An aging fleet and no federal investment means grain shippers and railways will need to look at new options
MOOSE JAW, Sask. — It is unlikely that governments will buy more grain hopper cars to replace the aging fleet, says Steve Pratte, policy manager at the Canadian Canola Growers Association.
However, that is one of six options loosely discussed as the grain industry looks at system capacity in the context of the Canada Transportation Act review.
Pratte told this summer’s annual Farming For Profit? conference that government car purchases beginning in the 1970s are viewed as a policy response to a unique period in the industry’s history that won’t be repeated.
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“I think that is not a realistic policy option, ever,” he said in an interview.
“It’s going to fall to the shippers or some sort of consortium.”
However, he said there is no clear way forward yet.
The other possibilities include:
- railway-purchased cars
- shipper-provided cars integrated into a common fleet
- shipper-provided cars operated as private fleets
- a partnership model in which parties would work together to replace the cars and competition would then drive car allocation
- a public-private partnership (P3) model in which a third party supplies the cars, the revenue cap stays in place so that the government can establish a floor price, and the railways use the cars
“For producers, the real issue is how is that going to be reflected in the price paid and what you’re paying for your transportation as part of your basis,” Pratte said of whoever owns the cars.
About 22,400 hoppers were in service at the end of 2014. The federal government owned 8,400 of them, while the Alberta and Saskatchewan governments and the then-Canadian Wheat Board owned 3,100.
That indicates about 10,900 were supplied by the railways and other shippers, Pratte said.
The cars owned by Alberta, Sask-atchewan and the former CWB will reach the end of their economic lives of about 40 years by 2022.
A more significant reduction will follow between 2025 and 2027, when 3,600 federal cars are slated to retire, he said. That doesn’t include cars that go out of service because of derailments or normal wear-and-tear.
“By this analysis, by 2035 there will be no remaining cars from the publicly supplied fleet,” Pratte said.
This is happening as western Canadian crop production is increasing. Annual handling has gone from 40 million tonnes to about 60 million tonnes over the last 30 years.
He said more capacity will be needed and at significant cost.
“At approximately $100,000 a rail car, replacing the federal fleet entails an estimated capital expenditure of approximately $840 million,” he told the conference.
Including the other publicly supplied cars pushes the tally to between $1.4 and $1.5 billion.
Newer cars can carry more grain, and trains can handle more of them, so it isn’t necessarily a one-for-one replacement, he added.
However, someone has to step forward.
Ron Gleim, president of the Chaplin Grain Corp., said his company ships several hundred cars a year and has had to lease cars from companies.
He said he has met with Canadian Pacific Railway and was told the railway matches supply to the size of crop it expects. If it’s only 75 percent of what it expects, that’s what it supplies.
“It looks to me like they’re going to force small processors like us, if we want service, we either have to lease our cars or own our cars. There is no future the way this is going,” Gleim said.
Chaplin Grain ships mainly pulses to India, and Gleim said similar processors are sprouting across the province.
“All this investment is being made and there’s absolutely no guarantee that we will get enough service to stay in business on a good crop if everybody has to manage cars,” he said.
Pratte said the grain sector would like suitable accommodation, as required under federal legislation, to be commercially driven rather than based on historical averages and railway allocation.
