CN Rail says it has moved a record amount of Western grain so far this crop year but shippers say that doesn’t make up for poor service earlier in the shipping season.
“I’m glad they’re moving the grain but I do take exception to their demeanour and tone,” Keystone Agricultural Producers’ president Doug Chorney said in response to CN’s news release announcing its improved performance. “It tells me they’ve learned nothing about service this winter.”
CN seems to be saying it’s doing farmers a favour, he said.
“I don’t think they felt our pain,” Chorney said referring to the estimated billions of dollars farmers and grain companies lost due to depressed country grain prices, delayed and missed sales, contract penalties and demurrage. “Farmers bore the brunt of this poor rail service. They’re now happily hauling all this grain at an entitled freight rate and there’s no pain felt by them at all.”
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Earlier this month, the railways were still 60,000 cars behind on orders, said Wade Sobkowich, executive director of the Western Grain Elevator Association. The backlog peaked at 78,000 unfilled car orders.
CN said In a May 28 news release its May hopper car deliveries to Western Canadian elevators are expected to average 5,500 a week — 50 per cent more than the eight-year historical average and 38 per cent more than the best-May ever.
Crop year-to-date, CN said its grain volumes are four per cent better than its previous best and 13 per cent above average performance.
“In the last four to five weeks, CN has turned things around considerably,” said Mark Hemmes, president of Quorum Corporation, the firm hired to monitor Western Canada’s grain handling and transportation system. “They are now slightly ahead of last year and ahead of the five-year average.”
Quorum is prohibited for commercial reasons from releasing specific data about an individual railway.
“We need to move away from comparing this year’s performance to past years,” Sobkowich said in an email. “We weren’t happy with the performance many times in past years.”
The railways blamed the record 76-million tonne Western crop harvested last fall and an unusually cold winter for the grain shipping backlog.
Grain shippers blamed the railways for not investing more in surge capacity. They say since grain is captive, the railways know they will eventually move it without spending more resulting in greater profits for shareholders.
Shippers say that wouldn’t happen in a competitive market and that’s why rail regulation that includes penalties for poor service is needed.
The federal government agrees. In March, it ordered the railways to move a million tonnes (11,000 cars) a week to export terminals.
Then it introduced Bill C-30, the Fair Rail for Grain Farmers Act, which allows the government to continue setting rail-shipping targets and extends interswitching limits to 160 km. The bill received Royal Assent last week.
The federal government is also speeding up a review of the Canada Transportation Act.
Meanwhile, last week the Canadian Canola Growers Association filed a level-of-service complaint against both railways to the Canadian Transportation Agency. The association hopes the CTA will order the railways to invest more to provide better service.
Louis Dreyfus has filed a complaint with the CTA against CN.
CN president Claude Mongeau said in February, before the government order, and the new legislation, he promised CN would move 4,500 cars a week after the weather warmed up and 5,500 cars after the Port of Thunder Bay opened.
“We have done exactly what we promised, without the need for regulatory intervention,” he said.
“True supply chain collaboration and normal commercial alignment, not ill-advised and unwarranted regulation… is what we need to help deliver this significant volume efficiently to the benefit of Canada’s grain-growing sector.”
In contrast, CN’s performance and Mongeau’s attitude demonstrate how “absolutely essential government regulation is,” Chorney said.
“We’re also not seeing in their news release how they are going to invest in future infrastructure to make sure they can handle this crop every year,” he added. “I think they’ve got enough business to warrant some investment, but they seem to be more focused on profit taking and short-term cash flow than on long-term business strategies that help their customers.”