A decline in rail traffic due to the recession could be good news for grain shippers.
Rail shipments are expected to take a hit because of shrinking demand in a number of sectors, including automotives, intermodal, chemicals, fertilizer and forestry products.
That could be good news for the grain industry as it enters its peak shipping season relatively unaffected by the slowdown.
“Overall, the demand in other sectors is down and that should help with the availability of equipment for moving grain,” said Rick Steinke, manager of logistics for the Canadian Wheat Board, the railways’ largest grain customer.
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The grain transportation system is running well, with an average of about 6,000 cars a week (about 550,000 tonnes of grain) being unloaded at the three major ports since Oct. 1. Movement by rail to domestic processors and U.S. customers is also running smoothly.
Total movement of CWB grain to all destinations from Oct. 1 to mid-December is six percent ahead of last year.
“It’s hard not to be optimistic heading into the rest of the marketing year,” said Steinke.
One way the board can take advantage of extra rail capacity is by moving grain into export position at transfer elevators on the lower St. Lawrence River even if there are no immediate sales.
“If we know we’re going to need it, we can take advantage of the available capacity when there is space at the ports,” said CWB spokesperson Maureen Fitzhenry.
The impact of the recession on railway operations was driven home by Canadian Pacific Railway’s recent decision to lay off 600 unionized employees, a result of the recession’s impact on the company’s business.
CPR spokesperson Breanne Feigel confirmed that so far grain seems to be weathering the storm.
“There is still strong demand for grain and that commodity seems to be moving efficiently through our network,” she said.
Asked whether additional capacity will become available for grain, she declined to comment directly.
“All I can say is we’ve had a solid year for grain performance and our goal is to keep up that level of performance and efficiency,” she said.
Kelli Svendsen of Canadian National Railway said the CWB is wrong to assume additional capacity will be made available for grain.
“There are no grounds for that assertion,” she said. “We strive to provide the best possible service to all our customers at all times.”
The two railways traditionally share the grain market equally. Over the last four crop years CPR has averaged a 50.05 percent market share and CN 49.95 percent.
However, that could change in the 2008-09 crop year.
“I think it’s safe to say market share is going to shift from CN to CP, unless CN does something different in the rest of the year,” said Steinke.
In situations in which the wheat board can choose between railways, it will opt for CPR because of a better package of service and rates.
“They’ve taken a new approach to operating their railroad and it seems to be working,” he said.
Svendsen declined to comment on market share, noting that the CWB is a monopoly organization that can direct its business where it wants.
She added it’s interesting that grain shippers claim there is no competition between the railways, and yet the biggest shipper of them all, the CWB, acknowledges that it is using its market power to take advantage of rail competition.
Asked if CN will introduce new service programs to try to win back grain business, she said only that the railway is in “constant discussion” with the CWB.
