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COVID surprise comes to grain movement in 2020

How the pandemic helped Canada set a grain shipping record and what’s to come

Railways were able to overcome a bad start to the shipping year after capacity opened up due to the COVID slowdown.

When it comes to the grain transportation file in 2020, it was a story of extremes.

Record western Canadian grain shipments in the 2019-20 crop year ending July 31, belies poor rail performance, much of it beyond their control, during the first six months of that period.

Mark Hemmes. photo: Supplied

“When we were in week 28 (Feb. 9-15, 2020) (the 2019-20) crop year was shaping up to be probably one of the worst movements that we had in 10 years,” Canada’s grain monitor Mark Hemmes, president of Quorum Corporation, said in an interview July 23, 2020.

“We could’ve come out of this crop year with a 20-million-tonne carry forward. And then COVID hit. COVID was a blessing to grain as much as it was a curse to every other aspect of our life… because it freed up (rail) capacity that was needed to get us caught up.”

Meanwhile, some of the ingredients needed to set a grain shipping record during the current 2020-21 crop year ending July 31, 2021 are present, including record 2020 western grain production of 77.745 million tonnes, just slightly above 2013’s record of 77.021 million.

But as 2020 was winding down, declining railway performance was setting off alarm bells among grain companies.

Why it matters: Western Canada’s multibillion-dollar grain industry relies heavily on railways to get its product to export terminals and domestic markets.

The 2019-20 crop year started off with a big crop and delayed harvest. Mud in September 2019 followed by snow, including one of Manitoba’s worst Thanksgiving blizzards, delayed grain shipping.

That was just the start.

CN Rail was shut down briefly in November 2019 by a strike, but by mid-December 2019 it was back to normal.

However, in January 2020 both CN and CP Rail experienced land and rock slides that delayed grain trains, followed by blockades by activists protesting plans to build oil pipelines across First Nations land.

By Feb. 19, 2020 there was a 905,000-tonne grain backlog — 705,000 tonnes of it accumulated in the previous four weeks due to the blockades, Hemmes said in an interview that same day.

“How do you make up for 750,000 tonnes, especially since everyone will be on the railways, saying, ‘I want my capacity back’? Eventually, a part of that is lost sales. We’re talking hundreds of millions (of lost revenue) here,” he said.

That same morning there were 54 ships waiting for grain in Vancouver and Price Rupert, one less than the worst week of the 2013-14 crop year where a grain backlog, which University of Saskatchewan agricultural economist Richard Gray estimated cost Prairie grain farmers between $5 billion and $6.7 billion.

Until the blockades both railways had done a good job recovering, Hemmes said.

Wade Sobkowich, executive director of the Western Grain Elevator Association, whose members handle about 90 per cent of Canadian grain, did a three-day snapshot of costs due to rail blockades from Feb. 10 to 12.

Direct losses — contract penalties, demurrage paid on ships and lost capacity — were estimated to be $10 million.

Hemmes noted that other commodities shipped by rail had suffered too.

Wade Sobkowich. photo: File

“This time around, we’re in uncharted territory,” he said. “Everyone is hurting — containers, coal, potash, the chemical industry… everyone.”

That forces the railways to ration what capacity they have. Meanwhile, because car cycles are out of sync it takes time to restore the conveyor-like flow of loaded grain heading to port and unloads returning to country elevators.

A few weeks later Canada’s first COVID lockdown was in place, and if anything, the demand for Canadian grain was stronger as folks hunkered down and panic purchased staples such as wheat flour and pulses.

The railways and the rest of the value chain kept grain moving.

“Our members are going to do their best to keep the supply chain moving,” Sobkowich said in an interview March 18, 2020.

Canola oil and meal were moving too, Chris Vervaet, executive director of the Canadian Oilseed Processors Association (COPA) said in an email March 19.

The Canadian Grain Commission and Canadian Food Inspection Agency continued their work too, to keep food export flowing.

Both railways said they were taking action to keep grain and its products moving.

The Port of Vancouver didn’t miss a beat either.

“The rail has been getting to port and we’ve had some really nice, dry weather out here so loading operations have been going quite smoothly,” Doug Mills, the port’s senior account representative said in an interview.

Increased capacity within the system is being put to the test by large crops for the past several years. photo: Allan Dawson

While COVID slowed down the world’s economy freeing up rail capacity for Canadian grain, it had a negative impact on container supplies, often used to ship pulse crops.

“The whole containerized marine supply chain has been hit by coronavirus… ” Pulse Canada president Greg Cherewyk said in an interview.

According to Maersk, the world’s largest container shipper, COVID-19 cut Chinese manufacturing by an estimated 50 to 60 per cent in February (2020). The result was fewer electronics and other goods coming to the rest of the world, including Canada.

“That has had a big impact,” Cherewyk said.

From March 2020 on, both railways accelerated grain shipping chewing through the backlog built during the previous six months. CN Rail set grain movement records every month from July to October and CP set many as well.

“We have never seen a summer where we saw this much grain being delivered into the system,” Hemmes said in an October interview.

Usually grain shipping declines in summer because demand and prices are better in the fall and early winter and supplies are limited by then. But there was still a lot of grain left with farmers anxious to make room for what turned out to be record production in the fall of 2020.

By July 31, 2020, when the crop year ended, the West’s grain pipeline set a new grain movement record of 58.6 million tonnes — 60.7 million when grain shipped by truck, mostly to the United States, is included.

Record grain production in 2020 and record grain shipping at the start of the current crop year, makes a grain shipping record three-peat a possibility in 2020-21. But railway performance declined in November and December 2020, based on Ag Transport Coalition data. The coalition represents the majority of grain companies.

Car order fulfilment was down, especially for CN Rail, which some weeks was meeting just 60 per cent of shipper demand on time. While shippers would prefer 100 per cent order fulfilment, 90 per cent or better is considered good, Sobkowich has said.

The data is slightly skewed by the fact that as the railways had been setting shipping records, grain companies were ordering more cars. But even after taking that into account, poorer rail service, especially in some corridors, is raising red flags, Sobkowich said in a late-December 2020 interview.

“The shippers are testing what the railways can do… ” he said. “If they (grain companies) don’t and their competitor does, the competitor is going to get a larger share of the pie. The system is designed to motivate shippers to ask for the top end of what they think they can get.

“We need to move a record amount in order to match the growing crop size in Western Canada… since 2013-14. The railways are adjusting their capacity offering… that’s good and what they should do. They are moving record volumes because farmers are growing record volumes.”

– With files from Gord Gilmour

About the author

Reporter

Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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