Railways vow to be ready for expected bumper crop
With Prairie farmers poised to harvest a potential monster crop in 2016, Canada’s railways say they are confident they can move the grain to market without a replication of the transportation logjam that plagued producers three years ago.
“Grain is king right now. We’re happy about it,” Canadian Pacific Railway president and chief operating officer Keith Creel said on a conference call with analysts Wednesday. Creel said strong growing conditions in Western Canada are spurring predictions of a bumper crop — good news for the Calgary-based railway, which saw its earnings decline by a disappointing 16 per cent in the second quarter and is hoping that a massive grain haul will help it improve its revenues later this year.
“It could be a huge opportunity for us,” Creel said.
The Western Grain Elevator Association — which represents the majority of the large grain companies operating in Western Canada — is projecting the size of the 2016 harvest to range between 63 million and 74 million metric tonnes, significantly higher than the fiveyear average of 61 million metric tonnes.
The biggest crop of all time in Canada was harvested in 2013, when farmers pulled in a record-breaking 76.8 million tonnes. However, that year, a transportation backlog — exacerbated by a brutally cold winter — left billions of dollars of that crop stranded in bins and elevators across the Prairies, unable to get to market. In an effort to get the crop moving, the federal Conservative government at the time enacted the Fair Rail for Grain Farmers Act, which — among other things — gave cabinet the power to impose grain hauling quotas on the railways with fines of up to $100,000 per week for non-compliance.
Earlier this spring, the new federal Liberal government extended the provisions of the Fair Rail for Grain Farmers Act for one year — giving it the ability to step in if a bumper crop causes issues in 2016. But in a letter to Transportation Minister Marc Garneau dated June 28 and provided to Postmedia by Canadian Pacific, CP’s CEO Hunter Harrison said his company is already “as prepared as possible” for this year’s harvest.
“Over the past few years CP has invested record amounts of private sector capital into capacitybuilding improvements,” Harrison stated in the letter.
Harrison added he is pleased to see that grain handlers have also made investments in country elevator and port capacity. He suggested all members of the supply chain will have to co-operate this harvest season in the event of a massive crop.
“I am hoping that the energy consumed by finger-pointing in the past can be put instead to a collective effort to work together,” Harrison said.
Though the provisions in the Fair Rail for Grain Farmers Act are temporary, the federal government is looking for a longer-term solution to farmers’ grain transportation woes. A report by former cabinet minister David Emerson suggested a number of reforms, including eliminating the revenue cap that limits the amount of money railways can make shipping regulated prairie grain.
That report is currently being reviewed, but Agriculture and Agri-Food Minister Lawrence MacAulay told reporters in Calgary on Wednesday that it is too early to speculate on what the government might do.
“Obviously, what happened a few years ago (the grain backlog) is totally unacceptable,” MacAulay said. “Everything we can do in order to make sure that the product gets to the customer I will do, and the government will do.”
Montreal-based Canadian National Railway Co. has also stated it is fully prepared and committed to moving the coming crop. In an emailed statement, CN spokesman Mark Hallman said the company believes commercial incentives, instead of additional government regulation, are the best way to get grain to port in a timely manner.
“Burdensome regulations will stifle innovation and discourage investments necessary to support Canada’s rail infrastructure,” Hallman said.