In the spring of 2014 Western Canada was suffering from a massive grain-shipping backlog and it’s happening all over again.
On March 7, 2014, almost four years ago to the day, that backlog forced the federal cabinet to do something radical: order Canada’s two major railways to transport at least 5,500 cars of grain a week totalling one million tonnes, or face fines of $100,000 per infraction.
They’d been spurred to action by losses estimated to have cost farmers more that $5 billion.
Bill C-30, the ‘Fair Rail for Farmers Act’ soon followed. It codified and added to the emergency measures in the order-in-council. However, the law contained a sunset clause and, after one extension, expired last July 31.
The federal government assured farmers and grain companies Bill C-49, the Transportation Modernization Act, would soon become law, improving grain transportation.
The bill is still before the Senate and impatient grain companies are demanding government intervention.
“It’s pretty bad,” Wade Sobkowich, executive director of the Western Grain Elevator Association, said in an interview March 1.
“Some farmers haven’t delivered (grain) in months.
“I know some (grain) companies that received zero cars on CP (lines) last week… because the railways are… trying to fill back orders.”
In shipping week 30 CN and CP Rail delivered just 17 and 50 per cent of their weekly car orders on time, respectively, the Ag Transport Coalition reported.
“We really feel like something needs to be done,” Sobkowich said. “The government needs to take a look at this to see how to get the grain moving again.”
The crisis has been building since early fall, with CN Rail consistently failing to meet orders. It blamed train derailments early in the season and later poor weather, but also acknowledged more non-grain traffic, including containers and frac sand, than expected.
“So far this year, 75 per cent of days have had cold so severe that we’ve needed to run shorter trains on significant portions of CN’s network to ensure safe operations,” Kate Fenske, CN Rail’s manager for media relation in Western Canada, said in an email Feb. 16.
CN is buying and leasing more locomotives and hiring and training hundreds of new employees, she added.
CP Rail, which has fared better, is also blaming cold weather and a bigger-than-expected crop — 71 million tonnes instead of 65 million.
“On top of the crop size (and) increased production in the north, weather and other challenges have created issues for the entire transportation supply chain over the last couple of weeks,” Murray Hamilton, CP’s assistant vice-president of grain sales and marketing, wrote on CP’s website.
“We continue to add both crews and locomotives to support volumes across all commodities and are confident that with the weather on our side, service and network fluidity will continue to improve.”
Sobkowich said the railways didn’t have enough resources for grain after shifting capacity to service non-grain traffic, knowing grain is captive.
Grain movement now is the worst it’s been since 2013-14, Sobkowich said.
As of April 1, 2014 there were about 70,000 unfilled car orders, which translates into 38,000 using the current tracking system, he said.
“Today we are behind by about 28,000,” he said, just 10,000 fewer than four years ago.
Is it as bad as 2014? It depends on how you measure it, said Mark Hemmes, president of Quorum Corporation, hired by Ottawa to monitor the grain pipeline.
Grain shipments to Thunder Bay and West Coast ports are down five per cent year to date, while total movement, including to Eastern Canada and the United States, is down 13 per cent, he said. But last year there was 80.5 million tonnes of grain to move — the second-biggest supply on record — and the system set a grain-shipping record.
Grain movement this year is worse than last year, worse than the three-year average and about equal to the five-year average, he said.
“Every (other) indicator that you look at, including the severity of the weather, it’s not as bad as it was in ’13-’14,” Hemmes said.
But that doesn’t tell the whole story.
CN and CP told the grain companies they would move 5,500 and 5,000 cars a week until Christmas, respectively, and then do around 4,000, Hemmes said. They didn’t, yet the grain companies were relying on that guidance to manage their operations, he said.
“Grain companies made sales, they made contracts with producers and booked ocean vessels based on the guidance given to them by the railways,” Hemmes said. “That is really what the critical issue is.”
Because the railways didn’t deliver on their guidance to the rest of the supply chain, the other players in that system are now starting to suffer. Grain companies are paying contract penalties and ‘demurrage’ fees for ocean-going vessels that are waiting at port for cargoes. Back in the country farmers have made plans and purchases inputs on the assumption they’ll be able to market their crop, Hemmes said.
“This is where it all starts to fall apart,” Hemmes said.
Although the basis — difference between the elevator and terminal price — isn’t as wide as in 2014, it is widening as grain builds up, Hemmes said.
Country elevators are almost plugged at 87 per cent of working capacity, about a million tonnes higher than it was in 2014, he said.
“You put that all into context and it’s not a great situation,” Hemmes said.
While the WGEA wants the government to intervene, it isn’t saying how. If Ottawa ordered the railways to move a certain volume of grain, the WGEA’s member companies would want more control over where it’s picked up and delivered, Sobkowich said.
In 2014 the railways controlled that, cherry-picking the grain that was the fastest to turn over.
As a result most of the grain moved from Alberta and Manitoba, leaving Saskatchewan farmers with much of the carry-over, Hemmes said.
“If they are going to go down that road there has to be a far more clinical and structured method of doing it…” he said.
“Be careful what you ask for.”
In the meantime, while the WGEA wants speedy passage of Bill C-49, Sobkowich stresses it won’t fix the current backlog because the law’s remedies aren’t retroactive.
“We are in a place where we need some relief right now, not two months, four months, six months from now,” he said.