Agriculture Minister Gerry Ritz says the railways are doing an “adequate” job moving a record western Canadian crop, and the chief commissioner of the Canadian Grain Commission (CGC) last week issued a press release backing him up.
But historical data, including from the CGC, show the railways aren’t moving much more grain than a year ago or even 19 years ago, despite huge gains in system efficiency.
That’s why the Western Grain Elevator Association (WGEA) and some farm groups say the railways can do better.
WGEA executive director Wade Sobkowich says the railways don’t invest in surge capacity because they don’t have to. He says that since the railways don’t compete, they know they will eventually move the crop without spending more money. And unlike when the railways were regulated under the Western Grain Transportation Act (WGTA), they don’t face the threat of a $720-million penalty for lacklustre performance.
Industry sources said last week 25 ships were waiting for grain at Vancouver with demurrage charges of $12,000 to $20,000 a day.
Last week the railways’ websites reported since Aug. 1 grain companies had ordered more than 23,000 cars that have yet to be spotted, and the shortfall grows weekly.
“We are getting about 60 per cent of what we ask for overall and that is on average three weeks late in spotting,” said one grain company official, who asked not to be named.
“Vancouver rail movement is sold out through to March and most of April. This is based on the assumption of lousy railway performance.”
Just feels slow?
The CGC, which maintains statistics on grain shipments, last week issued a statement hinting that poor rail service is an illusion.
“This year, producers in Western Canada saw record yields,” chief commissioner Elwin Hermanson said. “So while our data shows that grain is moving to export at a faster pace, this year, it feels like it’s taking a lot longer to empty the bins.”
The CGC said wheat and canola shipments were 31 and 28 per cent respectively higher than the five-year average. Sobkowich said that was a misleading benchmark because rail service was poor most of that time.
And while wheat and canola exports in 2013 are up almost 10 per cent from last year, total exports are up just two per cent.
History also shows the railways performed just as well in 1994.
During the first quarter of the current crop year Canada exported 7.4 million tonnes of the seven major grains. In 1994, 8.7 million tonnes were exported during the same period. There were more than 1,400 mostly wooden country elevators versus 342 mostly high-throughput elevators today.
“Those figures tell the story,” Sobkowich said. “Look at all the changes in the last 20 years… and we’re not moving more than in the past.”
Grain companies don’t expect the railways to move a record crop in one year, he said.
“There is a limit, we understand that. But we don’t think we’re asking too much of the railways.”
CP Rail has sidelined 450 locomotives, 10,000 cars and laid off 4,000 employees, according to Sobkowich.
“We have moved more grain in Canada over the last 90 days during the heavy harvest period… than ever before…,” CP spokesman Ed Greenberg said in an email. “Volumes are 18 per cent higher than our five-year average. CP’s grain loadings are about 20 per cent higher than our five-year average and our performance to the West Coast remains strong,” he said.
CN spokesman Jim Feeny confirmed CN is moving about the same number of cars as last year. The problem is a big harvest.
“It is physically impossible for the supply chain to handle it all at once,” Feeny said. “We are doing the best we ever have done in our history.”
Keystone Agricultural Producers president Doug Chorney says it’s not good enough. He contracted to deliver soybeans in October and hasn’t moved a tonne. Just as he was about to, the train scheduled for his elevator was abruptly cancelled. He suspects it might have been after a grain company official complained about rail service.
“Grain companies are afraid to speak out because of the fear of retribution and that’s exactly what’s happening,” Chorney said. “There’s too much power concentrated in their hands.”
Chorney said he hopes when rail legislation is reviewed in 2015, amendments are introduced to force the railways to do better.
Gary Stanford, the new president of the Grain Growers of Canada, also sees the 2015 review as opportunity to improve rail service.
Under the Western Grain Transportation Act, in place between 1984 and 1995, the federal government subsidized Prairie grain shipments by about $720 million a year. But if railway service was poor the government could withold the payments — a hammer that no longer exists.
As the industry was discussing rail deregulation in the mid-1990s Peter Thomson, then head of the Grain Transportation Agency, often said: “A little bit of competition will do away with an awful lot of regulation. The question one would raise is, is there sufficient competition to do away with regulation?”
According to Sobkowich, the answer some 20 years later, is no.