Report recommends greater communication throughout supply chain, as well as an upgraded hopper car fleet
A report that the Saskatchewan Chamber of Commerce commissioned after last year’s grain backlog says all supply chain participants could help improve rail system efficiency.
The Conference Board of Canada report said the province’s export potential is limited by existing infrastructure, and government targets won’t be met unless changes are made.
It was not directly aimed at improving grain transportation logistics, but the backlog was the impetus for the study.
SaskCanola was one of the funding partners.
The report made nine recommendations, including several aimed directly at agriculture.
It suggested a full and public review of the revenue cap, determining the current capacity and right size of on-farm storage and looking at alternative hopper car purchase arrangements.
However, agricultural leaders said a more generic recommendation, that there be more and timelier communication across the supply chain, will likely have the best outcome.
“It’s a two-way street,” said SaskCanola director Lane Stockbrugger.
“It’s not just always asking of the railways. If we know there’s going to be delays, how can we communicate that better to the affected parties and how can we get in front of that?”
Saskatchewan Association of Rural Municipalities president Ray Orb said he believes communication has improved through the last year but must get better, while provincial agriculture minister Lyle Stewart said ports will say co-ordination has never been better.
Orb said he didn’t necessarily agree that the revenue cap must be reviewed because it’s based on a formula that adequately compensates the railways.
Stockbrugger said the revenue cap is a “sensitive topic,” although it’s probably fair to recommend a full review.
Stewart said it would be controversial, but the province has recommended the revenue cap be examined.
“The railways have to be properly motivated to want to haul our product,” he said.
The province asked for a review in a submission to the Canada Transportation Act review, he added.
Stewart said on-farm storage could be reviewed, but Western Canada already has more than other grain-producing areas.
Orb said farmers can’t be asked to do more than they already are without being compensated. They have made huge investments in storage and use grain bags when necessary, he added.
“It all points back to the railways being able to move that grain in a more expedient manner,” he said.
Orb said improving the hopper car fleet would be a way to do that.
The recommendation to look at the fleet, and potential ownership by railways, shippers or third parties noted that newer cars could increase carrying capacity by 25 percent per train.
“That’s a problem that I think everybody agrees on,” Orb said. “The cars haven’t been maintained properly. Some of them are out of service.”
However, he said the railways are compensated for maintenance, and perhaps the federal government needs to make sure that money is being used for that purpose.
Stewart said he didn’t think any level of government would want to buy more cars, but the issue must be dealt with before the existing, aging fleet wears out completely.
The study was released as the federal government announced it would not renew minimum volume requirements that were imposed on the railways last year.
“That probably makes sense,” Stockbrugger said. “I don’t think anyone ever saw that as probably a long-term policy decision that was going to help us fix some of our transportation issues.”
He said the demand for rail is just going to increase, particularly from crude oil, and even a regular-sized crop could challenge the system.
The report said the province’s goal of doubling exports by 2020 is in jeopardy because of system constraints.
“We’re talking about 50 percent growth in transportation of goods by rail,” said Louis Theriault, vice-president of public policy for the conference board.
That includes 20 million more tonnes: nine million tonnes of potash, six million tonnes of oil and five million tonnes of agricultural products.
Steve McLellan, chief executive officer of the Saskatchewan Chamber of Commerce, said losses would equal $3.6 billion if only 80 percent of the target is reached.
McLellan also said removing the minimum volume requirements was the correct decision.
“This is a scenario where working through the supply chain is the solution, not penalizing one (participant) for not running faster than the others,” he said.
The report’s other suggestions included:
- Reducing the cost of rail shipping in Saskatchewan by bringing fuel taxes in line with other provinces.
- Increasing co-ordination with governments and infrastructure providers outside the province.
- Increasing supply chain options and redundancy.
- Considering the full effects of legislative solutions.
- Determining the impact of pipeline expansion for oil transport.