Complaining about rail service is a time-honoured tradition on the Canadian Prairies, and this winter is no exception.
It’s been a frustrating season for grain exporters as persistent rail delays continue to disrupt shipments and inflate costs.
The railways blame the shipping delays on winter, but there are signs of a more systemic problem.
Read Also
Crop insurance’s ability to help producers has its limitations
Farmers enrolled in crop insurance can do just as well financially when they have a horrible crop or no crop at all, compared to when they have a below average crop
Mark Hemmes, president of Quorum Corp., which acts as Canada’s grain monitor, recently said that not only do the railways have difficulty getting grain to port on time and in the right order, but their performance also consistently falls short of their own projected grain plans.
Hemmes says one of the biggest problems is the railways’ refusal to increase operational flexibility.
Rather than build extra redundancy into their operations to help out the system when more capacity is needed, the railways run as lean as possible to keep costs to a minimum.
“They’re always focused on controlling the costs. They’re always focused on asset utilization. They never want to have a person or piece of equipment sitting too long alone,” Hemmes said.
“But keep in mind, they answer to the shareholders, not to the shippers, not to the government.”
It’s this keen sense of fiduciary duty to shareholders that has been a thorn in the side of Canadian shippers for years.
Some trace the problem to precision railroading, which was pioneered 25 years ago by the late Hunter Harrison, the long-time railway executive who ran both Canadian National Railway and Canadian Pacific Railway.
He introduced the notion of improving rail efficiency by moving trains on a schedule that may have served the needs of the railways but not necessarily those of shippers.
It drew the ire of customers but made shareholders a lot of money as rail profits soared.
As far as Harrison was concerned, shareholders were his main priority, and some may argue that he had a fiduciary duty to take that position.
However, it’s not the only way to approach corporate priorities.
Richard Branson, the British billionaire, has said his companies’ priorities are employees first, customers second and shareholders third.
More recently, Michael McCain, executive chair of Maple Leaf Foods, has been talking about a “new model for capitalism,” which among other things aims to serve all stakeholders, not just shareholders.
“We serve all of our stakeholders — including the shareholders — and we reject the overt primacy of shareholders,” he says.
In a normal marketplace, it would ultimately be up to the customer to decide which philosophy they choose to support.
If shoe company A places more importance on shareholder profit than making a good shoe, customers will likely buy more shoes from company B, which doesn’t cut corners and makes a better shoe.
Customers who ship by rail in this country don’t have that option, and interswitching, which could level the playing field, is fiercely opposed by the railways.
Rail transportation problems have always been a concern, but they are about to become more vexing as Canada attempts to find alternatives to replace the unreliable U.S. market.
Regulation is the government’s nuclear option, but one that should be held in reserve until absolutely necessary.
For now, the railways should be put on notice that if they don’t start treating their customers better, the time may come when the nuclear option will be on the table.
Karen Briere, Bruce Dyck, Robin Booker, Paul Yanko and Laura Rance collaborate in the writing of Western Producer editorials.
