Grain is moving well in Western Canada, but rail service for canola oil and meal shippers needs to be more predictable.
That was Chris Vervaet’s, executive director of the Canadian Oilseed Processors Association, message to the Fields on Wheels conference Nov. 2 in Winnipeg.
Rail service is also inconsistent for crop shippers resulting in an uptick in car cycle times, Mark Hemmes of Quorum Corporation, Canada’s grain monitor, told the meeting.
“That is somewhat disconcerting,” Hemmes said in an interview on the conference sidelines.
“For five years straight we’ve been seeing cycle times in that 13- to 14-day range. In the last year to year and a half it has really bounced up.
“Cycle times have risen to 15-1/2 days. Some months it has gone as high as 18 days.”
The coefficient of variation for loaded car transit times had been 0.3 to 0.5, but in the last 10 months it rose to between 0.35 and 0.4, Hemmes told the conference.
“That’s like saying the average is six days, plus or minus 40 per cent,” he said. “If you’re a planner within the logistics group of any grain company and you’re dealing with a variability that could range anywhere between four days and 12 days it’s pretty hard to schedule when you’re going to load a vessel at port, or when you’re going to deliver the traffic to the end-user… ”
An unexpected jump in non-grain rail traffic, such as coal and containers, is behind it, Hemmes said.
“I think that has created a level of congestion where everything is just kind of slowing down,” he said.
Harvest delays didn’t help. Shipping capacity was lost because grain was still in the fields.
“That balled everything up so we have a long vessel lineup out in Vancouver,” Hemmes said. “But that’s not because of the railways… It’s not their fault.”
While both railways added extra capacity, demand from a wide array of shippers continues to exceed railway projections.
“It’s a case of where they’ve got themselves enough resources to handle the volume of traffic they moved last year and all of a sudden it goes up another notch,” Hemmes said. “They are playing this continual game of catch-up.”
CN Rail did get a lot more non-grain business in 2017 than it expected, David Przednowek, CN Rail’s director of grain marketing, said in an interview Nov. 8. CN had projected a three per cent increase but it was closer to 14 per cent, he said. The silver lining is CN will have more revenue to reinvest in improving its network.
Increasing railway capacity doesn’t happen quickly, and because of the cost, railways try to avoid idle capacity, Hemmes said.
Not all increases in car cycle times are caused by the railways, Przednowek said. For example, recent rains in Vancouver prevented terminals from loading ships, he said. Slower loading can delay car unloading and the return of empty cars to country elevators, he said.
Discussions are underway to allow grain loading through small holes in cargo hold covers when it’s raining, if approved by ships’ captains, which could address this in the future.
Car turnaround times are even more complicated for canola oil and meal, Przednowek said. In some cases a canola oil car picked up by CN at a Canadian crushing plant is handled by three or four other railways before getting to its final destination, he said. Each rail company can contribute to a delay, as can the car’s receiver.
Many factors can affect canola oil and meal transit times, Barry Prentice, a professor of supply chain management at the University of Manitoba, told the conference. For example, crushing plants have expanded production capacity, but not storage capacity or rail yards.
Vervaet acknowledged shipping canola meal, and especially oil, is more complicated than moving grain from a country elevator to an export terminal. Most oil can’t be shipped in unit trains because few customers can handle the volume, he said.
But unlike elevator shippers, canola crushers operate 24-7, 350 days a year, closing only for routine scheduled maintenance periods.
“That means we have very predictable rail demand,” Vervaet said. “It’s all about using that asset as much as you possibly can.”
It can take five days for a canola oil car to get to Vancouver from a specific crushing plant and then another time 10 days, he said.
“So to try to plan within that window certainly becomes a challenge,” Vervaet said.
Better supply chain communications will help improve rail service, he said.
Remedies in the Transportation Modernization Act (Bill C-49), including level-of-service agreements, backed by financial penalties if railway service is poor, and long-haul interswitching, should help, Vervaet said.
Canadian canola crushers want to process 14 million tonnes of canola annually by 2025, up 47 per cent from the current 9.2 million to 9.5 million tonnes, he said.
“What we think we need to do in terms of reaching our targets by 2025 is really a fluid supply chain with an emphasis on predictable, reliable movement of rail cars… ” Vervaet said.
Canada currently has 10.5 million tonnes of canola-crushing capacity and a successful record of increasing processing, he said.
Canada currently crushes about 9.5 million tonnes of canola a year compared to about 4.5 million tonnes in 2008.
Ten years ago a third of Canada’s canola was processed annually; now it’s almost 50 per cent, Vervaet said.
During that same period canola production jumped 40 per cent to more than 20 million tonnes.
About 75 per cent of Canada’s canola oil and 85 per cent of the meal are exported. The United States is the top market for both products, followed by China.