Strong demand to put grain handling system to test

(Resource News International) Canada’s grain handling and transportation system is expected to be put to the test this fall with few participants expressing any confidence that there will not be some sort of breakdown.

“Trying to move all the barley, wheat, canola, peas and other commodities that was sold for fall delivery through the West Coast will be like siphoning a large body of water through a garden hose… there is only so much that the hose can handle,” said Mike Jubinville, an analyst with the farmer advisory service ProFarmer Canada.

Traditionally, September to December is the heaviest grain handling and transportation period in Western Canada, with Prairie harvest operations in full swing and farmers making off-the-combine deliveries.

Ron Frost, an executive with Pike Management Group, a producer-focused management service in Calgary, said the extremely high prices and extremely high demand for commodities have resulted in high demand for freight.

“Western Canadian producers are not expected to harvest a bumper crop, but strong demand will put Canada’s grain handling and transportation system to the test,” Frost acknowledged.

Jubinville said that in order to handle the demand during this peak period, a couple more rail line companies would need to set up operation and there would need to be a couple more national lines established.

“There are going to be logistical issues to contend with, but hopefully the weather will co-operate with us and allow for the smooth transition of prairie grain and oilseeds being hauled to the West Coast for fast and efficient loading of vessels,” Jubinville said.

If there are disruptions, he said, hopefully they will be short.

There were ideas that the private trade has signed up a very aggressive grain and oilseed export program through the West Coast this fall.

There were also indications the amount of barley that private companies will be allowed to be moved through the West Coast ports, as part of the sales that were made when it appeared the Canadian Wheat Board (CWB) would no longer be in control of barley sales offshore, was also expected to eat up a lot of the transportation logistics.

Private trade sources have estimated those barley sales at between 800,000 and one million tonnes alone.

This also does not include any wheat, durum or barley the CWB may have sold as part of its regular shipping program.

The private trade sources have already begun to question the preparedness of Canada’s two main railways, Canadian National Railway (CN) and Canadian Pacific Railway (CPR).

“I can tell you that CN is continuously taking steps to increase efficiencies in the movement of all commodities, including grain,” said Kevin Franchuk, a media spokesman with CN.

CN has spent over $150 million over the past five years on new and extended sidings in Western Canada, along with corresponding signalling equipment to enable the movement of more and longer trains, he said.

CN is also taking delivery of the first of 130 new locomotives with technology that maximizes the productivity gains associated with the extended siding program, Franchuk said.

“What that means is that these locomotives are equipped with distributive power capabilities, which allows them to be placed in the middle of a freight train and operated remotely by the lead locomotive,” he said. “This improves fuel efficiency in train handling and allows us to maximize the gains in the extended sidings.”

Franchuk said CN’s capital improvement investment for 2007 was $1.6 billion.

Franchuk would not comment on how many rail cars CN has leased from the U.S. to help accommodate the movement of grains and oilseeds to West Coast export facilities.

“The issue is not the number of leased rail cars, but rather how efficiently they are used,” Franchuk said, adding that it was important to note that the success of a grain program depends on the operating conditions and the interaction of all players in the grain transportation system.

“The breakdown of any link in the transportation chain from producer to ship will elongate the rail car cycles,” Franchuk said.

Officials from CPR were not available for comment.

Frost said there is always the chance of a labour problem developing within the system, given that there are numerous unions between the producer and the time the grain or oilseeds are loaded on vessels at the West Coast.

“Mother Nature can also slow things up, given that Canada’s climate does pose some interesting challenges for everyone involved,” Frost said.

There have been no vessel delays at Canada’s West Coast export facilities, said Michelina Violi, a communications coordinator with the CWB.

She said CWB officials were, however, monitoring the system very closely.

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