerbated as Canada’s reputation as an unreliable supplier grows.

Canadian shippers face an accountability problem.

For example, companies are required to load unit trains within 24 hours to achieve efficiency rate incentives from the railways. Once cars arrive at port position, terminal operators must unload cars within 24 hours or they are subject to rail car demurrage. Grain companies don’t object to these accountability measures. They help bring efficiency and increase the capacity available for the entire value chain.

However, we do object to the fact that this accountability does not extend to every link in the chain. There is no corresponding accountability on the railway side. No one is held accountable when there is a failure to spot cars or when cars fail to arrive at port in a reasonable time.

Simply put, there is no penalty for a railway if it fails to provide service.

Grain shippers are captive. A grain company situated on a railway line has little choice but to ship product on that railway. Service will be offered under terms that minimize railway costs, not necessarily to meet the transportation needs of the grain industry.

There seems to be an assumption that the grain will move eventually. The negative impact of untimely movement on the operations of grain companies and farmers does not appear to be a factor in service decisions.

Railways are not operating in an unpredictable manner. They are simply maximizing their returns under the current legislative environment. They cannot be expected to change their behaviour until federal transportation law is amended.

Failure to bring forward legislative changes in a timely way, or even worse, introduce a bill that fails to fully address shippers’ serious concerns, will result in an ongoing erosion of our competitive position in international markets.

If the government fails to move forward with the right package of amendments, the grain industry will remain without appropriate mechanisms to challenge railways when problems arise.

This will result in:

  • lost grain sales domestically and internationally;
  • lost revenue because grain will be sold outside of peak price periods;
  • large potential for significant vessel demurrage bills and contract penalty charges;
  • lost confidence in Canada as a reliable supplier.

All of these costs will make Canadian grain, oilseed and special crop production less viable. With no changes to the legislation and no increases in railway accountability, there is little that can be done to address service disruptions and almost no way of holding the railways accountable.

There is much that individual farmers can do to correct transportation problems. Get in touch with your parliamentarians and push them on this issue. Remind your member of Parliament that transportation represents the single largest cost to farmers.

Let them know that the future competitiveness of western Canadian agriculture depends on an adequate and reliable transportation system.

Canadian agriculture needs to see transportation legislation this spring. If this is to happen, Canadian political leaders of all political stripes need support from individual producers, farm group leaders, as well as industry.

About the author

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