Big harvest to haul | Ag industry watches closely as negotiations continue between CN and its workers
Disruptions at either one of Canada’s major railway companies would have serious consequences for the grain industry, says the head of an organization representing the country’s largest grain handlers.
Wade Sobkowich, executive director with the Western Grain Elevators Association, said any disruption to rail service — be it labour related or otherwise — would make the already difficult task of moving this year’s record crop even more onerous.
The WGEA represents major grain handlers including Viterra, Richardson and Cargill.
Association members handle 90 percent of Canada’s bulk grain exports.
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“It’s a large crop … the largest in Canadian history, so it stands to reason that if we have more volumes of grain and oilseeds to move, that we’re going to struggle more than we otherwise would,” Sobkowich said.
“So yes, we’re concerned with our ability to do that.”
Last week, the union representing conductors, trainmen, yard workers and traffic co-ordinators at Canadian National Railway said labour disruptions at Canada’s largest railway could occur before the end of the month.
Representatives from the union and the railway met with a federally appointed mediator Oct. 21.
Entering the meeting, officials from both sides said they were optimistic that progress would be made.
However, a settlement had yet to be announced by the Western Producer’s press deadline Oct. 21.
Close to 3,000 CN workers represented by the Teamsters have been without an agreement since late July.
“While the earliest date for a strike or lockout is … Oct. 29, CN remains optimistic that it can negotiate an amicable settlement with the (union) to avoid labour disruption,” CN’s Mark Hallman said in an Oct. 21 email.
The threat of any disruptions to rail service, caused by labour, weather or another factor, is causing anxiety among farmers and grain handlers.
Sobkowich said fulfilment of rail car orders is already low with an estimated 50 percent of orders going unfilled each week for the past month or so.
“Grain handling companies are already rationing their sales” to match rail capacity, he said.
“The country system is about 91 percent full and terminals have a lot of space left, so we need to move a lot of products from the country to the terminals so that we can … relieve congestion,” he said.
Moving this year’s big harvest will require all parties along the supply chain to work together, not just railways, Hallman told Reuters last week.
CN expects to have a $100 million expansion to its capacity on the Winnipeg-Edmonton corridor in place by the end of November.
Mark Hemmes, president of Quorum Corp, which monitors rail performance in the grain sector, said both of Canada’s major railways are offering a larger number of rail cars for grain than usual.
However, moving crops fluidly is also about matching the needs of vessels lined up at port, he said.
“The railways are motivated to move as much grain as they can, and they may have a tendency to grab grain from an origin that might not match what’s required in that time frame at the port. That’s where we end up with congestion.”
Sobkowich acknowledged that demand for rail cars is higher than normal this year, in step with agricultural production.
However, he said current railway performance is failing to meet the grain industry’s requirements.
A bigger factor complicating grain movement this year is demand for railway capacity from other sectors of the economy.
“I think it’s fair to say that a large part of the problem is because they’re moving a lot more oil and petroleum based products,” he said.
Grain companies are incurring monetary penalties related to contract extensions and vessel demurrage, which are ultimately reflected in the payments producers receive for their grain, he added.
Sobkowich was also critical of rail service legislation passed by the federal government in June.
That legislation gives railway customers the right to negotiate service level agreements with railway companies.
However, Sobkowich said nobody in the grain industry is lining up to negotiate a service level agreement, largely because the arbitration process does not include provisions for monetary penalties.
“It (the legislation) is not having an effect,” Sobkowich said.
“We asked for some amendments to the legislation before it was passed and we didn’t get them, so it’s essentially made the legislation not very useful for grain shippers,” he said.
“We don’t see anybody sitting down and negotiating service level agreements with the railways because at the end of the day …you can’t negotiate a service level agreement that puts in penalties for poor rail performance.”
