‘Every week it’s actually getting worse’: Feds push railways to ease grain backlog
OTTAWA Canadian grain farmers, facing pinched cash flows just ahead of their critical spring seeding season, received some good news from the federal government Tuesday, with a promise to put pressure on Canada’s two major railways to clear a growing backlog of grain shipments.
Transport Minister Marc Garneau and Agriculture Minister Lawrence MacAulay have written jointly to Canadian National and Canadian Pacific to express their “serious concerns” about the failure of the railways to meet the expectations of shippers and customers over the winter.
The two ministers say they understand that the railways have faced challenges due to a larger than expected grain crop last year and extreme winter weather.
Nevertheless, they call the railways’ performance “disappointing ” and ask them to take further action.
The comments came a day before an emergency meeting of the House of Commons transport committee is scheduled to explore the backlog problem.
For farmers the situation is getting dire.
“Every week it’s actually getting worse,” said Stephen Vandervalk, who operates a 12,000-acre malt barley and canola farm south of Calgary.
The delays have left Vandervalk behind schedule on a $450,000 contract for durum, a grain typically used in pasta products, that was meant to be shipped to an overseas buyer in January. Other grain farmers are facing similar delays, with contracts for wheat barley, oats, and other products going unfulfilled — with delivery dates sometimes stretching as far back as 2017.
According to farmers, logistics firms are months behind on grain shipments due to a steep shortage of rail cars supplied by Canadian National Railway Co. and Canadian Pacific Railway Ltd., leaving storage tanks and grain elevators across the prairies near full capacity.
Farmers, meanwhile, are struggling to plan for the upcoming planting season without assurances over delivery dates.
“Usually you have a date — say next week, or a week from now,” Vandervalk said. “There’s literally no time frame anymore.”
Opposition members have been pushing the Trudeau Liberals to pursue an order in council as the bottleneck persists.
“They should have started this weeks ago,” said John Barlow, a Conservative MP and committee member who called for the Wednesday meeting.
Grain farmers say backlogs in the early portion of the year are typical, but that this year has been particularly pressing for producers.
“We’ve really felt the pinch,” said Ian Boxall, who operates an 8,500acre farm near Tisdale, Sask.
Boxall has yet to fulfil a wheat contract that was scheduled for delivery in December. He said the seven grain elevators near his home are all near full capacity, and are months behind on some contracts.
Many producers are now facing a critical shortage of cash flow to pay loans or buy new equipment or fertilizer ahead of their planting season, which can begin as early as April for some farmers.
“It’s absolutely absurd,” Boxall said. “Farmers already deal with so many unreliable factors — weather, crop prices, and input costs. Reliable rail service should be something we can depend on.”
A statement from CP said the delays were partly due to grain production being higher than expected, six tonnes over its annual prediction of 65 million tonnes. It also said that an unusually cold winter had crimped its ability to supply rail cars.
Representatives at CN declined to comment on the backlogs.
Delays for grain shippers come as Canadian oil producers also struggle to move their product by rail in a timely fashion, largely due to a capacity issues on Canada’s oil pipeline network that has forced more barrels into railcars.
Several companies have complained about delays in getting their oil-by-rail shipments to market.
The higher-than-expected grain production comes amid rising oil output that’s already straining Canada’s rail system, and adding to oil producers’ steep discount for their crude.
“They are obligated to move whatever product by rail for the good of the country,” said Scott Saxberg, the CEO of Calgary-based oil producer Crescent Point Energy Corp.
Systemic shortfalls in Canada’s rail system have also led to calls for government officials to expedite Bill C-49, the Transportation Modernization Act, currently making its way through the senate.
The far-reaching bill includes changes to protect suppliers, including reciprocal penalties for both suppliers and rail companies, and more widespread data sharing aimed at making shippers more transparent.
The bill also calls for extended long-haul interswitching, or LHI, which would effectively liberalize some portions of Canada’s transportation system to allow more rail companies to vie for customers on a single line.
Currently, most regions on Canada’s rail network are limited to service by a single shipper, almost exclusively CN or CP.
Rail companies were initially critical of the bill, but later warmed to the government’s proposals.
“We also urge the senate and government to move forward on Bill C-49 and bring some further certainty to the supply chain moving forward,” CP said in its statement.
Ron Bonnett, president of the Canadian Federation of Agriculture, cautioned that the order in council did not contain enough detailed information about which grain needed to be shipped, in turn causing delays to persist for Canada’s more isolated farmers.
“The railroads just picked off sites that were really close to the tracks,” he said.
The CFA is pushing for amendments to Bill C-49 before it is passed by the senate, including more comprehensive data sharing requirements for rail companies and the ability for the Canadian Transportation Agency to intervene in disputes between suppliers and shippers before an official complaint is filed.
“Barring that, the only other solution we would likely see would be an order in council,” Bonnett said.