In separate news releases to the public on August 3, both Canadian National Railway (CN Rail) and Canadian Pacific Railway (CP Rail) reported a record amount of grain moved during the 2020-21 crop year. For the first time ever, both railways transported more than 30 million tonnes of grain.

CN Rail said it moved more than 31 million tonnes of grain, exceeding the record of 29.4 million during the 2019-20 crop year. In addition, CN also moved 1.1 million tonnes of grain from Western Canada via containers with grain volumes moved from Eastern Canada.

“CN’s grain movement has been resilient during the pandemic, achieving 14 straight months of Canadian grain volume shipment records,” said CN Rail president and chief executive officer JJ Ruest in his company’s news release.

Meanwhile, CP Rail reported 30.62 million tonnes of grain moved, as well as 590,000 tonnes moved in containers, in 2020-21. This is the fourth straight year the railway broke its single-year record for grain movement after reporting 29.52 million tonnes in 2019-20.

“The challenge created by the COVID-19 pandemic over the past 17 months has underpinned the value of strong communication and supply chain collaboration. Despite a sharp reduction in demand this spring, CP and our customers have again broken our movement record, and we celebrate that achievement across the supply chain,” said Joan Hardy, CP Rail’s vice president of sales and marketing, grain and fertilizers in its news release.

Both railways announced new investments in new high-capacity grain hopper cars earlier this year, including CP Rail’s 8,500-foot High Efficiency Product train model. In their news releases, they also acknowledged the reduced yields in Western Canada due to hot and dry conditions.

“We recognize that growing conditions across much of the Prairies have been very challenging as many producers face extremely hot and dry weather this year. Our dedicated team of railroaders will continue to work tirelessly with Canadian farmers, agri-organizations and grain customers to have the resources in place to move the upcoming harvest for the communities we proudly serve,” said Ruest.

“Through May, June and July shipper demand was almost 15 percent below the same period last year, and 25 percent below the fall peak demand levels,” CP Rail said in the release.

CN Rail also touted its proposed merger with American railway Kansas City Southern announced earlier this year, of which CP Rail is also vying for its attention.

“The proposed CN-Kansas City Southern combination will introduce new options for Canadian farmers and grain costumers to ship both grain and processed grain products,” CN Rail’s release said. “It will create a new single-line service to a wider array of destinations in the U.S. and Mexico, and will also create an end-to-end transportation network across North America, enhancing competition, spurring economic growth and delivering benefits to the local communities in which both railroads operate.”

CN Rail published its annual Grain Plan for its stakeholders on July 30, while CP Rail submitted its 2021-22 Grain Service Outlook Report to federal minister of transport Omar Alghabra on July 31.

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The Canadian Grain Commission reports that as of July 21, with 10 days left in the 2018-19 crop year, total exports of Canadian grain had reached 43.65 million tonnes, 2.6 million ahead of 2017-18.

In a release, Canadian Pacific said it shipped 26.8 million tonnes of Canadian grain and grain products for the 2018-19 crop year ending July 31, 2.8 per cent higher than last year’s record.

CP said achievements for the year included a record May for grain products, a record month of 2.643 million tonnes of grain and products shipped in April, and for the first time, three consecutive months (Sept.-Nov. 2018) of shipping 15,000-plus carloads of western Canadian grain and grain products to the Port of Vancouver.

CN also announced record shipments of more than 27 million tonnes for the crop year, compared last year’s record of 26 million tonnes and 25 million in 2017-2018. CN broke its best monthly record with 2.71 million tonnes moved in November and again in April with 2.72 million tonnes. CN also delivered seven individual weeks of over 7,000 hopper cars of grain movement per week. It also moved approximately one million tonnes of grain in containers.

“CP’s record performance and focus on innovation supports the entire grain supply chain in moving increased volume,” Joan Hardy, CP vice-president sales and marketing, grain and fertilizers said in a release. “This past crop year, the 13,000-strong CP family was there to ensure even more Canadian grain and grain products moved to port for export, and to other destinations for processing.”

“Our $7.4 billion investments in our network are delivering results for Canadian grain farmers and the Canadian economy,” CN president and chief executive officer JJ Ruest said in a release. “I’m proud of what CN has achieved. Despite a late start to the harvest, record cold temperatures in February and rainy weather at export terminals restricting ship loading, our dedicated ‘One team’ of railroaders moved more grain than ever before.”

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These days rail service feels like a knock knock joke. The billion-dollar question is when and if cars will arrive. The shipping industry had enjoyed decent rail service since the Conservative government issued an Order in Council in 2014, which imposed minimum volume requirements on the railways. Car orders were fulfilled well last year, and the industry came to depend upon reasonable service.

• Read more: CN’s Q4 grain handle down in ‘challenging conditions’

But in the last few months a sense of déjà vu has set in — no cars, cancelled cars, erratic service, fewer cars than ordered, slow delivery to port.

This fall CN rail’s overall car order fulfilment rate dropped to 56 per cent, well under the performance of CP rail. Shippers made sales only to find themselves plunged back into the territory of unreliable rail service, making it difficult to commit to new sales.

• Read more: CN sets new record for grain shipment

This comes in a year when the pulse export market has been tough due to increasing global production. With lower demand, every contract gleaned is a prize weighted heavily, but lack of rail service can mean potentially losing even the little bit of business squeezed out of the moribund market.

In 2013-2014, when already-bad rail service actually broke down in Western Canada, buyers waited months for product. Today, increased global supply finds Canadian suppliers in a much more competitive market. Importers have options beyond Canada.

Canada’s age old problem needs a long-term solution.

Level of service agreements exist, but without reciprocal penalties for non-performance by the railways (shippers must pay penalties and demurrage), railways have zero liability for failing their customers. Industry has done its part by investing in more efficient elevation capacity. There are fewer loading points with faster loading equipment. Producers haul farther and have invested in more on-farm storage.

• Read more: New record set for Prairie grain throughput in 2016-17

Fewer points of origin, we were told, would be the key to better service. But still, railway service is not dependable.

Shippers take issue with the way the lack of service is managed. Individuals must file tedious, expensive and lengthy complaints. If the ruling is in favour of the shipper, relief only applies to that one shipper bold enough to file the complaint.

Ideally, the Canadian Transportation Agency would be able to take action on its own to address railway underperformance.

Sounds reasonable, but railway lobbyists are working hard to convince the government to err on the side of the railways, and the record suggests they will.

While our forefathers bound the nation with the critical artery of rail, knowing that landlocked production would need to get to an ocean, this country has been continuously plagued with rail service issues. This, despite taxpayer-supported infrastructure and government policy that has included the Crow Rate Agreement, the Western Grain Transportation Act (WGTA) and dozens of studies and commissions. One process after another, until dismal service forced government intervention — a short-lived bill that was rescinded by the Trudeau administration promising relief, which is now held up by the Senate.

Railway shares have been an amazing investment with excellent shareholder returns. But poor service still rears its ugly head, and a tired export community finds less reason to believe the nation has any intention to get this right after 150 years.

Is 56 per cent order fulfilment good enough to ensure Canadian businesses can earn a return on investment and meet their customer’s needs? Is this what global customers expect from a supplier? Like the driving of the last stake 150 years ago, only the federal government can determine the right mix of legislation that will encourage the railways to provide a level of service that preserves the confidence of an industry invested in export supply.

Fifty-six per cent is not a passing grade. Knock Knock. Who’s there? It’s a Canadian exporter! Guess what, we still just want dependable rail service.

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“It’s great to have legislation (saying) that we can get producer cars, but if there’s nowhere to drop them off, it’s not going to help anybody,” says Todd Lewis, president of APAS.

With new legislation and reciprocal penalties coming in, the grain shipping industry is in a time of transition, Lewis says. APAS doesn’t want to see any more infrastructure lost right now, he says. The producer group has asked Federal Transport Minister Marc Garneau for a moratorium on producer car loading sites until railway costs have been reviewed. APAS is also asking for an extension of the 60-day notice before CP closes the 10 sidings.

“If they discontinue service there, it’s not going to save farmers a nickel,” says Lewis, because under the Maximum Revenue Entitlement, railways are still compensated for those closed sidings.

Lewis also questions whether CP has spent much money servicing these sidings. “If they’re not getting used, they’re not servicing them, either,” he adds.

James Nolan, professor of ag resources and economics at the University of Saskatchewan, agrees that CP should hold off on closing more sidings until the new bill is in place, and all parties have had a chance to use it. Nolan adds that “that the government needs to get off the proverbial pot” and do a full rail costing review.

CP says it’s about safety

CP spokesperson Jeremy Berry says switches are a source of risk, as they “have moveable components and require mechanical fastenings to join the components to the main track structure.”

“Removing a producer car site that is not being used is necessary to keep communities where we operate and our employees safe by removing a track switch, which can increase the risk of an incident,” says Berry.

In some cases, CP doesn’t own the adjacent land, and so the sidings are inaccessible, Berry says. In other cases, CP doesn’t own the infrastructure itself, he adds.

There are other shipping locations within 20 km of the sites CP plans to close, Berry says. Most of the sidings on the closure list haven’t been used in years, he adds.

The typical siding on the closure list was once beside a grain elevator that is now gone, Lewis says. Lewis farms south of Regina, about 15 miles from the Wilcox siding, which is one of the sites slated for closure.

Lewis says he hasn’t used that siding, as producer car service has been too unpredictable. The 2013/2014 shipping year scared off many producer car shippers, he adds.

But he views the planned closures as lost opportunities in an evolving grain market. For example, Lewis spoke to a smaller grain company interested in shipping soybeans in Lewis’ area with producer cars.

Producer cars are also a “good balance to the basis rates” with the elevator companies, says Lewis. “If it gets too far out of whack, you can save thousands of dollars if you go the producer car route.”

Berry says CP has placed ads announcing the planned closures in local papers. The sites won’t be discontinued for at least 60 days following those notifications, he says.

“CP remains firmly committed to delivering outstanding service to our grain customers, which is our largest line of business,” says Berry.

APAS notes the following sidings could be closed by mid-September:

• Tompkins – RM of Gull Lake
• Midale – RM of Cymri
• Cupar – RM of Cupar
• Markinch – RM of Cupar
• Grand Coulee – RM of Lumsden
• Wilcox – RM of Bratt’s Lake
• Moosomin – RM of Moosomin
• Tisdale – RM of Connaught/Tisdale
• Qu’Appelle – RM of South Qu’Appelle
• Duval – RM of Last Mountain Valley

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A record 15,865 carloads were moved to West Coast ports in October, besting the previous record of 15,449 carloads in March 2016. Total Western Canadian grain movements in the month climbed 3.9 per cent over last year, just off the record set in May 2014.

The company credits spent millions over the past three years improving its performance combined with investments by grain companies in country elevator capacity.

“I am proud of the CP team and applaud the efforts and early success of our supply chain partners as the crop season begins to accelerate into the colder months,” said CP president and chief operating officer Keith Creel said in a release.

“We continue to focus on providing best-in-class service to our customers and look forward to moving more Western Canadian grain to market for the benefit of farmers, shippers and the Canadian economy.”

The release cautioned against “finger-pointing” at any component of the supply chain as winter approaches with the majority of the 2016-17 crop yet to move.

It pointed to “misleading and inaccurate data published by the Ag Transport Coalition” as promoting the notion that the railways are engaged in an adversarial relationship with farmers and grain handlers. “The truth is we are partners in driving the Western Canadian economy forward.”

CP says more than three-quarters of CP’s Western Canadian grain business uses the Dedicated Train Program (DTP), which allows customers to control their own train assets for a period of 12 months or more.

“Trying to compare DTP performance to an ‘order fulfillment’ model, as the Ag Transport Coalition does, simply does not work,” CP said.

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Kyle Petluk hails from Alberta’s Peace River region. He was one of few farmer delegates at the Field on Wheels transportation conference in Winnipeg last December. Farmers are hurting after last winter, not CN and CP shareholders, he said during an interview.

“(The railways are) saying it’s a harsh winter — and, hey, we know all about it. We’re producers. Our livelihood is based on the weather,” said Petluk.

“Now they’re going to throw even more risk upon us saying, ‘Well, the movement is due to the weather. You’re going to incur that too?’ No.”

But no one should expect dramatic technological improvements anytime soon, Paul Miller told delegates at Field on Wheels. Miller is former vice-president of Canadian National (CN) and now serves as railroader-in-residence at the University Alberta.

• More Grainews: Farmers still concerned about grain movement

“If a rail-roader comes to you and says ‘We’ve got winter solved this year,’ I’d be a little bit skeptical of that rail-roader,” said Miller.

Winter is tough on railroads because of the basic technology they use, Miller said. Once the mercury drops to -25 C, railways are plagued by all kinds of problems.

Steel rails contract and break. The ballast under the rail also freezes, so when wheels pass over the rail, there’s no give.

Steel wheels also suffer, getting into “a bit of an out-of-round condition,” Miller said. And when air brakes are applied, wheels heat and cool dramatically, producing a brittle material known as martensite, Miller said. The martensite flakes off the wheel, moisture gets under the flakes, and wheel pieces break away, he explained.

Cold weather also means shorter trains as more leaks develop in the air brakes. Miller said trains could be cut from 10,000 feet to 7,000 feet in cold weather.

Dropping those cars ties up the switching operation and another track in the yard, Miller said. It also delays the crew that’s doing that work.

“And now once the train is put back together at 7,000 feet, they have to again requalify the brake pipe and requalify the brake system,” said Miller. “All of this takes time. So time is kind of the enemy in the winter time.”

Operating conditions may be good through most of the network. But if a central location such as Chicago gets backed up, it ripples through the network, Miller explained.

Sometimes a railway has to choose between sending crews and locomotives to a specific customer’s location or the busy main line. Miller said when the chips are down in the winter, railways will try to keep their main lines and main terminals going.

“If they can’t keep the main core network fluid, dealing at a particular customer location frankly isn’t going to help. So those are the decisions that get made,” he said.

New technology

Steel-shattering cold only affects part of the rail network for part of the year. Historically, research has focused on things that will help all the railroads all the time, Miller said.

But even implementing innovations in air brake and rail technology is easier said than done, according to Miller.

The current air brake system is based on the Westinghouse system from the 1920s, Miller said. “It does not work, on the same train, in conjunction with the new system. So it’s a big, big logistical challenge.”

Both Miller and Jean-Jacques Ruest, executive vice-president of CN, mentioned portable compressed air stations as one way to make rail movement more efficient.

If it’s very cold, it takes two or three hours to charge the air lines before a safety test can be done, Ruest said. Elevator staff can use compressed air stations to boost pressure in the air lines of unit trains before the rail crew arrives. That way the crew can be moving in half an hour instead of three hours, Ruest said.

CN is offering a financial incentive, which Ruest said adds up to $5,000 per train, for grain companies to charge air lines of unit trains in the winter.

“So we’re very happy with those that joined us in that effort and we hope that more of them will decide to sign up, assuming moving grain in the winter time is mission critical for all of us in the supply chain,” Ruest told Field on Wheels delegates.

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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.”

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