WINTER weather conditions and competition from oil shipments have caused extreme delays in grain transportation by rail over the last couple of months.
A lower supply due to shipments not reaching their destinations resulted in higher prices for products like dried distillers grains and oats.
Canada's Transport Minister Lisa Raitt and Agriculture Minister Gerry Ritz recently announced new measures the government is taking to address the growing problem and maintain Canada's ability to supply world markets.
"The current grain logistics system is not meeting demand, and today, our government is taking concrete action to ensure the livelihoods of farmers and our overall economy," Ritz said.
Raitt recently announced an order in council establishing minimum volumes of grain that the Canadian National Railway Co. (CN) and Canadian Pacific Railway Co. are each required to move. The order, under section 47(1) of the Canada Transportation Act, also requires the railways to report to the minister of transport on weekly shipments.
"By making the order in council and working to introduce legislation, our government continues to act in the best interests of our farmers while ensuring Canada maintains our global reputation as a reliable grain shipper," Ritz noted.
"For the past several months, the bumper crop of grain produced in Canada has not been moving fast enough to Canadian ports. This issue affects more than just our farmers; it affects trade and Canada's ability to supply our markets around the world," Raitt explained. "We are taking this action to more than double grain shipments in order to preserve the integrity of Canada's transportation system and our reputation as a global supplier."
The railways are required to increase the volumes carried each week, over a period of four weeks, to a combined target of 1 million metric tons per week — more than doubling the volume previously being moved.
The order created direct legal obligations on railways and will result in penalties for non-compliance of up to $100,000 per day.
The government continues to call on all parties in the grain supply chain to play constructive roles to ensure the timely movement of grain and to work together on medium-term and long-term solutions.
Responding to the order, CN said it will work to meet the demand but emphasized that the whole supply chain needs to work together.
"CN will do its part to meet the challenge of moving this 100-year record grain crop," said Claude Mongeau, CN president and chief executive officer. "Our assessment shows that an upper limit of around 5,500 cars per week may be achievable, but only if all members of the supply chain work together closely."
He said the assessment is broadly in line with what the government mandated, but it will require a new level of collaboration to succeed.
Last year's prairie grain crop was by far the biggest in Canadian history. As a result, CN pointed out that it has to move 10 million tons more export grain, or 50% more than for any other crop. CN said, to put this in perspective, 10 million tons is equivalent to twice the amount of export potash CN handles, 25% more than the total amount of lumber it moves to export and almost as much coal as it moves to export in a year.
CN had indicated to the federal government its intention to ramp up towards 5,500 cars delivered to country elevators each week, as soon as weather conditions permit and a strong Thunder Bay, Ont., program starts. CN will have the resources — locomotives, cars and crews — in place to support this record weekly spotting level.
CN said this level of performance can be sustained, provided that there is strong collaboration from grain companies, country and terminal elevators. Critical factors will include: use of all sale corridors, timely loading and unloading of grain cars and encouragement from the federal government to act in a collaborative, as opposed to accusative, manner in the grain supply chain.