While rail rates have fallen for most grain exporters, special crops shippers could be facing higher rates under new pricing policies.
The new rates and programs announced by CN Rail and CP Rail include penalties for special crops shippers who don’t move the crop directly from land to sea without delay.
CN introduced a $2 per tonne extra charge for staged shipments, the ones where the railway has to collect small numbers of grain cars from a variety of places and assemble them over a protracted period before they are taken to their destination.
Read Also
Agriculture ministers agree to AgriStability changes
federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
CP Rail’s new rates include a storage fee of $250 per car that will be assessed to shippers of special crops who aren’t moving product directly to port. The “storage fee” works out to approximately $2.50 per tonne.
“That $250 per car option is designed to encourage shippers to try to assemble cars as quickly as possible and get them to a waiting ship as quickly as possible to avoid the storage,” said CP spokesperson Ian La Couvee.
CN officials say their staged shipment fee is also meant to speed up the movement of special crops.
“We’re focusing on that area because our records indicate that they cause us to incur up to two days delay in our car cycles and that means we can’t get the cars back to all other farmers to move their grain in a timely fashion,” said Ross Goldsworthy, CN’s vice-president of grains and fertilizers.
“In the peak period, that causes untold problems – bugs up the pipeline so you can’t move cars in and out. So it’s a move to change behavior that will encourage storage.”
The fees could more than offset the price reductions recently announced by both railways.
CN is reducing its single car rate by four percent, which amounts to a $1.30 per tonne savings on an average haul. CP’s single car rate reduction is 1.7 percent.
In addition to the new fees, the railways have made it more expensive for any grain after it arrives at port.
“They’ve reduced our number of demurrage-free days in port from five down to two,” said Eric Fossay, a special crops trader with Xcan Grain Pool Ltd.
That means the grain industry could pay more than twice the demurrage it shelled out last year, or shippers will be forced to make better use of west coast storage facilities, said Fossay.
The latter is exactly what the railways would like to see, especially from special crops shippers.
CN spokesperson Jim Feeny said the industry prefers to store grain in cars rather than use storage facilities offered by shipping companies and licenced terminals.
Fossay said there’s a good reason for that.
“There isn’t a lot of storage out there that is suited to gently handling pulse crops, which do tend to shatter and break, which is a downgrading factor.”
Under the new rules, special crops shippers will either pay more demurrage or fill vessels full of cracked and damaged product, said Fossay.
If the trade does incur a lot of extra shipping and demurrage fees, there are only two places where they can be recovered, he said.
“If we’re unable to pass it on to overseas buyers just as an extra cost of shipping, it would likely be reflected in lower bid prices in the country.”
He said this is a bad year to be introducing the new fees and regulations because the prairie pulse crop is 53 percent bigger than last year.
But Feeny said there would never be a good time to introduce these fees and encourage efficiency.
