The grain industry’s transportation woes have eased somewhat over the last few months, but farmers’ concerns linger.
To get a sense of where things are at and what need to be done to resolve the complex issues around transportation, Grainews spoke to farmers from each Prairie province.
Grain bound for ports at the West Coast “moving very well”
Recent grain movement pushed the grain handling and transportation system’s total handlings to record or near-record highs in recent months, according to Quorum Corporations’ third quarter report.
Road and rail shipments from western Canadian primary elevators rose by 7.6 per cent from the previous year, reaching 29.1 million tonnes. Shipments in the third quarter jumped over 26 per cent, hitting 10.5 million tonnes. That’s a record for Quorum’s grain monitoring program, which began in 2001.
Canadian National (CN) Railway’s December 8 order book showed the cars spotted for this crop year were well above the five-year average. In October 2014, CN spotted on average 5,508 cars per week, while the five-year average was 4,738 cars per week. November 2014 saw 4,836 CN cars per week, while CN’s five-year average was 4,369 cars per week.
On the ground, farmers are seeing some improvements over last year.
Allison Ammeter, who farms near Sylvan Lake, in central Alberta, wrote via email that grain bound for export on the West Coast is “moving very well” in her area.
But, Ammeter wrote, her farm is close to both the CN and Canadian Pacific (CP) lines, “both of which are about as close to the ports as we can come in Alberta. The railroads cherry-pick us first.”
Crops headed for the U.S., such as oats, are stymied in her area, she added.
Stuart Person is a business adviser with MNP and farms near Shellbrook, Sask. Asked about rail movement in his area this fall, Person said it was significantly better on the surface.
Shellbrook, located in northeast Saskatchewan, is “at the end of the world for grain shipping,” Person said, because of the distance from ports. Grain didn’t move immediately in his area after the order-in-council, but once Alberta was cleaned out, things started moving, he said.
“In general, the east-west rail movement has been significantly better this year, or at least steadier. But anything going south is pretty much non-existent,” said Mike Bast, who farms near La Salle, south of Winnipeg. Rail movement started picking up in the spring and remained steady through the summer, he added.
“We are in the interswitching area but we haven’t seen the benefit from that yet,” said Bast. More time may be needed for interswitching to take effect, Bast said. Logistics issues in the U.S. may be having an effect, too, he added.
Farmers concerned about competition, capacity and safety
All three farmers interviewed expressed long-term concerns about grain transportation.
Ammeter is troubled by the lack of competition between the two major railways. CN and CP, she wrote, “take the attitude that they can dictate what they will do. And they can.”
She suggested open running rights, or even a farmer-owned railroad, as potential solutions.
At interview time, Bast was worried the order-in-council calling for railways to move a set amount of grain each week would be lifted once the backlog was cleared. Since then, the federal government has opted to extend the order-in-council. Weekly tonnage requirements have dropped from the 536,200 tonnes per railway called for in the previous rule.
“I’ve never been a fan of government sticking their nose too much into things,” said Bast. But if the industry can’t figure it out on its own, the government has to step in, he added.
Bast saw the focus on weather as the reason for poor rail service as a red herring.
“We’ve had that for 100 years. We’ve always dealt with it. We can move grain when we want to,” he said. “I think it boils down to, at the end of the day, profits for companies. They’re going to move the stuff that makes them the most money.”
Bast said he doesn’t blame CN and CP for wanting to make the most money on what they haul. “But when we’re a captive group or captive industry that’s held to them — we have no alternative — then there have to be other things in place that make it more fair, I guess.”
If more regulation isn’t on the books, hopefully interswitching, allowing other shortlines to operate, or sending grain south will help, Bast added.
Person wondered whether sales lost during last winter’s logistics knots are long-term.
“We need to figure out what capacity needs there are and how do we fix it,” said Person. Whether government, railroads, farmers or grain companies should invest is the question, he said.
Person said he doesn’t really believe it’s a government issue. “But the issue is what is it costing the government not to do something?”
Ammeter’s wish list includes a focus on serving farmers’ needs rather than moving cars to port.
“We should not have to continually be battling the railroads for appropriate service,” Ammeter wrote.
Person would like to see an engineering firm or logistics company step back, take a look at the geography of the Prairies, the ports, and grain movement “and really think hard about well, if you could start from scratch, what would you do?”
Person would like to know if it would make more sense to beef up the current rail system, or start sending Saskatchewan grain south to the Mississippi.
Ammeter is also concerned about railway safety. Last summer she visited ports in Oregon, Washington and B.C. American unloaders told her automatic wrenches often wouldn’t work on Canadian cars so they had to manually wrench the cars. American unloaders used terms such as old, outdated, and poorly maintained, Ammeter wrote.
Since 2007, grain cars have been provided to both railways at no cost to the railways, Todd Frederickson of Transport Canada told Fields on Wheels delegates in early December. Under an agreement with the federal government, railways are responsible for refurbishing the fleet to ensure “hopper cars remain in good operating condition throughout the service life,” Frederickson said.
Cars are normally good for 40 years, but refurbishing them adds 10 years to their lives, Frederickson said. The majority of the fleet won’t be retired until 2026, he said. “So there is a bit of time to have a policy discussion on the capacity of the fleet long-term.”
Cap or entitlement?
Both Person and Ammeter raised concerns about discussions around the revenue cap.
The revenue cap is a formula the Canadian Transportation Agency (CTA) uses to determine how much revenue CN and CP should earn from hauling grain. An index takes into account forecasted costs for railway, fuel, labour, material and capital purchases by both railways, according to the CTA website. The CTA also looks at how much grain the railways hauled and the average haul length.
Ammeter wrote that the media often refers to the revenue cap. But, in her opinion, it is not a cap.
“There is a revenue entitlement for moving grain, and it is plenty,” she wrote.
Person said, as railways are responsible to shareholders, they are going to haul freight that makes them more money. Person said if a railway’s capacity is limited, it will pick and choose freight.
There is a perception, Person said, that the freight caps “do not allow the railroad to maximize revenue from hauling grain.”
But, Person added, it’s tough to nail down a fair rate for hauling grain without a valuator.
While the formula may need to be adjusted, he said, “nobody really knows what the right rate is because we have two rail line companies. They’re not really that competitive.”