Grain companies don’t have to worry about getting enough grain to haul.
They don’t have to worry about making overseas sales deals for Canadian crops.
But they do have to worry about getting grain cars because they could always buy more from farmers and sell more to buyers if they could simply get enough rail service to get what they needed to port.
That’s a bad situation for farmers.
“They don’t get cars, they don’t buy the grain,” said Mark Hemmes, president of federally appointed grain monitor Quorum Corp., during Crop Connect on Feb. 13.
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“They’re not really competing for market share out there in the global market. They compete for rail capacity.”
This is the reality that farmers instinctively understand. The grain companies don’t fight too hard to get access to farmers’ grain because there’s always more than they could ever move.
That’s why, in my view, farmers always have much harsher views of the railways than they do of the lacklustre service they get from the grain companies. They sense that the grain companies are also caught in this capacity squeeze, even if it is price-taking farmers who always pay the costs.
It isn’t fair to blame the railways entirely for this situation. Grain production and shipping has radically increased in the past 40 years. As Hemmes sketched out for the CropConnect crowd, total supply of Canadian grain was about 54 million tonnes per year in the half-dozen years from 1980, but has risen to an 80 million tonne average in the last few years.
That requires a lot of extra grain handling and railroad capacity, and the various components of the industry have kept along with the growth. Railways have increased their capacity, port terminals have been built and expanded, and much storage has been constructed.
But the railways have not ever caught up with the supply of grain, and I’m sure that’s because it’s more comfortable for them to almost always have a surplus and no worries about being over-capacity than it would be to build out their systems for maximum capacity in high production years and have to carry that cost and management challenge for a few months.
“Don’t worry. Your grain will move.” That’s what one grain company executive told me was most infuriating about what the railways were telling him in 2013-14 when the grain companies were seeing overseas sales disappearing.
That nightmare winter saw the birth of new legislation to toughen demands on the railways, and that helped. Then last year most of the grain industry, and farmers especially, got what they wanted with Bill C-49, which offers hope that the creation of reciprocal penalties and other features will finally goad the railways into setting up their systems to handle a full prairie crop.
Will it achieve that? Hemmes said it will take a year to see how it’s working out. The legislation was passed after this crop year was already dunning.
But whether it works or not, farmers can’t let up the pressure on governments and the railways to do better. They will always think they’re doing well enough until there’s a crisis. Farmers need them to avoid crises in the first place.
And farmers could be a little tougher on the grain companies too. Those companies would no doubt like to move lots more because they make money per tonne, but right now they don’t need to fight for farmers grain, and that’s something every farmer realizes.
If we ever evolve a rail system that can almost always haul everything we can grow, and booming world demand can actually be directly engaged, we might finally see the grain companies act like they need and appreciate farmer favour.
As Hemmes said: “As producers, what you want is to create a situation in the country where grain companies … compete for your grain at the driveway …. When you add rail capacity … that means that grain companies will compete more for your grain in the driveway.”
Bill C-49 might not fix everything, but it’s been a step along a path that farmers will always have to tread. Farmers will never be able to relax and accept the way things are because everybody will always have an incentive to provide farmers with less than they need, and farmers can’t let them get away with that.
