The prospects of another bumper crop this year have western Canadian grain companies and farm leaders warning the railways to be ready.
They want to avoid a repeat of the colossal and costly backlog of 2013-14 when crop production set a new record by a large margin.
“We know it’s going to be a big crop and the grain companies are doing everything possible to be ready for it,” Wade Sobkowich, executive director of the Western Grain Elevator Association (WGEA), said in an interview June 22.
“This year’s crop, based on the probabilities, is going to be higher than average.
“If we run into a problem it is going to be for the same reasons we ran into a problem in 2013-14. Nothing has changed in a significant way to the policy environment or the competitive environment to require the railways to do anything different and they will be the bottleneck.”
Based on estimates from its six member-companies the WGEA, which handles 90 per cent of the West’s grain, says western farmers will harvest 68.6 million tonnes of grain. Production could be as low as 63.3 million or as much as 74.1 million, Sobkowich said. The low estimate would exceed the five-year average of 61 million tonnes and the high would challenge the 2013 record of 76 million tonnes.
“These numbers have been communicated to the railways and the federal government,” he said.
The Agricultural Producers Association of Saskatchewan is also urging rail readiness, president Norm Hall said.
“Three years ago the railroads used the excuse, ‘well, we didn’t know a big crop was coming,’” he said in an interview.
Crops look good in Saskatchewan and right across the West, Hall said. But he’s worried. There have been reports of staff layoffs and leasing agreements sending cars and locomotives to railways in the United States.
The railways blamed the 2013-14 backlog, which cost grain companies and farmers billions of dollars in lost revenue, on the record crop and the coldest winter in 100 years. But the WGEA says the problem is the railways have no incentive to invest in surge capacity because grain shippers are captive. Rather than invest in surge capacity the railways can move grain later when there is capacity. That’s why shippers and farmers want regulations to penalize the railways when they fail to deliver the service they’ve promised.
The railways say they are ready to move this year’s crop.
“Canadian Pacific (CP) is well positioned to provide best-in-class service to western Canadian grain shippers during the 2016-17 crop year,” company spokesman Jeremy Berry said in an email.
“CP continues to invest in its network to improve efficiency, create velocity and provide the best service possible to customers.”
Shippers can manage their rail service through CP’s Dedicated Train Program (DTP), which CP expects to soon expand, Berry said.
Shippers who move less grain than a unit train can use CP’s Open Distribution program, which allows them to submit orders for four weeks. As orders are filled, new orders can be placed.
“CN is communicating with its grain customers to understand the requirements associated with the transportation of the coming grain crop in Western Canada,” Canadian National Railway spokesman Mark Hallman said in an email. “Moving a crop successfully requires a high level of performance by all supply chain participants.”
Neither railway answered questions on staff layoffs or leased-out equipment.
Berry noted CP has been moving “record amounts of grain.”
So far in the 2015-16 crop year, CP moved 4.8 per cent more grain than the same period last year and 10.4 and 16.7 per cent more than CP’s three-year and five-year averages.
Both Sobkowich and Hall agree grain is moving well this crop year, but they say it’s because the railways have less non-grain traffic.
“Year over year the railways are down 225,000 cars because of the oil, potash, coal and container traffic (being down), but grain is up 15,000 (cars),” Hall said.
It’s a message Hall delivered to politicians in Ottawa recently after hearing Transport Canada tell the House of Commons agriculture committee how well the railways are doing.
Sobkowich fears the government will get complacent.
“The problem has not been solved,” he said. “Service has been good, but we don’t see it as sustainable without some fundamental changes to address railway market power.”
The WGEA is frustrated because it sees a big crop coming “but is at the railways’ mercy in terms of whether they are going to bring on enough capacity to meet our needs,” Sobkowich said.
Western crops are looking better now than they did this time last year, Bruce Burnett, G3’s weather and crop specialist said last week. The 2015 crop was the West’s second biggest ever.
“We could be looking at increased production from last year,” he said, but added there are more pulses, some of which yield less than wheat.
Carry-out, for most crops, is expected to be down too, he said.
“The crops are ahead of normal,” Burnett said. “The temperatures have been above normal since planting overall. Growth has been very good. So in Western Canada you are probably generally looking at an earlier start to harvest than average.”