Canada’s two major rail companies have taken heat over the last few years for failure to provide consistent movement of agricultural products. However, now it looks like genuine change is underway.
The turnaround is remarkable.
After a difficult winter in 2013-14, which the Saskatchewan Wheat Development Commission says cost around $6.5 billion, and more difficulties during the 2017-18 winter, which cost $7.8 billion in delays according to the Western Grain Elevators Association, it looked like the problems in grain transportation would be with us for some time.
However, approval of the Transportation Modernization Act, which changed the maximum revenue entitlements for railroads, brought quick changes, largely through new capital investments.
This year looks like it will be close to a record year for grain movement in Western Canada.
Canadian National and Canadian Pacific railways invested heavily in new, more efficient cars that could carry more grain and enabled them to ship more cars per train.
CN spent more than $7 billion in capital over the last two years, which included new hopper cars. CP is spending $500 million on new high-capacity hopper cars. Both companies have built new track and have upgraded existing track.
In the past, railway investments in facilities barely kept pace with increased grain output. Wheat exports peaked in 2017, at an increase of 54 percent since 2006. Canola exports increased upwards of 150 percent from 2006-18, while other crops held steady.
The importance of successful rail transportation can’t be overstated. Canada is aiming to become the second-largest exporter of agricultural products in the world, up from fifth. Most of Canada’s soybeans, wheat, canola, pulses and beef cattle are exported. Over the last 10 years, exports in agriculture and agri-food have grown by more than 100 percent, with farm cash receipts increasing by 46 percent.
Yet it isn’t only railway infrastructure investment that has enabled rail companies. After the difficult 2016-17 winter, which saw producers again unable to move enough of their grain, CN replaced its chief executive officer.
CN is also setting up an advisory council on grain movement. Producers and farmer representatives from Manitoba, Alberta, Saskatchewan and British Columbia will provide advice and feedback on the company’s annual grain plans.
While the railways’ initiatives are laudable the recent success in grain movement isn’t all the rail companies’ doing. Investments in grain terminals on the West Coast and construction of a series of new elevators by grain companies have helped.
G3, for instance, built a high throughput terminal at North Vancouver, the first new export terminal in 50 years in the port.
Several other new projects and expansions are under way in Vancouver, so much so that vessel calls at the port could increase by as much as 12 ships per day by 2026.
However, along with successes, there has been tragedy. In February, a parked CP train began to move on its own before tumbling 60 metres from a bridge in British Columbia killing three employees. Winter still poses a problem for rail movement.
And with the delay in construction of oil pipelines, more oil is being moved by rail. If that trend continues, rail companies may again be trying to catch up.
More than $280 billion worth of goods are moved every year by Canada’s railways, about $15 billion in grain alone. We are seeing now what happens with targeted investment.
More is planned, so there is reason for optimism.
Karen Briere, Bruce Dyck, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.