Guenther: Gears grinding on grain freight co-ordination

(CN.ca)

Saskatoon | Grainews — The Prairie grain industry and railways are likely to behave like the House of Commons as they try to fix logistics problems plaguing the industry, Perry Pellerin told delegates here at the Grain Handling and Transportation Summit.

“There’s going to be a lot of finger-pointing. A lot of badgering. Maybe even the odd name-calling,” said Pellerin, transportation manager for GNP Grain Source Group, a consortium of independent Prairie grain shippers.

And the industry needs to keep the facts in perspective, he said, to solve long-term issues.

Right now 3.5 million tonnes of grain sit in country elevators, while stocks at terminal elevators are half of what they were a year ago, said Bruce McFadden, director of research and analysis at Quorum, the company that monitors the grain handling and transportation system on the federal government’s behalf.

Between last year’s record-shattering crop and a smaller-than-normal carryover of just under five million tonnes, Western Canada had an 80 million-tonne grain supply this year, McFadden said. If the industry hits the five-year-average watermarks for export and domestic use, there will still be a 25 million-tonne carryover.

Hopefully shipments to port exceed the five-year-averages, McFadden said, “but there’s only so much that it’s going to grow between now and Aug. 1.” Carryover, he added, was likely to exceed 20 million tonnes.

David Miller, assistant vice-president for government affairs at Canadian National Railway (CN), told delegates the federal government’s March 7 order-in-council — which forces the railways to move a total of 500,000 tonnes per week each or face fines of up to $100,000 per day — would require CN to move “at near-record levels for an unprecedented number of weeks.”

CN intends to meet those expectations, Miller told the audience Wednesday at the University of Saskatchewan-sponsored summit — but  it can’t meet those targets alone, he added.

“We certainly understand the political realities that the government issued this order. But we find disturbing is that it continues to play to the view that this is only about the railways.” [Related story]

Co-ordination may be needed

Today grain shippers are trying to target grain from the farm all the way to specific vessels, McFadden said.

“And with this kind of backlog, the way that the grain has actually been served in the country is not meeting the same sequence that the orders were put in place by the grain companies, which has been exacerbating this problem,” he said.

Miller said cold weather puts the whole network out of sync. “Nothing is where it should be. And it could take many days to get back to full efficiency even after the weather improves.”

More co-ordination is needed to manage the current backlog, Pellerin said. “When you have 70,000 outstanding orders, the last thing we really need the railways to do is go after the ones that are the easiest.”

Pellerin added the industry needs consistent communication between the railways and the Vancouver terminals. “A few years ago CN was very difficult to talk to. I think they’re better but we’ve got a long, long way to go. I think we have to get better at coming up with solutions that work for all of us and not just one individual or one company or one railway,” he added.

Pellerin said CN did a good job overall of moving the 2012 crop, leading independent terminals to be optimistic about 2013.

“So we got ready. And I have to say at some of our independent terminals, we cleaned switches roughly 747 times for no reason. They never showed up, never came,” said Pellerin.

Miller told delegates since 2010, CN’s spotting performance has been around 80 per cent to the day. “Ten years ago we didn’t hit 80 per cent to the week.”

Pellerin, however, put CN’s overall spotting performance at six of GNP’s terminals at 34 per cent. In September, spotting performance was 45 per cent. “My point is, if it’s 80 per cent overall, holy smokes, are we getting screwed,” he said.

Pellerin wants to see more transparency in how cars are allocated. He said during backlogs, allocating cars based on the previous year’s shipping percentage is “a disaster” for independent or small single-point shippers.

The overall time grain spends in the system has dropped from an average of 70 days to 45 days, and overall railway loaded transit time has improved in recent years, McFadden said, but there’s still plenty of variability in transit times.

“Having a clear picture of whether it’s going to take four or five days from Prairie to port, as opposed to four or five days plus or minus two or three, gives them a much better planning tool,” he said.

CN investing

In 1999, there were over 1,000 grain elevators in Western Canada at 685 delivery points. Today there are only 391 licensed elevators at 274 delivery points, McFadden said. Since 1980 the rail network has been “pared down” as well, he added.

But CN is investing over $2 billion in infrastructure this year, Miller said. The railway is hiring crews, and purchasing 45 new locomotives, which will be delivered later this year.

“We see increasing demand coming from a lot of different sectors and we’re certainly spending the dollars to try to address that,” said Miller.

To deal with cold weather, CN focuses on recovery capacity, he said. For example, last year the railway invested about $100 million in the Winnipeg-Edmonton corridor. But this winter there were “very few opportunities for recovery. Once the cold weather set in there were almost no breaks across the Prairies.”

It takes about nine months for CN to order and receive new hoppers and locomotives, plus several months to train new crews for the railways, he added.

CN wants to negotiate more service agreements in grain so they can invest in assets to meet those commitments, he said.

“We’re not prepared, as a responsible company, to buy cars or hire additional crews without some reasonable confidence that those cars are not going to end up parked for large parts of the year, or that we won’t lose new employees because they’re not getting enough work to justify them sticking with the job.”

Pellerin said GNP would like to negotiate a service agreement with the railways — but “we find it awfully difficult to negotiate with a monopoly.”

— Lisa Guenther is a field editor for Grainews at Livelong, Sask. Follow her @LtoG on Twitter.

 

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Field Editor

Lisa Guenther

Lisa Guenther is field editor for Grainews based at Livelong, Sask. You can follow her on Twitter @LtoG.

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