It is clear that Ottawa had good intentions in March when it imposed regulations re-quiring Canada’s Class 1 railway carriers — Canadian National Railway and Canadian Pacific Railway — to move a million tonnes of western Canadian grain each week to market or export position.
But now that the regulations have been in place for the better part of a year, it is also clear they have had many unintended negative repercussions, that are costing some stakeholders in the grain industry millions of dollars a week.
Ottawa’s million-tonne-per-week directive was effective in that it compelled CN and CP to move a specified amount of prairie grain to market or pay monetary fines for non-compliance.
The directive was put in place after a long, cold winter that impeded grain shipments and left most prairie elevators filled to capacity. To its credit, the directive helped get grain moving. Fluidity was returned quickly to a prairie elevator system that was severely constipated.
However, the directive also created winners and losers in the western Canadian grain industry. Short-line railway operators, particularly those in Saskatchewan, are clearly among the losers.
At a recent meeting of the Saskatchewan Shortline Railway Association, short-line operators were unanimous in denouncing the million-tonne-per-week regulations.
SSRA members who spoke to The Western Producer said the regulations — predictably — have prompted CN and CP to move more grain than ever from centralized or main-line locations.
Indeed, business has never been better for grain companies that have elevators on centralized main-line railway locations.
Grain volumes are up, rail cars are plentiful and farmers are hauling grain farther than ever for a delivery opportunity.
Little wonder that basis levels and main-line elevator profits have risen to such unimaginable levels.
Short-line operators have not been so lucky. They have seen a steady erosion of business since Ottawa’s directive was put in place.
Delivery of empty rail cars to short-line locations by CN and CP has been sporadic and unpredictable at best.
Business opportunities are being lost, and in many cases, sales programs are half a year behind. With no empty cars to fill, short lines and the grain buyers that depend on them are defaulting on delivery commitments, losing revenues and ultimately losing customers.
Local grain producers, desperate for a delivery opportunity, are looking further afield for a chance to sell their grain.
More often than not, a farmer’s long drive to a main line elevator location does not result in the best grain price, but it does result in a sale.
How much revenue have farmers, short lines and independent grain buyers lost this year?
That number may never be known.
What seems clear, however, is that Ottawa’s regulations need to be reworked or replaced with a system that provides equal opportunities for all stakeholders.
Shortly after Ottawa’s regulations were put in place, federal agriculture minister Gerry Ritz acknowledged publicly that the million-tonne-per-week regulation was a “blunt instrument,” meant to revive a rail system that had flat-lined during the winter.
The patient has been revived, Mr. Ritz, but unfortunately, there were limbs and appendages sacrificed in the process.
It’s high time for Ottawa to bring out the scalpel and do some detail work, lest Western Canada’s short lines and the farmers they serve die a slow and painful death.