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Grain transport problems solved? Not quite

Mandated minimums for grain movement are set to expire this summer — 
but Alberta crop industry leaders say they’re still needed

Canada’s railways moved a record amount of grain for the 2014-15 crop year — but any improvements were mostly thanks to luck, not fixes to the system, say users.

Tom Steve

Tom Steve
photo: Supplied

“A lot of the same issues that were evident in 2013 and 2014 are still there, but we’ve had a good run based on excellent weather, lower volumes, and less competition for those volumes,” said Tom Steve, general manager of Alberta Wheat.

“While we’re relatively pleased with the movement we’ve had over the last couple of years, we still have the same issues that existed and that could once again create problems for us if we have a large crop or adverse weather conditions.”

A record 35.8 million tonnes of bulk grain was loaded from western port terminals, says the 2014-15 annual report released in early April by Quorum Corporation, Canada’s government-appointed grain monitor.

That’s up 15 per cent from 31.1 million tonnes in 2013-14 and slightly more than the previous record of 31.9 million set in 1983-84, said Quorum president Mark Hemmes.

“More grain moved through the grain-handling and transportation system in the 2014-15 crop year than at any other point in the history of the grain-monitoring program,” Hemmes said in an email.

The system, as measured by rail car cycles and grain transit times, was a little less efficient than in 2013-14, “but it moved a hell of a lot more grain,” Hemmes said. “The minute reduction in efficiency is an anomaly. The bottom line: For everybody from the country to the port terminals, it was a far, far better year overall.”

But that doesn’t mean the system is fixed, said Wade Sobkowich, executive director of the Western Grain Elevator Association.

“We don’t want people to read about this and say, ‘Problem solved,’” said Sobkowich. “It’s not solved.”

Association members were mostly happy with their rail service last crop year, he said, but it was a drop in other rail traffic, including oil, that freed up capacity to move more grain.

“Now is the time to prepare for the inevitability of demand for rail service from all industries converging at a high point again,” Sobkowich said. “If those forecasts are accurate, then long-standing, systemic system failures will re-emerge.”

‘Captive’ grain companies

Some parts of Alberta are still seeing those system failures, said Ward Toma, general manager of Alberta Canola Producers Commission.

Ward Toma

Ward Toma
photo: Supplied

“Where both lines — both CP and CN — are present within the interswitching distance of 160 kilometres, we are seeing better performance to a certain degree,” said Toma, adding areas between Edmonton and Calgary are seeing “better pickup and movement.”

“But in areas where there’s really one main line, the guys are still telling us that some companies are two or three months behind in their pickups. It’s April, but they’re delivering January contracts.”

Grain companies in those areas are being “held hostage,” he said. And “the smaller the company, the bigger the problem.”

“Grain companies are still captive at various points,” said Toma. “They have to wait for the cars to show up. They have to wait for the right number of cars to show up. They have to wait for the railways to pick them up and hope that they’ll get them delivered in time.”

Oil crushers in particular are struggling with service delays, he added.

“When you start talking to the crushers, who are moving oil in their own tankers and are very close to both lines, they’re not getting the service that they want,” said Toma.

“To a degree, I think the rail companies are thinking, ‘The grain’s not going to go bad. We’ll move it eventually. Just don’t worry about it — we’ll get around to it.’

“That doesn’t help when you’re co-ordinating boats and shipments through a bottleneck in Vancouver.”

Ten to 45 per cent of the time there are no cars unloading at port terminals, said Curt Vossen, Richardson International’s president and CEO, citing data collected by the Ag Transport Coalition.

“What we’ll have (when operating 24-7)… is guys sitting around twiddling their thumbs waiting for cars that aren’t going to show up,” he said.

More grain moved in 2014-15, but often not when the railways said it would, Vossen said.

“That means you’ve got… vessels waiting for grain that doesn’t get there,” he said. “At a high level, they moved more grain. Are we happy with that? Yes, but there are a lot of other measures that aren’t really reflected and many of those speak directly to the efficiency of the system.”

Hemmes has often said Canada has the best grain-handling and transportation system in the world and he said 2014-15 demonstrated what’s possible.

“But when you’ve got that long of a haul and the terrain, geography and climate we have to go through, having the best system isn’t good enough,” he said. “Best isn’t going to cut if you can’t be reliable.”

Mandated grain minimums

But on the whole, both the grain companies and the railways were happy with their performance.

“I think we have demonstrated that, if the railways move more, we will keep up with that,” said Sobkowich of the capacity at western grain terminals. “It takes away the rail argument about operating 24-7.”

Canadian Pacific spokesman Jeremey Berry credited their performance, in part, to CP’s dedicated train program, which allows shippers to manage cars.

“CP does not favour one product or commodity over another and is well positioned to move grain in line with the needs of its customers,” Berry said in an email. “CP is committed to hauling grain and has continuously delivered on this commitment by moving record amounts.”

CN spokesman Mark Hallman also pointed to record movement and said government-ordered minimum grain volumes in 2014 were unnecessary. Minimum grain volume mandates and extended interswitching should not be extended when they expire this summer, he said.

But organizations like Alberta Wheat and Alberta Canola are fighting to keep those minimums, which were enacted following a record 77-million-tonne bumper crop in 2013.

“The government-mandated minimums were needed in that time frame because nothing was moving,” said Toma. “The railways were putting other shipping products in front of grain, and farmers in some areas had not moved anything. They were getting desperate. They couldn’t move grain and weren’t getting paid. That was a significant financial hit to farmers.”

The situation may not be as dire now, he said, but “that’s not to say that the tool that was used by the federal minister at that point in time is something that should be given up.”

Steve agreed.

“The minimum volume requirements were very effective in providing some discipline to move grain in a timely fashion. It’s not that we would advocate that those be in place on a permanent basis, but certainly, we think the government should retain the right to implement them if necessary.”

Without those rights in place, Canada could face further damage to its reputation as a reliable seller of grain on the international market.

“I think we have successfully regained the confidence of our international customers over the last few years by virtue of the fact that we’ve been delivering product in a timely fashion, but it’s still on the radar screen for our customers in Japan and Indonesia,” said Steve.

“If we don’t address it, we’re going to have the same recurring issues with our transportation system over the course of the next number of years.

“We could lose those markets, and we really can’t afford to have that.”

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