More cars sought Regulations sought by grain industry would give ag sector priority over others and include minimum shipments to the U.S.
WINNIPEG (Reuters) — Grain handlers are lobbying the federal government for even stricter rules that require railways to allocate thousands of rail cars to them each week.
The hope is to stop an unprecedented crop logjam from becoming worse.
Tougher rules could give grain handlers priority over other shippers, including oil companies, which have moved a rapidly growing although still relatively small volume of crude by rail.
A record-large harvest and frigid weather snarled the transportation system last fall and winter, leaving millions of tonnes of grain stuck in farm bins.
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Minimum shipments to the United States, which is part of the grain handlers’ wish list, could keep cereal companies from suffering a repeat of last winter’s oat shortage.
Federal agriculture minister Gerry Ritz said the government intends to have new regulations in place by mid-July, possibly with tougher volume requirements.
“If it’s necessary, it will be done,” he said. “I’m not going to be prescriptive yet.”
Under pressure from angry farmers, the government decided in March to order Canadian National Railway and Canadian Pacific Railway to boost grain shipments to minimum weekly levels.
The minimums expire in August, when the next harvest begins, but a recently passed bill allows Ottawa to set new targets for the 2014-15 crop year.
Adding more regulations creates tricky politics for the Conservatives, although they have also gotten tougher on banks and phone companies.
The Western Grain Elevator Association, is arguing for between 11,000 grain cars, which is now the weekly minimum, and 14,000, which CN says may overwhelm grain handlers.
WGEA is also asking for minimums along each rail corridor, such as the lines to the United States, Canada’s West Coast and Thunder Bay.
Grain handlers say railways shunned trips to the United States last winter, which can take longer from the Prairies than those to busy West Coast ports.
“If the railways ignore certain corridors and focus all movement into others, then it stands to reason that port terminals could face challenges unloading rail cars,” said WGEA executive director Wade Sobkowich.Â
The grain handlers’ lobbying push extends from Ritz to federal assistant deputy ministers, whom the WGEA met with in late May, and to the government’s Canadian Transportation Agency.
The CTA is meeting individually with shippers and railways, trying to estimate how much grain must move after the next harvest.
It will make recommendations to transport minister Lisa Raitt in coming weeks.
CN chief executive officer Claude Mongeau said the grain handlers’ call for up to 14,000 cars per week was “not constructive” because the industry had never moved more than 10,000 before the current rules.
CN will deploy hundreds of U.S.-based cars in Canada for the summer to clear some of the backlog in this usually slower period and aims to temporarily deliver 6,000 grain cars per week, exceeding the current requirement for 5,500 per railway.
The Port of Thunder Bay had its busiest month in 16 years in May, but there is still a mountain of grain to move.
Agriculture Canada estimates that leftover crops before the next harvest will amount to 22.4 million tonnes, the biggest pile in 34 years. Early indications point to the next crop reaching average to above-average size, adding considerably more to move.
“We’re moving all out as we speak, and we will continue into next year,” Mongeau said.
CP is working on an operating plan for the fall that includes improved train velocity and better use of its fleet to deliver more cars weekly, said spokesperson Ed Greenberg.
Railroad consultant Tony Hatch of ABH Consulting said further Canadian railroad regulation would be “crazy,” considering the ample incentive to ship as much grain as possible.
Despite its looser regulations, the U.S. rail system works “pretty darn well,” Hatch added.
Ritz said he and Raitt plan to meet with shippers and railway officials.
“The biggest difference moving forward will be the ability to get all the players around a table and talk it out,” he said.
“That was never done before. When it didn’t work right, they blamed each other.”
Considering the huge crops, a more co-operative approach looks more important than ever.
Months before farmers harvest a bushel, the Canadian arm of commodities trader Louis Dreyfus Corp is almost booked for spring wheat purchases through the end of 2014.
Buyers, worried about securing transportation, are making purchases three to six months in advance instead of the usual 60 days, Brant Randles of Louis Dreyfus said.
