Canada’s grain handling and transportation system has descended into one of its periodic episodes of chaos and uncertainty.
A big crop and some cold weather have met railways cut to the bone in search of profit, observers say, leading to the predictable outcome of grain movement grinding to a near halt.
The last time was the brutal winter of 2013-14, but that’s just the latest iteration of a story that’s now decades old.
There are two factors that make this a recurring theme.
First, railways are the only economical way to move bulk grains to market from the Prairies. Trucking simply cannot compete over long distances, there are no navigable waterways in the style of the Mississippi River and other options like a pneumatic grain ‘pipeline’ remain pie in the sky.
In addition to no competition for the railways, there is little incentive for the two national railways to compete. There are of course a few areas of overlap, but generally the two lines operate in geographic isolation from each other, CP on the southern Prairies and CN to the north.
In light of these two realities, frustrated grain shippers say this result is unsurprising. Railways understand this grain is captive to their lines and the result is a lack of any sense of urgency to service these shippers. If other shipping volume grows — containers from China or frac sand for the energy industry, for example — that means less rolling stock and fewer people to move grain.
The immediate effects are sobering as demonstrated by the billions of dollars lost to demurrage, lost revenue and lost sales from the 2013-14 debacle.
Grain shippers may be captive, but Canada’s grain customers are not. Keep overseas processors waiting for too long and they might go elsewhere; they might not be back.
The federal government needs to move swiftly to pass Bill C-49, which provides grain shippers with better tools for holding the railways more accountable. The bill should have been in place before temporary measures brought into play in the wake of the last disruption were allowed to expire.
History has shown that without competition and without adequate regulation, Canada’s railways will continue to put their short-term economic interests ahead of national goals.
But that’s all water under the bridge so to speak. Speaking of bridges, maybe the discussion should now turn to what is needed to secure Canada’s reputation as a reliable and high-quality supplier of grains in the future.
The Prime Minister’s Advisory Panel on Economic Growth report, the so-called Barton Report, identified the agriculture and agri-food sector as a key player in this country’s economic future. It recommended Canada set its sights on becoming the world’s second-largest exporter in the next decade or so. But that report also cited the need for major investments in its transportation infrastructure in order to make that happen.
“Canada’s agri-food, resources, and energy sectors, for example, all underwent positive transformations over the past decade, but our comparative advantages there are all too often curtailed by inadequate capacity in transportation infrastructure,” the report said.
That report noted that infrastructure investments are in of themselves a factor in economic growth, pointing out that for every dollar invested, the economy grows by $1.60 in the first year.
Looking to the future, investments that make the movement of goods to market more seamless are bound to have economic spinoffs that ripple through the economy, just as transportation snafus like this year’s spread the pain far and wide.
The federal government is promising action on the immediate crisis by mid-March, and there are no doubt benefits that accrue from legislation that can hold the railways to account.
Looking to the longer term, the government established the Canada Infrastructure Bank (CIB) in February as recommended by the Barton Report. It’s a Crown corporation that will use $35 billion in federal funds to leverage investments in infrastructure that contributes to long-term economic growth.
A mere $5 billion of that is dedicated to trade and transportation corridors, but it’s a start. Is better logistics management the only fix needed in Canada’s grain transportation network, or are hard investments needed?
For example, can some of those investments be used to add a degree of competition to the system by adding infrastructure that increases the potential for interswitching?
The thought of building new rail infrastructure after decades of pulling up lines and shipping the steel off to China might sound heretical, but it’s time to think outside the box.
Changes to the transportation system now should not only be focused on addressing the problems of today. They need to face the demands of the future.