Amendments to the Canada Transportation Act that were deemed a “watershed moment” for the country’s rail freight sector have turned out to be completely useless, says the Western Grain Elevator Association.
“If we thought that after Bill C-49 we had turned a corner on the rail service woes of the past, we now know that we haven’t done that,” said WGEA executive director Wade Sobkowich.
“We’re right back to the same quagmire we were in before Bill C-49 was passed.”
Grain companies were most excited about the Own Motion provision of the bill paving the way for the Canadian Transportation Agency to conduct investigations if it sees systemic issues related to poor rail service.
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The WGEA asked for such an investigation for what it deems appalling service for the first four months of 2022.
But the CTA turned it down.
“If the current circumstances don’t trigger an Own Motion investigation, then we don’t know what will,” said Sobkowich.
Canadian National Railway’s car order fulfilment rate averaged 53 percent in weeks 23 through 35, while Canadian Pacific Railway’s was 65 percent.
“We think that was abysmal and it really points to a systemic issue,” he said.
CN spokesperson Jonathan Abecassis said the British Columbia floods reduced overall carload traffic in the CN network by an average of 18,000 carloads per week for a three-week period, resulting in a significant backlog of all kinds of traffic.
On top of that, it was one of the worst winters in decades and the railway was dealing with a significant surge in COVID infections of employees due to the omicron variant.
“These conditions would affect rail traffic movement for a crop small or large along with all the other rail traffic moving in the network,” Abecassis said in an email.
Car order fulfilment started to pick up in February and by the first week of March the railway was essentially caught up, with little grain car demand carryover from one week to the next, he said.
Canadian Pacific Railway spokesperson Salem Woodrow said the railway has recovered from the challenges it faced in the first few months of the year. Its fulfilment rate was 100 percent in week 37 and 98 percent in week 38.
She noted that the railway responded to the unanticipated winter surge in feedgrain flowing from the United States to Canada due to poor domestic supply.
The company has delivered more than 26,000 carloads of U.S. feedgrains so far this crop year, compared to 1,200 last year.
“We have received accolades from our customers for the service CP provided through the winter, especially considering all the challenging conditions,” Woodrow said in an email.
Sobkowich said the reason the CTA gave for refusing to launch a service investigation is that fulfilment rates over the entire duration of the crop year have averaged 70 to 80 percent.
But he said that is too long of a window. Grain companies can’t function properly when service dips to unacceptable levels even on a weekly basis, let alone for months.
The dismal service led to ships being moored off west coast ports for 25 to 30 days during January and February.
The WGEA estimates that its member companies paid $16 million in vessel demurrage fees and contract extension penalties between Aug. 1, 2021, and Jan. 31, 2022.
But the real cost is not quantifiable.
“Our reputation is terrible with our customers internationally,” said Sobkowich.
“They really have been looking for other sources of product because they don’t have confidence in our logistics system.”
Greg Northey, vice-president of corporate affairs with Pulse Canada, said rail service has been on a downward slide since the November floods in the interior of British Columbia.
“We’ve been collecting data on this since 2013-14 and we’ve never seen performance this bad,” he said.
What he finds particularly troubling is that this is happening in a year where farmers harvested a crop that was 30 percent smaller than the previous year.
“The crop was short. The volume that we needed to move was much, much lower,” he said.
Mark Hemmes, president of Quorum Corp., said the railways can’t be blamed for the disruption caused by the floods followed by a severe cold snap.
But he believes there is another factor confronting the railways as well.
“The container issue has just befuddled them,” he said.
Shippers of all sorts of commodities have been switching from containers to bulk due to the poor availability and high cost of containers.
That has resulted in a surge in rail car demand but the railways are stuck with the same number of cars they had in late 2019.
“It’s not a function of, ‘well, we’ll get more cars,’ because they don’t exist,” he said.
“Every railway in North America is in the same boat. They’re all scrambling to move as much as they can with what they’ve got.”
Poor rail service is also a big problem in the United States, where there were 60 container vessels waiting to be loaded off the Port of Long Beach compared to 13 at the Port of Vancouver as of late last week.
The U.S. Surface Transportation Board (STB) held two days of hearings last week where groups like the National Grain and Feed Association testified about rail service failures in that country.
“Many NGFA members have a daily risk of slowing down or shutting down operations due to reduced and inconsistent rail service,” said association president Mike Seyfert.
NGFA estimates that lost revenues and additional freight expenses cost grain shippers more than US$100 million in the first quarter of 2022.
Sobkowich said the STB hearings are the type of response the grain industry was expecting from the CTA with its new powers but that hasn’t happened.
The WGEA believes there is a systemic problem where railways strive for regular monthly movement of grain to maximize operational efficiencies rather than adjusting to the peaks and valleys in demand because they know the grain isn’t going anywhere due to a lack of competition.
Grain companies believe it may be time for Ottawa to force competition through extended interswitching or joint line running rights because amendments to the Canada Transportation Act appear to be toothless.
In the meantime, they live in fear of what could happen in the upcoming crop year if farmers harvest a normal crop.
Northey said this year’s situation hasn’t generated much “noise” from farm groups because the crop was so small that there is still plenty of storage space both on the farm and in the elevator system.
But he agrees with Sobkowich that the situation is unsustainable. The railways keep posting tremendous quarterly profits while shippers are left in the lurch.
“Logistically, we just spin our wheels constantly. Things just never seem to work,” said Northey.
Hemmes said the encouraging news is that the railways seem to be turning the corner in recent weeks.
But he agrees with the notion that if they struggled to move a crop that was 30 percent smaller than the previous year it raises serious doubts about the upcoming harvest.
Average car cycle time to Vancouver has been about 20 days in 2022 compared to the traditional norm of 15.
“What happens if we have a normal crop come the fall? How are they going to deal with that?” he said.
