Canada’s Class 1 railways have a curious relationship with their grain haul capacities. When there was little competition for their services through some of the worst days of COVID-19, they were able to meet deadlines, boost capacity and set records for grain movement.
When higher paying freight, such as oil and consumer cargo, was slowed by the initial wave of COVID, the railways demonstrated an ability to set records. Even strains on labour, at ports as well as on their own rosters, didn’t hold them back.
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In 2021-22, Canadian Pacific Railway hauled the most grain it had ever moved in its 140- year history. That was its fourth record in a row, as it handled 31.21 million tonnes and ran well above its average haulage rates in the peak grain shipping fall and winter months.
Canadian National Railway, Canada’s other big rail company, also set a record. Just over 31 million tonnes were handled by the end of that grain year.
Since then, the companies have invested in new, higher capacity grain cars and their prairie elevator terminal customers have built new loop tracks and other efficiency tools to get bigger, more efficient trains turned around more rapidly.
The companies, and the world, have learned more about how to manage with COVID. Port capacities have improved as a result.
Thus, it came as a surprise when one of these record-setting companies suddenly suggested that, even though there will likely be an average crop in Western Canada this year, it might not be able to keep up with grain car demand in 2022-23.
Is it suggesting that, if the Canadian crop could be meted out to international customers more evenly throughout the year, rail performance might not be as disappointing to farmers and grain companies as it might be otherwise? Of course, that wouldn’t be as profitable for farmers.
There is also the suggestion that COVID could be an issue again this year, which could affect grain delivery performance.
Farmers are likely skeptical of railways’ claims that future follies won’t be their fault, especially when these two monopolies regularly add that harsh winters are hurting capacity.
Two seasons ago, at the height of COVID-19’s early days, there was also a terribly cold winter that arrived early, set cold temperature records and stayed late. In that same year, the railways set grain movement records.
Maybe something else was at play? Could it be that when the railways had enough staff, enough engines and little higher-paying freight to motivate operational behaviours, they were suddenly able to show their true capacities to ship grain, the one product that they get every year?
Railway investors measure success through operating ratios, the relationship between expenses and revenues. Miles per tonne of road and financial gross per tonne per mile also play into evaluations.
In the past 30 years, operating ratios have dropped from nearly 90 percent to below 60. Reductions in workforce and miles of track helped to bring these measures down, improving railway profits and elevating share prices.
A few facts: Winter comes every year in Canada. Grain is sold in the winter seasons, on both sides of the globe. Farmers need cash flow between harvest and seeding. Railway monopolies with too few staff and too little rolling stock make more money and have higher share prices.
It all adds up. Maybe it should add up to more regulation. Let’s see how the railways move this crop before we do something in haste.
Karen Briere, Bruce Dyck, Barb Glen and Mike Raine collaborate in the writing of Western Producer editorials.
