The destruction by fire of a critical rail bridge connecting Alberta’s Peace Country producers to west coast ports highlights the vulnerabilities of the grain transportation system in Canada, according to the chair of the Alberta Wheat Commission.
“We need to find a way to make the system more resilient. Between weather issues and other things that can disrupt a rail line, it’s really a pretty skinny line of steel that connects us to our outside markets and keeps our economy running,” said Greg Sears.
Sears farms near Grande Prairie, Alta., and has been directly affected by the rail outage that occurred on Oct. 5, when a bridge about 200 metres long and 100 metres tall near Grande Cache, Alta., was destroyed by fire.
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The cause of the fire has yet to be determined and there is no timeline on when a replacement structure can be built.
That’s going to hit producers’ pocketbooks, at least in the short term, said Sears.
“I don’t think anyone is immune,” he said of the impacts of the rail outage. “Even my small 90-tonne contract of canola, that’s a high five figure amount of cash flow that the farm needs to buy its inputs and pay off last year’s crop.”
The situation is indicative of systemic issues with the Canadian rail network and its concentration split between Canadian National and Canadian Pacific railways, said Wade Sobkowich, executive director of the Western Grain Elevator Association.
“We’ve seen a drop in the car fulfilment numbers, on CP in particular, over the past three weeks,” said Sobkowich. “Whenever we see car fulfilment drop below 85 percent for three weeks in a row, we start to get concerned and we start to look deeper to what’s going on.”
In a CP statement, the company responsible for rail transportation on the southern portion of the Prairies said it’s addressing that concern.
“CP has quickly ramped up hopper car delivery to customers at the start of the crop year, matching record order fulfilment and port unload levels over the past three weeks,” read the statement. “Last week (Week 9), CP supplied more than 6,500 hopper cars and shipped 709,342 metric tonnes of grain and grain products, a 10 percent increase in tonnes from the previous week.”
Sobkowich said while the rail network can’t control natural disasters, burned bridges, blockades and strikes that affect transportation, “we should be able to control rail car fulfilment on a week-to-week basis in October when it’s warm, when we don’t have any other issues in the supply chain.”
The near monopoly CN and CP have on rail shipping in Canada and the lack of competition in the country will likely see instability continue, he added.
That instability is caused by the different operating models the rail lines and grain companies operate on, said Sobkowich.
“The rail companies strive for 100 percent asset utilization. They would like to move 1/12th of a crop every month,” he said, allowing for consistent flow, a stable workforce and expectant use of its rail operations and rail car inventory.
“The grain company business model is to try and move as much grain as possible during the peak price period when the world wants our grain and that’s between now and December, January when the Australian harvest comes off.”
Sobkowich said the only solution to the problem is increasing competition or improving regulation governing the movement of grain.
For its part, CP said it’s working to synchronize transportation cycles.
“CP is working diligently with grain customers to sync CP’s dedicated grain train cycle and customers’ supply chains. Since Week 5, unloads have grown over 130 percent at the Port of Vancouver and 160 percent at the Port of Thunder Bay,” the company said in its statement.
Regardless of the causes of delays, farmers will feel the pinch the most when they get stuck between having a good crop and the lack of reliable shipping networks, said Sears.
“We’ve had an incredible run of weather through September and I haven’t seen much in my travels in the south Peace that is not harvested,” he said.
Not being able to move that grain south to meet delivery contacts will put producers in a cash crunch, while slow shipment of fertilizer coming north will delay farmers’ ability to prepare for next season, he said.
