Canadian Pacific Railway says demand for shipping is down but it is ready to move the smaller-than-average crop
Executives at Canadian Pacific Railway say they are ready to move Western Canada’s grain and oilseed crop but they acknowledged last week that shipping activity early in the 2016-17 crop year has been a bit slower than expected.
“I think right now, we would (have hoped) to be moving more and we would have hoped that it would have been ramped up a little quicker,” said John Brooks, CP’s senior vice-president and chief marketing officer, in an Aug. 21 interview.
“Maybe it (suggests) some of the producers in our territory are a little bit reluctant to move some grain right now, until they see exactly what they have out there.”
“We’re not disappointed but we’re waiting and watching and ready for this crop to get going.”
By all accounts, Western Canada’s 2017 harvest will be earlier than expected in many regions.
Pulse crops in southern parts of the Prairies are mostly harvested and durum crops are beginning to come off, with yields generally lower than expected.
Harvest progress is a week to two weeks behind in more northerly growing areas but yields are expected to be average or even slightly above average in many regions.
Producers that are knee deep into harvest are watching markets closely and may be less inclined to deliver grain in anticipation of future rallies.
Brooks said grain companies have indicated they are anticipating strong and steady shipping demand once farmer deliveries begin to flow.
“I think the feedback that we’re getting from the shippers is that once it gets going, it’s going to be a fairly high level of demand…,” Brooks said.
“We’re just ready to get going.”
CP has not made a prediction on the size of Western Canada’s 2017-18 crop but Brooks said the company is prepared for a 66 to 67 million tonne harvest.
“That’s what we sort of modelled off (and that’s) what our expectation was,” Brooks said.
“I can tell you that we’re below that, but I think regardless, we’re going to be ready to move it….”
With a smaller-than-average crop expected on the Prairies this year, competition for grain could be higher than it’s been for several years.
The 2016-17 crop was the second largest on record in Western Canada and Brooks said larger crops over the past few years have contributed to generally strong demand for shipping services.
This year, with fewer tonnes to ship and more high-throughput country elevators coming on line, competition for farmers’ production could be heightened.
“(It) will be interesting to see how things play out,” Brooks said.
“I do think the level of competitiveness between the grain companies is significant and I know they all want to capture their share in the marketplace….”
Overall, shipping efficiency within the grain supply chain has increased dramatically over the past few years, Brooks added.
New infrastructure investments by grain companies and railways has contributed to faster load times and shorter cycle times for grain hopper cars.
CP’s introduction of dedicated grain trains under the dedicated train program (DTP) has given shippers and railways more certainty over the number of cars required at each delivery point throughout the year and car placement schedules, Brooks added.
The dedicated train program is available to shipping locations that have the ability to load 112-cars at once, with load out times of 24 hours or less.
The DTP rewards shippers for quick loading and unloading capabilities and allows the railway to make more efficient use of its on-track assets.
“Probably about 75 percent of our unit train movements move in our dedicated (grain) trains so it’s a pretty big percentage of our total grain movement,” Brooks said.
“We’ve actually sold into the marketplace about 15 percent more dedicated trains than we did (last) year on what will likely be a smaller crop.”
In general, shipping efficiency has increased since the elimination of the Canadian Wheat Board five years ago, Brooks said.
“The level of collaboration between CP and our shippers is at an all-time high,” he said.
“The level of co-ordination with each one of those customers is pretty intense so I think it’s created a lot of good dialogue and it’s actually created some opportunities in terms of learning about things we can do better as a railway and things that our customers are looking for.”