Farm groups and grain companies said last week their grain transportation woes are far from over as the federal government considers whether to keep or lift minimum movement orders for the railways.
In an emailed statement Oct. 31, Agriculture Minister Gerry Ritz’s office appeared to backtrack from a news story earlier in the week saying the government was preparing to end the regulated volumes by month’s end.
Oct. 28 Reuters quoted Ritz as saying barring a sudden pileup of grain in the next five weeks the shipping order, which expires Nov. 29, would be lifted.
However, in an email from Ritz’s office Oct. 31 an official said: “Minister Ritz has stated that no decision has been made with respect to volume requirements. The ministers of transport and agriculture will receive advice from the CTA (Canadian Transportation Agency) and will make a decision in due course.”
Keystone Agricultural Producers (KAP) and the Western Grain Elevator Association (WGEA) called for the retention of shipping thresholds to avoid a repeat of last year’s grain-shipping backlog.
The railways oppose the government order introduced March 7 requiring them to move 500,000 tonnes of grain weekly or be fined, saying it’s unnecessary and draconian. Ottawa increased the shipping threshold to 536,250 tonnes Aug. 1 and the fines for failing to comply went from $100,000 a day to $100,000 per incident.
Fertilizer shippers, domestic millers and short line railways have also complained the order resulted in poorer rail service for them as the railways focused on moving grain in corridors where cars could be turned the quickest.
Ritz told Reuters while there are still problems, grain was moving much better this year than last.
However, several farmers attending KAP’s Oct. 30 General Council meeting here complained about plugged elevators.
“We’re hearing reports from all across the province that contract deliveries are behind,” KAP president Doug Chorney said in an interview. “We know that there are grain companies filling bunkers (outside) because they can’t get the car allocations that they need to support their customer demands. So we don’t see this problem as resolved at all. We need continued government oversight.”
Minto farmer Bill Campbell told the KAP meeting his neighbour hasn’t been able to deliver on his September canola contract leaving him no place to store his corn.
“So this transportation thing isn’t going away,” Campbell said. “I think we need to keep harping on it.”
However, the Western Canadian Wheat Growers Association (WCWGA) supports ending the grain movement order.
“Our thinking here is we want to get back to a market-driven system where grain moves where there’s the best demand rather than based on railway preferences,” said WCWGA executive director Blair Rutter. “Grain should flow to where it earns farmers the highest return.”
However, Rutter stressed the order should be reinstated at the first sign of trouble.
Grain has been moving well since the start of the 2014-15 crop year Aug. 1, but there’s still a lot of grain to move, Mark Hemmes, president of Quorum Corp., which monitors grain movement for the federal government, said in an interview.
“It’s not a case of, ‘well everything is fine, everything is back to normal,’” he said. “It’s not back to normal. It’s not because the railways aren’t trying, it’s just that there’s a hell of a lot of grain out there.
“This is the second-highest supply we’ve ever had in history. It’s important to recognize that we’re not out of the woods yet.”
Canada exported 3.9 million tonnes of wheat and 1.9 million of canola Aug. 1 to Oct. 19, up 16 and 41 per cent, despite a smaller harvest this year, according to Canadian Grain Commission data.
Those figures need to be put into context, said Wade Sobkowich, executive director of the WGEA. Grain movement was down early last crop year because of a small carry-over and delayed harvest. This year grain movement weeks seven to 13 were just slightly lower than the same period last year, he added.
“So it makes you wonder what’s going to happen come the winter, if we’re going to have a repeat of last year,” Sobkowich said.
“We say it’s not advisable to lift the volume thresholds going into the winter months.”
The WGEA estimates this year’s crop is 60 million tonnes. With 17 million tonnes of carry-over, there’s 77 million tonnes to move, “which isn’t much less than last year.
“My members tell me they are on a week-to-week basis receiving less cars than they order.”
Last week there were 21 ships waiting to load grain at Canada’s West Coast ports, double the normal, according to Sobkowich.
Not only does the WGEA want the grain movement threshold to stay, it wants it increased by 1,600 cars a week to handle canola oil and meal shipments.
“They need to be motivated to bring on more supply to meet demand,” he said.
Every winter bad weather slows grain movement so the railways should add surge capacity to deal with it, Sobkowich said. “That means having capacity ready and idle at times when you don’t need to use it,” he said.
Government-mandated grain movement is a short-term fix, Sobkowich said. The WGEA hopes changes to the Canadian Transportation Act, currently under review, will force the railways to agree to service contracts resulting in penalties when the railways breach their agreements.
“This problem just won’t go away until we get that,” he said. “Once we get that level playing field then we have the basis to build something that looks commercial.”