By Alison Squires
An order for the two national railways companies to help clear up backlogged grain shipments was formalized March 27 when the federal government introduced Bill C-30.
The Fair Rail for Grain Farmers Act is intended to amend both the Canadian Grains Act, and the Canada Transportation Act was introduced into the House of Commons by Agriculture Minister Gerry Ritz to address inefficiencies in the railway system.
A record harvest, an extremely cold winter and a long-criticized rail service created a perfect storm for an increasingly critical backlog of grain delayed in its transport from the Prairies to market. Growing pressure from farmers resulted in Premier Brad Wall appointing a committee mid-February including Agriculture Minister Lyle Stewart, Economy Minister Bill Boyd, Highways and Infrastructure Minister Don McMorris and Legislative Secretary to the Agriculture Minister MLA Scott Moe to meet with both Canadian National (CN) and Canadian Pacific (CP) railway companies.
“This grain movement backlog is a very serious situation for the entire province and it is a high priority for our government,” Wall said. “The delays in moving grain have led to lower prices for our producers at the farm gate and are harming our reputation as a reliable supplier of agriculture products throughout the world.”
This was followed by the federal government announcing an Order in Council on March 7, forcing the railways to double the amount of grain they move each week or face fines up to $100,000 a day, putting the railway companies at odds with Ottawa. The railways have stated they have had to shorten their trains because of cold weather and that’s why they are having trouble meeting orders for grain cars.
Although he supports the efforts of the federal government to improve grain movement, Minister Stewart says he is disappointed in the proposed legislation, expressing it in a letter to Minister Ritz and Transportation Minister Lisa Raitt.
“While our government appreciates the introduction of this proposed legislation, we are disappointed it does not go far enough to address the current issues facing our producers and shippers,” said Stewart.
Some of the key issues Stewart points out are the lack of service-level agreements and “meaningful reciprocal penalties for shippers and railways for poor performance,” increasing the minimum number of grain cars from 11,000 to 13,000 and the penalty from $100,000 to $250,000.
“All customers in all corridors must have assurance of adequate service and farmers need assurance that the crop currently in the bin will make its way into the system on a timely basis,” said Stewart.
Stewart also felt that the sunset clause of August 2016 (when the legislation ends) does not ensure this does not happen again with future crops.
Among other things the legislation addresses inter-switching limits. Under current rules, shippers are allowed to transfer traffic to another rail firm at a rate set by the Canadian Transportation Agency as long as the shipper’s facility is within 30 kilometres of where the two railways connect. The legislation would increase that distance to 160 kilometres. Also proposed is that the Canadian Grain Commission would determine the amount paid to the farmer by the grain company if the company does not meet the contract delivery date.
The record crop of 76-million tonnes or 50 per cent higher than average was harvested by Western Canadian farmers in 2013, and millions of tonnes valued between $14.2-million and $20-million still sit in the bins. The backlog is estimated to cost the Western economy between $7.2- and $8.3-billion.
According to the Western Grain Elevator Association:
• There are approximately 50 vessels waiting for grain at the west coast and eastern Canada combined. In addition, U.S. and domestic processors and feedlots have been running out of grain products.
• Grain companies run a very tight logistical program where rail shipping orders are matched to individual sales and vessels. Due to the extreme lateness in filling railcar orders, many of the cars being delivered today are out of sync with the vessels waiting for product to arrive. The priorities, with respect to which railcars to move from which locations and to which destinations, must be set by grain shippers.
• Grain handlers have seen an increase in railcar movements to Vancouver, Prince Rupert and Thunder Bay, which is positive. Both CN and CP have stated they plan on increasing programs to the U.S. and the St. Lawrence Seaway, which is consistent with the intent of government.
• The Canadian grain industry can sustainably handle (load and unload) the approximately 11,000 railcars per week, as per the federal government’s March 7 Order in Council. This is dependent on consistent and regular placement of railcars, and allocation of capacity among the corridors (1. West coast, 2. Eastern export, 3. U.S., 4. St. Lawrence and 5. Domestic). If the railways limit their focus to certain corridors, then port terminals could face challenges unloading railcars. However, as long as the railway companies spot and deliver the railcars at a consistent rate, apportioned appropriately among the corridors, grain companies are not concerned with their ability to handle the volume.