Canada’s grain-handling and transportation system showed just what it’s capable of in the past crop year.
“It was kind of like a logistical utopia,” Mark Hemmes, president of Quorum Corporation, the firm hired by the federal government to track grain-handling and transportation statistics, said in an interview Aug. 31.
“The whole system worked really well all year. That’s partly attributable to the fact that we had a nice winter. It was ideal.”
The railways shipped 48.3 million tonnes of western grain to various destinations between Aug. 1, 2015 and July 31, 2016, down three per cent from the pervious year.
Western Canadian primary elevators shipped 42.38 million tonnes of grain, matching the previous crop year.
Terminal elevator shipments of 35.552 million tonnes were down just 0.6 per cent.
(Find the full report at www.grainmonitor.ca.)
“Now how long can we keep that up?” Hemmes said. “When the volumes (of 2016 grain) really start to hit us here in the next few weeks, it will be interesting to see how everybody reacts after sitting through a long three- or four-month lull.”
In fact, had shipments not dropped off starting this May, 2015-16 grain movement would’ve exceeded last year’s record, Hemmes said.
Meanwhile, farmers are currently harvesting what’s believed to be another above-average crop, which could again test the system.
It took two crop years, but the mountains of grain that started with a record 77-million-tonne western Canadian crop in 2013 and was added to with big crops in 2014 and 2015, has been whittled down. Since May elevators have been sweeping out their bins. But before that the system was working flat out.
“We went for a 16-month-long frenetic pace,” Hemmes said. “And that’s what it took to clean up the 2013-14 problem. Now we will spend the next 10 years debating what was the cause of the 2013-14 problem. At the end of the day it was no one single thing.
“If we learned nothing else we should understand that it is guaranteed to happen again because we don’t learn.”
Grain companies and farmers blamed the railways for not being prepared with surge capacity. The railways blamed the coldest winter in 100 years.
Hemmes said they’re both right.
Record cold starting in November 2013 saw railway capacity drop by 35 to 40 per cent for seven or eight weeks in a row. It would have been “insane” for the railways to have surge capacity to fully offset it, he said.
“They would’ve been guaranteed to lose money — and a whole lot of money,” Hemmes said.
The federal government is trying to find the balance between what shippers need and what the railways should provide.
“Given that, there is nothing to say come November 1 this year we aren’t in the same pickle depending on how much comes off fields,” he said.
Bad weather was an issue in 2013, but Hemmes also acknowledges shipper complaints.
“The lack of preparedness, or resilience by the railways, is in large part because they don’t have to worry about it because there isn’t a competitive alternative,” he said.
The good news is how well the system recovered, Hemmes said.
that grain companies shipped and railways moved and we sold as a country,” he said. “Instead of looking at it as a problem… we just showed what the system is capable of doing.”
Railway service has improved, says Wade Sobkowich, executive director of the Western Grain Elevator Association, which represents the major grain companies. But it’s because other rail traffic is down and there’s a spotlight on railway performance.
“Until we remedy the core issue of railway market power any other solutions are really just band-aid solutions that eat around the edges of the fundamental issues that need to be corrected,” he said in an interview Aug. 24. “Until we bring about legislation that requires the rail freight market to behave as if it were operating in a competitive market we will never solve the problem.”
The railways counter that more regulations will make the system less efficient and discourage investment.
The system is more efficient than it used to be, Hemmes said.
“A typical car cycle when I left the railway (in 1999) was 20 or 21 days and now we are down to 13 or 14.”
Eighty- and 100-car trains were once considered long, now 112 is the norm and the railways are going to 135.
Other report highlights include:
- The for vessel-time-in-port was 7.9 days, a 22.5 per cent reduction from last crop year.
- The number of country elevators rose 3.5 per cent to 383 from 370, increasing storage capacity seven per cent to
- Average primary elevation charges declined 1.6 per cent. Hemmes attributes it to increased competition. However, average terminal charges increased 2.2 per cent.
After a three-year streak of big crops and above-average throughput, it could all happen again this crop year, Hemmes said. Statistics Canada and others are forecasting a bumper crop.
Hemmes also said there’s little doubt the problem will recur, pointing to the fact it’s the fourth year in a row of large crops.
“I think we are looking at a new normal now,” he said.
But he also noted the system has improved.
“If we could move that much, could we move 80 million tonnes or could we move 90 million? I have a good feeling, that as much bad stuff has come out of the last couple of years with all the finger pointing, I think it has probably made the system better and more resilient,” he said.
“But now we have to start thinking about the next plateau and what will it be and when will it come?”