The Canadian Wheat Board expects a Canadian Transportation Agency ruling to lead to greater efficiencies in its grain export program.
By ordering the railway to bring back a program allowing shippers to order 50 cars at a time, the federal regulator has injected much-needed flexibility into a grain shipping system that had deteriorated to the point where the CWB was having difficulty getting the correct grain to port position at the correct time.
“Instead of having to load 100 cars at one station and possibly moving product you don’t need, we’ll have more flexibility to move grain in smaller blocks and to move the correct product to port,” said Mark Dyck, manager of rail logistics with the CWB.
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In its submission to the transport agency, the CWB said 80 percent of the primary grain elevators in Western Canada could not qualify for CN’s GX100 program, which provides financial incentives to shippers filling 100-car trains for a minimum of 30 consecutive weeks.
And by simultaneously eliminating its GT Secure Export program, where shippers could order blocks of 50 rail cars, the railway was forcing small grain companies to either go through an expensive bidding process to secure car supply in advance or take a chance on the railway’s “unreliable and non-transparent” general allocation process.
The end result was a chaotic grain transportation system where the few companies that could meet the requirements of the GX100 program were loading grain on a weekly basis that might not even be required at port, simply to take advantage of shipping incentives.
The board said CN’s distribution policies seriously increased the logistical challenges of getting the various types, classes and grades of grain to port. It led to increased storage and demurrage costs and created congestion in the grain pipeline.
“The GX100 program offers too many large unit trains and too few smaller unit trains, which affects CWB’s ability to orderly market grain at a reasonable cost,” is how the transport agency summarized the board’s position.
Dyck said the CWB doesn’t have an issue with 100-car trains, but it needs the flexibility to move grain in 50-car units at certain times of the year and for certain specialized commodities like red winter wheat and malt barley.
The CTA said the submission by the wheat board, CN’s largest grain customer, was “particularly compelling” in convincing it that the difficulties the complainant, Great Northern Grain Terminals Ltd., had in obtaining adequate rail service were part of a system-wide failure.
“In establishing car supply policies that have restrictive terms and conditions like minimum order durations that exclude significant segments of the shipper community, CN unilaterally becomes the arbiter of which of its captive shippers are eligible for a competitive advantage,” said the agency in its decision.
“Through its virtually exclusive control of rail service in portions of the western Canadian grain market, CN creates an imbalance and, inevitably, as seen in this case, a failure in the marketplace.”
While the wheat board did not get all the remedies it was seeking, including the complete removal of the GX100 program, it is pleased that in addition to calling for a program allowing companies to order blocks of 50 rail cars, the regulator said CN cannot prevent Great Northern from trading cars with other shippers.
Dyck said trading gives small companies the ability to put together two 50-car trains to take advantage of CN’s $7 per tonne incentive for shipping 100-car trains.
He is confident the decision will resonate with the country’s other main railway, which has also been moving toward 100-car trains.
“I would hope that it will prevent (Canadian Pacific Railway) from going down the path that CN went,” said Dyck.
Aside from the indirect benefits for producers through a more efficient CWB shipping program, the decision should deliver tangible benefits to farmers by making small grain companies more competitive with the line companies.
“The decision will help keep competition in the country,” said Dyck.
