Grain-shipping three-peat possible

Western Canada could ship another record amount of grain this crop year but it’s going to take good management and good luck

While the 2020-21 crop year is young, when it ends next July 31 it’s possible western Canadian grain shipping will have set another record — the third in a row.

Mark Hemmes.
photo: Supplied

A three-peat requires a big crop, rail capacity, good management and luck, but it’s off to an unprecedented start, says Canada’s grain monitor, Mark Hemmes, president of Quorum Corporation.

“If they keep it all together it could happen,” Hemmes said in an interview Oct. 6.

Why it matters: Grain shipping, especially in the critical early part of the crop year, is vital to reach markets at peak prices.

Western Canada moved a record 58.6 million tonnes of grain by rail to export terminals and domestic facilities during the 2019-20 crop year, Quorum figures show. (With trucking included, 60.7 million tonnes of grain moved.)

The previous rail shipping record, 54.3 million tonnes, was set in 2018-19.

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Quorum estimates Western Canada will have a total grain supply of 84.5 million tonnes this crop year, down just slightly from 84.7 million in 2019-20, so another record is plausible.

Based on industry forecasts and estimates, Quorum puts Western Canada’s 2020 grain production at 76.4 million tonnes. That’s not far off the record 77-million-tonne record set in 2013.

Carry-over stocks from last crop year are estimated to be 8.07 million tonnes.

“I think we’re going to have a slightly higher-than-normal carry-over (from 2019-20),” Hemmes said. “It’s going to be a good production year. It kind of reminds me of 2013-14 when the sun, moon and stars all aligned.”

Usually grain movement slows in summer, in part because stocks are usually lower then and demand is too. Not at the end of last crop year, nor at the start of this one.

“We are entering the critical period of time for grain movement (October to February); we hope rail service is going to stay in this general range… “ Wade Sobkowich.
photo: File/Allan Dawson

A litany of problems last crop year began with a delayed 2019 harvest followed by derailments, blockades and a labour dispute at CN Rail. In fact, things were so grim 2019-20 was shaping up to be the worst grain shipping year on record, Hemmes said in an earlier interview.

Then COVID-19 hit locking down much of the economy by March. Rail traffic for non-grain products dropped, while the demand for grain at home and abroad increased. The railways had more capacity to move that grain that didn’t move earlier. And they did.

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

“I looked back 20 years in July and August and we have never had this much grain ever moved. It wasn’t just a record for the railways it was a record for the system.”

During the first eight weeks of the crop year farmer grain deliveries to country elevators averaged just over 1.2 million tonnes, up from a three-year average of 916,000 tonnes for the same period, Hemmes said. In percentage terms, shipments are 38 per cent higher than last year and 41 per cent higher than the three-year average for the first eight weeks of the crop year.

“We’ve had deliveries into the country elevator system unlike what we’ve ever seen before,” he said. “In August I think it was people emptying out their bins. As we got into September it was stuff coming right off the combine.”

Both CN and CP Rail set grain movement records in the third quarter (July, August, September) of 2020, each said in separate news releases — 7.76 million and 7.72 million tonnes, respectively.

At the end of September CN had recorded new grain shipping records for seven straight months, including 2.43 million tonnes in August and 2.81 million tonnes in September.

David Przednowek.
photo: Supplied

“For the first two months of the (current) crop year we moved 5.06 million tonnes of western Canadian grain,” David Przednowek, CN Rail’s director of sales and marketing said in an interview Oct. 6. “Last year at the same time 3.92 (million). Three-year average — 4.08.”

CN’s movement was 29 and 24 per cent better than 2019-20 and the three-year average.

According to Przednowek the increase was “all demand driven” and not because CN had extra rail capacity. CN’s other non-grain traffic bottomed in May and has mostly recovered, he said.

An earlier harvest and better harvest conditions, helped too, Przednowek said, while stressing the credit goes to CN’s train operators.

“They’re the ones working at night,” he said. “They’re the ones working on the weekends. These are essential service personnel.

“When we’re setting records the record belongs to the folks moving the traffic.”

In addition to record grain movement during the third quarter, CP Rail set a September movement record, exceeding the previous one set in 2017 by eight per cent.

Joan Hardy.
photo: Supplied

“We are proud of the steadfast commitment and dedication the CP family has shown throughout the pandemic, which has been critical to Canada’s grain supply chain and to our customers,” Joan Hardy, CP vice-president of sales and marketing grain and fertilizers, said in a news release. “The CP team showed itself ready for this fall’s harvest, supporting customers and their supply chains to get grain moving off the combine and to market. Customers tell us the crop that continues to come off the fields is large, and CP is ready to keep it moving.”

Both railways have been buying new locomotives and higher-capacity cars to increase their grain shipping capacity.

“We are resourced to deliver a really strong grain program this fall and into the winter,” Przednowek said.

CN and CP’s goal is to ship 5,250 and 4,300 grain cars a week, respectively, during the winter this crop year and 6,750 and 5,850 a week outside of winter.

If we can achieve those levels that’s going to be record-strong grain movements,” Przednowek said.

“We’re (CN Rail) expecting to move between 27.5 million to 29.5 million tonnes of grain and processed grain products by carload. Last year it was a record at 28.3 million.

“The table is set here. We’ve got a way better quality crop to work with. That’s going to take a lot of the complexity out of the grain supply chain. That’s going to make for more fluid movement.”

Record grain movement is welcomed by major grain companies represented by the Western Grain Elevator Association (WGEA), its executive director Wade Sobkowich said in an interview Oct. 5.

Wade Sobkowich
photo: File

“So far we would say the rail service has been in the acceptable category for this crop year,” he said. “We are entering the critical period of time for grain movement (October to February); we hope rail service is going to stay in this general range, if not improve as the fall and winter progress.

The WGEA’s subdued response reflects its long-held view that the railways usually can’t meet companies’ grain shipping demands during the peak fall-winter shipping period.

“I don’t think we’re going to see (railway) capacity improve overall, but if the railways meet their grain plan numbers overall then we think that will end up being pretty good service,” Sobkowich added.

Sobkowich said it’s important the railways meet their stated shipping goals because companies make grain sales based on that.

The WGEA also contends when other rail traffic increases grain shipments suffer.

Hemmes agrees.

“If they (railways) all of a sudden get a higher level of demand from other commodities that are competitive, or partially competitive, grain is going to go to the back of the line again because grain has got to go by rail. Period. End of story,” Hemmes said.

“You can’t lose sight of that. They are a business and they are going to do what is best for them and not for what the grain industry needs.”

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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