Farm success is biggest grain transportation challenge

The prairie grain production business will never be anything other than a never-ending race between the ability of farmers to grow bigger and bigger crops and the ability of the grain-handling system to carry it all.  | Reuters/Valerie Zink photo

Some things never change.

Especially this: farmers fume when the grain-handling system backs up or slows down and they get stuck with mountains of grain on the farm, have no cash flow and see their incomes and financial security leaking away as the grain companies and railways seem to do fine.

Ever since I started working for The Western Producer in 1994, I’ve been covering farmers’ frustrations with what seems like a chronically inadequate grain handling and transportation system that never seems to be able to keep up with farmers’ needs and reasonable expectations.

In one way that inadequacy is obvious. Whether it was the grain transportation crisis of 1996-97 or that of 2013-14, or the near-disaster of 2019-20’s railway strike and blockades, Canada’s system always seems to be one step away from falling into another disaster, for which farmers will pay the price.

But in another way, it’s unfair to the railways, grain companies and ports to suggest they’re not doing their jobs or that they’re neglecting farmers’ needs.

Sure, any year of extreme cold or an extended incident of a main line being blockaded will see farmers unable to deliver grain and having to carry the costs and risk of all that grain sitting in bins, unable to move.

This is not ever going to change. That’s because farmers keep kicking the can down the road when it comes to setting a reasonable expectation for what the system is going to be required to handle.

Back in 1995, farmers only produced about 47 million tonnes of crop. Last year they produced 77 million tonnes. We’re expecting the elevators and railways to move all that extra crop in about the same amount of time, and to move it down the same two main lines and through the same ports.

That’s quite a lot to ask.

Fortunately, because handling and hauling grain makes money, lots of private players are willing to invest in the business, and they have been.

“We have not been shy in terms of spending capital even in the midst of a pandemic,” David Przednowek, Canadian National Railway’s grain manager, said about his company’s more than $2 billion in investments in 2020.

That money has gone into double-tracking portions of CN’s main line, adding sidings that will accommodate the longest trains, improving bridges and tunnels, and establishing systems that allow the trains to run better and longer without breakdowns.

Canadian Pacific Railway has been doing the same things, investing in a grain industry that it sees having a future of continuing growth.

So too have the ports and grain elevator companies been pouring money into the grain-handling system. They all see more and more growth coming in Western Canada’s crop-growing economy, and they all want as big a piece of that action as they can get.

Unfortunately for farmers, the more successful they are in growing ever-bigger crops, the more they will push the grain-handling system to the max. There’s no spare capacity in the system most years because farmers keep growing bigger crops. What was sufficient two years ago probably won’t be sufficient two years from now.

A year of widespread crop production problems leaves some slack in the system. A year of bumper crops quickly overwhelms the ability of the system to haul it all by the end of the year, and especially during the crucial winter market.

Farmers are caught in the situation of hoping to produce the greatest yields possible, knowing that if most other farmers also achieve that they’ll plug the system.

It’s a good problem to have. At least, it’s a better problem to have than producing too little or not seeing yields rising steadily over time. Every time farmers climb toward a higher yield plateau, they are challenging the handling system to keep up with them.

Farmers are right to expect the grain-handling system to be cost-competitive and adequate to meet their needs. It isn’t a truly free market because farmers are captive suppliers within it.

But it will never be anything other than a never-ending race between the ability of farmers to grow bigger and bigger crops and the ability of the grain-handling system to carry it all.

It’s unfortunate, but farmers are probably going to have to lead the growth of the system by proving they can keep growing bigger crops. Instead of a situation of “build it and the yields will come,” it’s one of “grow it, and they will build it.”

The only time farmers are likely to feel that rail and grain-handling capacities are sufficient is if western Canadian crop yields permanently top out while new investments in capacity are still being completed.

That’s not a day any farmer should want to see.

The farmer’s frustrations with the grain-handling system are likely to be permanent. The better the farmer does in the field, the more he confronts the transportation system with a load it might not yet be capable of carrying.

It’d be nice if things could be different, but that would mean overturning one of the foundational phenomena of the prairie grain production business. It’s just something farmers have to live with.

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