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Poor rail service hurts grain competitiveness

If Paterson Grain serviced its customers the way the railways service Paterson Grain, it wouldn’t get much repeat business, according to the Winnipeg-based company’s vice-president of operations Keith Burch.

“If we (said) ‘We’ll sell you 10,000 tonnes of canola and we promise to deliver 80 per cent of that, and only 90 per cent of the 80 per cent (will be delivered) within three weeks of when you need it on a 12-week moving average,’ I’m not sure we would have a second sale to that customer,” Burch told the Canada Grains Council semi-annual meeting here Nov. 14.

Earlier this year Paterson and five other companies complained to the Canadian Transportation Agency (CTA) about Canadian Nat ional Railway’s (CN) allegedly poor service. The CTA, an independent, quasi-judicial federal agency, set a performance benchmark for CN to meet. It’s supposed to supply 80 per cent of the cars the companies order, 90 per cent of which are to be supplied within three weeks of when they were requested, on a moving 12-week average, unless there are circumstances beyond CN’s control.

“Our issue is getting what we need, when we need it,” Burch said.

“Competitive threat”

No grain company expects to get all the cars it orders, all of the time, he added, but CN’s performance was unsatisfactory and the CTA’s benchmark still isn’t good enough. It’s also making Canadian grain less competitive.

Grain production in Eastern Europe is up 52 million tonnes over last year.

“There’s huge investments going into assets and they are a serious competitive threat to Canada,” Burch said. “We have to be better than we are today and all the components in the industry have to be better than they are today. And in order to do that there has to be accountability.”

If a farmer fails to deliver contracted grain he or she pays a financial penalty to the grain company, Burch said. If a grain company fails to load or unload rail cars in a timely manner, it pays a penalty to the railway and if grain isn’t loaded on a ship on time, the grain company pays a penalty to the charter company.

Railways, however, “are not held to account for their performance with their customers,” Burch said.

Railways are accountable to their shareholders, but not their customers, he added.

A raft of complaints were submitted to the CTA in the last couple of years. And protests from Paterson and other railway customers haven’t fallen on deaf ears.

The federal government has ordered a review of all railway service across Canada. The process, which includes gathering data on what’s working and what’s not, and the appointment of an “eminent panel” to recommend reforms, is underway.

The analysis will look at the whole system, including the role of shippers and ports, said Mark Hemmes, president of Quorum Corp., whose sister company QGI Consulting is gathering the data.

The analysis will focus on three areas: demand fulfilment (what were shippers told by the railways when they ordered cars and did the railways deliver?), car ordering and supply and car transit times.

Data will be collected from 2006, 2007 and to the extent possible, 2008.

Although most railway customers have complained about poor service, the loudest complaints come from captive shippers, Hemmes said in an interview.

“That’s largely in the grains and forest products area,” he said. “Forest products and grain shippers have probably been the loudest and had the largest amount of frustration in the last five to eight years.”

Car cycle times

Quorum, which has been contracted by Ottawa to monitor Western Canada’s grain transportation system since 1999, has found both grain companies and railways have improved their performance, Hemmes said. For example, car cycle times have improved dropping to an average of 17.4 days from country elevator to port and back, compared to 20 days in 1999.

“I think that is a significant improvement,” he said.

It’s inconsistent service that so frustrates the grain companies, he said, but added that the railways aren’t always at fault. Sometimes grain companies order cars on short notice and at a time when supplies are tight.

“Nobody here is lily white,” he said.

According to most grain companies and the Canadian Wheat Board, the problem is that the railways don’t have to compete to ship grain because the railways hold geographic monopolies.

“In absence of motivation to reach commercial settlements I think we need legislated settlements,” Burch said. “We need that for car supply; we need that for service.” [email protected]

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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