Ottawa’s last-minute decision to continue setting grain-shipping targets for the railways until March 28, 2015 has the support of western elevator companies and most farm groups, but not Canadian millers.
“It’s good news that they are keeping the spotlight on grain transportation for this winter period,” Wade Sobkowich, executive director of the Western Grain Elevator Association (WGEA), said in an interview Dec. 1. “We’re pleased to see this announcement.”
But millers are worried the order will see railways focus shipping to destinations with the quickest car turnaround times, resulting in supply shortages again in 2014-15, said Canadian National Millers Association (CNMA) president Gordon Harrison.
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“Our position is that the (shipping) mandate has been a powerful deterrent to satisfying North American processors — not an incentive, a deterrent,” Harrison said in an interview Dec. 1. “From my vantage point this just extends the deterrent. This continues and compounds the error. The government itself has described this repeatedly as a blunt instrument.”
Last March the federal government ordered the railways to each haul 500,000 tonnes of western grain to market each week to address a huge shipping backlog following a record harvest. In August the volume was increased to 536,000 tonnes.
That order expired Nov. 29. Late that evening Transport Minister Lisa Raitt and Agriculture Minister Gerry Ritz issued a press release announcing new volumes of grain the railways must haul between Nov. 30, 2014 and March 31, 2015.
As with the previous order, the railways are subject to a $100,000 fine per order violation.
The Canadian Canola Growers Association, Alberta Wheat Commission and Grain Growers of Canada issued statements favouring the extension.
The new tonnage figures are lower and vary by month. To late December, the railways have to move 345,000 tonnes each, dropping to 200,000 tonnes during the Christmas holidays and rising to 325,000 tonnes each a week through most of January and February. It will be 345,000 tonnes each for most of March, peaking at 465,000 tonnes for the last week of March. By that time, the government will again have to decide whether to renew the weekly limits.
Continuing the minimums “should help ensure that the rail shipping deficiencies experienced last winter do not recur and the orderly movement of grain continues,” Grain Growers of Canada president Gary Standford said.
The Western Canadian Wheat Growers Association doesn’t support the extension, policy manager Blair Rutter said in an interview.
“We would prefer a market-driven system where the customer primarily determines where the grain is shipped,” he said.
If the railways failed to keep up with demand again, as they did in 2013-14, the government could introduce a shipping order, Rutter said in an earlier interview.
The shipping volumes set by the government are low, Rutter added.
“We hope this is a floor, not a ceiling,” he added.
Sobkowich has the same concern.
“It needs to be treated as a minimum (not a cap),” he said. “If the railways strictly adhere to these numbers then we won’t be able to move as much grain as we need to.”
The WGEA also shares the CNMA’s concerns about getting grain to North American processors, Sobkowich said.
“Hopefully, if the railways are providing capacity that’s more in line with industry demand, as opposed to the strict numbers set out in the volume thresholds, we’ll get closer representation to the demand by corridor than we received last year,” he said.
Some North American millers ran out of grain last crop year because of poor rail service and millers don’t want a repeat, Harrison said. But last week there weren’t enough stocks of certain types of wheat in Thunder Bay to meet some millers’ needs, he said.
“This is exactly how it started last year — déjà vu all over again,” Harrison said.
“I’m not happy with it,” he said. “This really is a disappointment.”
The federal government continues to call on the supply chain to co-operate to ensure efficient grain movement, Ritz said.
Conflicting signals
Meanwhile, the government has sent conflicting signals about its plans for renewing the tonnage limits as the grain industry and the railways argued for and against an extension.
CN and CP also have to submit formal winter contingency plans to Transport Canada and supply the Grain Transportation Monitor with details about empty hopper car delivery to grain shippers.
That’s also welcome, said Rutter, Stanford and Sobkowich.
The total grain supply for the 2014-15 crop year is estimated to be 56.4 million tonnes harvested this fall, compared to 80 million tonnes in 2013, and a carry-over from the 2013 crop year of about 15.4 million tonnes.
Overall, the railways are expected “to provide reliable and predictable service to all shippers, all destinations, and throughout all corridors, as is their obligation as common carriers,” the government said in its release.
CN Rail says that normal commercial relationships and stable regulations are essential for a well-run system.
“More regulation threatens to increase costs, stifle innovation and potentially discourage investments that are critical to building the strong, safe and resilient supply chains of the future,” CN said in a news release Nov. 29. “It is vital for Canada’s stature as a trading nation — and CN’s role as a true backbone of the economy — that the government foster true supply chain collaboration.”
