Blockades hurting key supply chains
‘Confidence shattered’ with shipments to ports dropping by 1.2M tonnes: analyst
Rail blockades are upending Canadian meat and grain supply chains, pushing storage capacity to its limit and squeezing the flow of feed and propane to farms as producers rack up millions in additional costs and lost sales.
So far this year, grain shipments to Canadian ports have dropped by 1.2 million tonnes, with the most intense losses occurring during the past month, when environmental and Indigenous-rights activists erected random blockades protesting the construction of TC Energy Corp.’s planned $6.6-billion Coastal Gaslink project, said Mark Hemmes, president of Quorum Corp., an Alberta company monitoring Canada’s grain movements for the federal government.
During the past four weeks alone, grain deliveries to awaiting ships plunged by 560,000 tonnes as the country’s rail system — still working through backlogs due to a range of challenges that began with the eight-day Canadian National Railway Ltd. strike in November — was choked by the barriers, he said.
“At some point in time, we might make this up, but it’ll be way into the summer before we do,” said Hemmes. “Everybody in this business right now, they’ve had their confidence shattered and the impact of that stretches well beyond our borders. We’re going to have to work hard to win back the confidence of our buyers.”
Contract penalties, demurrage costs and capacity losses are all contributing to costs of roughly $63 million each week, according to an estimate from the Western Grain Elevator Association.
Indeed, 52 ships are currently waiting to be filled in Vancouver and Prince Rupert, though the removal of certain blockades Tuesday allowed some grain to begin moving again to those critical ports. The ships charge fees for each day they sit idle, adding to the burden facing the sector, said Mary Robinson, president of the Canadian Federation of Agriculture.
“These extra costs will not be paid by ports or rail companies,” Robinson said at the association’s annual general meeting in Ottawa on Tuesday. “They come directly out of farmers’ pockets at a cashpressed time when we need to prepare and invest for the coming crop year.”
While the ships sit empty, grain elevators in western provinces are now at 90 per cent capacity, said Hemmes, adding that farmers are paid when they deliver their harvest to the elevators.
“If the grain elevators run out of room and they can’t deliver it, the farmers can’t get paid,” Hemmes said. “That’s what’s so frustrating about this. There has to be a balance between empty and loaded cars moving through the country and that is not happening now.”
Like grain farmers, Canadian pork producers rely on rail containers to move meat out of storage facilities and on to ports in Vancouver and Halifax. Pork processors fill roughly 1,000 refrigerated containers each week as trains return a steady flow of empty ones to be filled again. Now, with only trucks available to move the containers, processors are running out of storage to house the backlog, said Gary Stordy, director of government and corporate affairs for the Canadian Pork Council.
“The trucking companies are overwhelmed too, and it’s slowing everything,” Stordy said, adding that moving pork by truck is roughly three times as expensive as by rail. “Everybody’s getting really concerned. This is getting more and more difficult.”
In addition to impeding deliveries, blockades are slowing the movement of critical inputs to agricultural supply chains. In Quebec, home to the largest proportion of Canadian pork producers, farmers depend on railways to deliver feed for animals and propane to heat barns. Indeed, the system delivers 1.1 million litres of propane each week for the latter purpose — 85 per cent of which arrives by rail.
With just seven to 10 days’ worth of supply on hand, farmers are rationing inventories and again, turning to trucks to bring in additional feed and fuel — a mode that costs roughly three times that of rail, Stordy said.
Olymel LP, one of the country’s largest pork exporters, said it was still assessing the fallout of the blockades. “It’s complex and of course there will be losses,” said spokesperson Richard Vigneault. “It’s costing much more with road transportation and if we have to freeze fresh product there will be losses there too.”
The upheaval is happening just as things were looking up for Canadian pork producers, who were anticipating a renewed surge in demand from China after Beijing lifted a four-month suspension on all Canadian meat in November.
“All of this is happening at an unexpected additional cost for farmers and it’s starting to get serious,” Stordy said.