AGAINST THE GRAINS
Farmers, railroads at odds on quota
The minimum grainhauling requirements for Canada’s railroads are set to expire on Saturday, and while there is no lack of strong opinions about whether they should be extended, the government still hasn’t made up its mind.
“The minister of transport has received advice from the Canadian Transportation Agency and will make a decision in consultation with the minister of agriculture with respect to the volumes in due course,” Lauren Armstrong, a spokeswoman for Transport Canada, said in an email. The Department of Agriculture issued the same statement.
The rules have been a source of fierce contention between the railways, farmers and government since they were implemented in March, and without clarity from Ottawa, the stakeholders are jockeying to win the public relations battle over what should be done next.
“We would prefer that we don’t have quotas because a quota isn’t necessary,” Michael Bourque, president and CEO of the Railway Association of Canada, said in an interview.
“We’ll move grain anyway because we make money moving grain. A quota sends the signal that we’re to blame when we’re not.”
Last year saw a record grain harvest combined with a brutal winter, creating a “perfect storm” that’s not likely to happen again, Bourque said.
While farmers sat on huge stockpiles of grain, persistently cold temperatures forced the railways to run shorter trains for much of the winter, leaving as much as 30 million metric tonnes of grain waiting for transport. This cost Western farmers $5 billion in lost revenue, according to Norm Hall, president of the Agricultural Producers Association of Saskatchewan.
The railways reduced that backlog over the summer and the carryover from last year’s harvest will be closer to 15 million tonnes at the end of this crop year, according to Gary Stanford, president of the Grain Growers of Canada. An average carry-over is about eight million tonnes.
But many farmers are worried that the problem could be repeated this winter as railways focus on moving other commodities like crude oil and potash that tend to generate more revenue.
“The railways haven’t proven themselves,” Hall said in an inter- view. “They’re saying that things are moving along fine now. Well, sure they are, because they’re still under the (government) order. As soon as the order’s taken off, there’s nothing to ensure they’re going to move the grain.”
But Bourque said the notion that railways don’t want to move grain is wrong.
“I think it’s unfortunate that people who have a vested interest have managed to convince people that somehow railways are not willing to move grain, when in fact grain is a very important commodity for railways and we have every interest in moving grain,” he said.
The current requirements state that Canadian National Railway Co. and Canadian Pacific Railway Ltd. must each haul approximately 500,000 tonnes of grain per week. The railways face fines of $100,000 for every week that they don’t comply (that was lowered from $100,000 per day in an earlier iteration of the rules).
Stanford said his organization’s members are torn about whether the minimums should be extended, but he feels that the railways understand how important the movement of grain is to Canada’s economy.
“They understand this is about Canada’s reputation as a reliable source (of grain), but also that the farmers need to move grain to pay their bills,” he said.
“I really believe this Order in Council has made the railways take a different view on the grain sector.”
Bourque said the railways want to move more grain but stressed that the existing regulatory system is preventing them from investing in better infrastructure that would help alleviate bottlenecks.
Currently, annual revenue caps limit the amount of money CN and CP can make from hauling grain.
“Right now there’s no incentive with this maximum revenue cap to invest in grain cars,” Bourque said, adding that new models are shorter and hold 30 per cent more grain, which would help boost productivity.