The federal government’s order-in-council requiring the two major railways to ship a minimum amount of grain has expired, but can be reinstated if required, says Agriculture Minister Gerry Ritz.
The first order last March compelled the railways to ship one million tonnes in total per week or face a fine of up to $100,000 a day. The minimum shipping volumes changed several times since and the maximum fine was changed to $100,000 per incident.
The Western Grain Elevator Association and Keystone Agricultural Producers said that while grain shipping has improved, problems requiring a permanent fix remain and need to be addressed as part of the review of the Canada Transportation Act.
“Our two key recommendations are No. 1 for the act to provide a better definition of the railways’ obligation to provide adequate and suitable accommodation in a way that reflects shipper demand,” WGEA executive director Wade Sobkowich said in an interview. “And No. 2, to allow an arbitrator to include performance penalties in service-level agreements so service contracts resemble normal commercial agreements.
Sobkowich said his members want a demand-based system for filling rail car orders as opposed to the current car supply-based system.
Ag Transport Coalition data shows shippers are only getting cars during the time they ordered them about 30 per cent of the time, KAP president Dan Mazier said through a text message.
“I could expect these numbers out of a Third World country but in Canada? The long-term fix is through the CTA review and well-thought-out regulations. I just hope our customers and their shippers can hang on that long.”
The Agricultural Producers of Saskatchewan said it was disappointed in the decision.
The decision of the federal government to not renew the order and to avoiding specifying volume requirements by corridor or type of shipper, places producer car users, small grain handlers and short lines at risk,” APAS vice-president Arlynn Kurtz said in a release.
Railways welcome decision
Canadian National Railway issued a statement saying it supports Ottawa’s decision not to renew the order.
“CN believes that normal commercial relationships and a stable regulatory environment are essential for an effective, well-functioning rail transportation marketplace, including that for grain,” CN spokesman Mark Hallman said.
He said that since the first order last March, total tonnage of western grain shipped has exceeded the mandated volumes by nearly three million tonnes, or more than 12 per cent.
Canada’s grain supply chain is fully back in sync in all corridors and CN continues its record-setting grain movements in the 2014-15 crop year, Hallman said. As of March 21, 2015, CN has moved on average approximately 4,650 grain hoppers weekly in Western Canada — 20 per cent more than during the same period of the record 100-year crop year of 2013-14.
A CP official declined to comment on the order, but added “CP will continue to move Canadian grain consistent with demand from our customers.”
The government said its order, issued to clear a huge backlog in grain exports following a record western Canadian crop and the worst winter in 100 years, had done its job. Grain shipments to ports are 31 per cent higher than last year and 25 per cent higher than the five-year average. The West’s carry-out going into the new crop year is near average, at 10 million tonnes.
The Ag Transport Coalition’s weekly reports continue to paint a less rosy picture. In shipping week 30, CN and CP supplied 2,302 of the 6,228 hopper cars ordered for delivery that week, plus 4,202 cars filling orders from previous weeks.
So far this crop year, each week’s unfulfilled demand for hopper cars has reached nearly 24,000 cars, the coalition said. Net unfulfilled demand now sits at 9,539 orders, the coalition added.
With input from grain industry stakeholders through the Crop Logistics Working Group and Ag Transport Coalition, the government said it will review its Grain Monitor program before the new crop year, “to determine how more effective data can be collected to find efficiencies in the supply chain.”
Before the end of the year, the CTA review will issue recommendations to improve the system.