The great grain backlog of 2013-14 was a disaster, costing western Canadian farmers billions, but there’s a silver lining: since then, grain movement has never been better.
“I think it really was a wake-up call for a lot of parties, especially governments, and people who aren’t necessarily as close to the (grain transportation) issue,” Wade Sobkowich, executive director of the Western Grain Elevator Association (WGEA), said in an interview Aug. 23. “The WGEA had been talking about it a long time prior to 2013-14.”
Because of the backlog grain companies widened the basis — the difference between port and country grain prices — costing farmers an estimated $5 billion to $6.7 billion, estimates University of Saskatchewan agricultural economist Richard Gray.
While the WGEA doesn’t agree with Gray’s analysis, it does agree farmers and grain companies suffered financially through lost and delayed sales.
Three crop years later Canadian grain terminals handled 35.945 million tonnes, setting a new record in the 2016-17 crop year that ended July 31, the Grain Monitor’s week 52 report shows. That’s the second throughput record in the last three crop years.
And even though the railways failed to meet grain company demand in 2013-14, in the end shipments from bulk terminals at port of 31.1 million tonnes were also record — 15 per cent higher than the previous record of 26.9 million set in 2012-13, according to the Grain Monitor’s statistics.
Still, 2013-14 saw the largest vessel backlog at West Coast ports since monitoring began in 2000 and the highest average vessel time.
The backlog, which the railways blamed on a record crop and coldest winter in 100 years, got everybody’s attention, including Ottawa’s.
“It got bad enough that… if there is a turning point that we are experiencing (now), it is because a critical mass got behind change as a result of 2013-14,” Sobkowich said.
Lack of capacity
The WGEA, which represents the West’s major grain companies, and farm groups all agreed the brutally cold winter was a factor, but argued the backlog was worse than it should have been because the railways lacked residual capacity, and claimed it wouldn’t have happened if the rail market was competitive.
Despite finger pointing that sometimes got personal, grain transportation has improved. Railways and shippers agree more collaboration and better communication played a big part.
“It has helped build our understanding at CP of the key elements required to move grain from the producer to the port,” John Brooks, CP Rail’s senior vice-president and chief marketing officer, said in an interview Aug. 21. “I think we’ve been able to educate the grain companies a lot too on what are the challenges at the railway and what do we need from them to help them understand so we can do a better job also. And I think because of that discussion and collaboration it has allowed us to manage better and think how we resource coming into the crop year.”
Has grain transportation turned a corner? Brooks thinks so.
“There are endless qualifiers, but I think the bottom line is the industry and the supply chain as a whole has done a really good job over the last few years and we’re certainly, at CP, anxious to deliver another record year in (20)17-18,” Brooks said.
The WGEA is wary.
Sobkowich agreed the current situation “… has that feeling like maybe we have turned the page…” but he then also added it was too soon to tell for sure.
There are lots of unknowns. The railways have been under a microscope since 2013-14 when complaints prompted the federal government to order them to ship a minimum volume of grain weekly or be fined. That was followed by the Fair Rail for Farmers Act, formalizing government intervention.
The government launched a review of the Canada Transportation Act a year early, which led to Bill C-49, the Transportation Modernization Act, currently before Parliament, which the WGEA and farm groups hope subjects the railways to financial penalties if they fail to meet service agreements.
When the spotlight dims will rail performance slip? wonders Sobkowich. What happens when there are increasing volumes of other traffic?
“We need some experience that we are operating in a new era before saying that we are,” he said.
Both CP and CN Rail say non-grain business is increasing, but it won’t hurt grain shipping.
Meanwhile, the railways are boosting shipping velocity with bigger cars and longer trains. Hauling 134 cars per train instead of the standard 112 adds 20 per cent more capacity, Brooks said. If 268,000- or 263,000-pound-capacity cars are replaced with 286,000-pound-capacity cars that can hold 100 tonnes or more each, that adds a further 30 per cent more capacity.
Proposed changes in the maximum revenue entitlement recognizing each railway’s investment in new cars will encourage replacement of the current aging car fleet, say both the major railways.
Last crop year CN Rail, on average, ran 9,500-foot-long trains, Doug MacDonald, CN’s vice-president of bulk, said in an email Aug. 22.
CN has also combined two, 100-car trains near ports.
“When practicable, this has improved network fluidity by doubling the volume of grain flowing through each train slot, and improved asset utilization, which put empty hopper cars back in the country faster for the next grain load,” MacDonald wrote.
But CN also wants the federal government to invest in infrastructure to improve grain movement at the Port of Vancouver (see sidebar).
CP Rail’s Dedicated Train Program (DTP) will account for more than 75 per cent of CP’s grain service, the company said in a news release.
“In the 2017-18 crop year CP will look to expand the DTP’s power-on component, improving cycle times and efficiency by ensuring locomotive power is available as soon as loaded grain cars are ready to be moved,” the release says.
Under the program grain shippers book a train for the shipping season, giving them more certainty and control.
“If they can load them fast and unload them fast they can get more capacity,” Brooks said.
CN’s innovations include guaranteed car supply contracts, which accounted for about 70 per cent of its grain business in 2016-17.
Another change welcomed by the WGEA is CN’s decision to state the number of cars it will provide — 5,500 per week, except in the winter when it falls to 4,000.
“My members have told me for years they sell to rail car capacity,” Sobkowich said. “The first question they ask themselves is, can they get the cars? If they are getting inaccurate information on how many cars they should expect, they are selling based on inaccurate information.
“As important as an issue of adding capacity is making sure that we have accurate information on the existing capacity.”
Sobkowich hopes the West’s grain-handling and transportation system is in a new era, but knows there’s no utopia. Natural and human-caused problems never end. And just like with the internet, the more capacity the railways provide, the more grain shippers will seek.
“We are always striving to improve,” he said. “You are never there. You are always trying to get there.”