Grain shipments by rail are leaps and bounds ahead of last year — but there’s still a long way to go.
“I think both railways have really stepped up the volume, but we haven’t been without our issues,” said Mark Hemmes, president of Quorum Corporation, the agency tasked with monitoring grain movement by rail.
“If you’re looking for perfection, you’re never going to find it.”
But perfection was a pipe dream last year, and even progress seemed out of reach for producers. The 2016-17 crop year had set records for grain movement by rail, including car cycle times, West Coast movement, total movement, and lowest-ever total time in the system.
That high point was short lived.
Canadian Pacific managed to keep up its fast pace until the beginning of last February but soon started to slide, while Canadian National Railway (CN) had nothing but challenges moving grain, partly owing to the weather and congestion, but more because of a shortage of trains and a focus on other commodities.
And with 80.5 million tonnes of grain to move — second only to the 81.9-million-tonne bin buster seen in 2013-14 — both CN and CP had their poorest order fulfilment to date.
But both railways have seen a turnaround in the year since. CN unloads are up 36 per cent from the same time last year, while CP unloads have seen a more modest 12 per cent increase. Total weekly unloads at the western port are up 24 per cent over last year, even though the total unloaded tonnage is seven per cent higher than the same period last year.
And despite the fact that producer deliveries to elevators in the country are up seven per cent over last year, only about 78 per cent of the country elevator capacity and 76 per cent of western port terminal capacity is being used right now.
Essentially, both railways are moving more grain, but they’re also moving it faster, and there’s more space in the system to accommodate it.
“Everybody along the supply chain has really stepped it up,” said Hemmes.
“2013 and 2014 were a real slap in the face for a lot of people, and I think everybody has picked up their pace since then.”
A few things have changed over the past year to get grain moving more reliably.
First, the grain companies have added over a million tonnes of storage capacity in the country.
“That was one of the big problems in 2013 and 2014,” said Hemmes in an interview in mid-February.
“When the railways failed to deliver on their capacity, the grain companies ended up having all of their storage facilities full and they couldn’t buy grain and producers couldn’t get cash flow.
“But now we’ve seen all these new players come in, and the existing players have spent a lot of money in expanding the storage space that they’ve got in the country elevator system to make sure that when a producer wants to deliver, they’ve got space to accept it.”
Second, the rail companies have invested in new cars, new equipment, and new people.
“They’ve placed orders for new locomotives and have gone through rehabilitation of their old locomotives to bring them up to brand new status,” he said.
“So now they’ve got a level of certainty that they’re going to have enough locomotives, and both railways are training people left, right, and centre.”
And finally, external factors — like a milder start to winter and a drop in crop yields — have reduced the pressure on the supply chain.
“Right up to the end of December, things were going reasonably well, especially if you compare it to last year,” said Hemmes.
“Both railways stepped it up by making sure they had the resources they needed, including crews and motive power, and our numbers were looking really good. Both railways were moving really good volumes through the fall.”
Cold weather woes
But the situation has shifted yet again in the early part of 2019, underscoring the ongoing problems that plague Canada’s rail transport system.
“Getting into January and February, the picture has changed a bit,” said Hemmes.
“It’s not the fault of the railways; it’s just the things they have to contend with.”
CN faced some problems with moving its shipments to Vancouver in December — “not so much on the grain side, but the echoes of it did impact some of the bulk grain that was moving to the North Shore in particular.”
And then CP experienced a massive train derailment in central Alberta in mid-January that put it out of commission for a couple of days. Right after that, both railways had to contend with heavy snowfalls in the Rockies, which took them out for another few days and “really slowed them down.”
Then, another catastrophic derailment in British Columbia killed three workers and put CP out of business for the better part of four days. Extreme cold across Alberta slowed things down again after that.
“Right now, everybody is struggling to move grain, but you can’t really blame the railways for that,” said Hemmes.
“They have to run a safe operation, and in order to do that, they end up having to reduce the available capacity because of the cold weather. Everything moves slower in the cold weather.
“So the next few weeks are going to be really tough.”
That won’t be welcome news for farmers, said Hemmes. Despite the progress that the rail companies have made, “people are still hoping for better performance,” and the problems facing the industry aren’t going to go away overnight.
“There is no single silver bullet. They have to add resources — crews and motive power — but it’s not like they’re not doing that. They’re training people and buying locomotives,” he said.
“But they’ve got a long wait list for locomotives, and it takes eight to nine months to train a running trades employee with the railways.
“It’s going to be a precarious balancing act, but I think it’s in everybody’s self-interest to move more grain.”
And that’s going to become even more critical as western Canadian farmers continue to grow more and more grain, he added.
“When farmers go to seed in the spring, they’re always thinking about growing as much as they can,” he said.
“So the issue really becomes how to accommodate the increased yields that we’re seeing and the cash flow requirements of farmers.”
But agriculture isn’t the only industry that’s growing. The rail companies will also have to accommodate the demand for additional capacity from other industries.
“Grain is a big part of what the railways do, but they also have potash, coal, forest products. Everybody is always looking for more capacity,” said Hemmes.
“We ain’t the only game in town.”
Because of that, Hemmes doesn’t see the acrimony between the agriculture industry and the railways going away any time soon.
“I think there’s always going to be a certain amount of tension between the grain industry and the railways,” said Hemmes.
“Maybe that’s a good thing — it keeps everybody on their toes. Everybody has to keep pushing.
“If we’re not always getting better, we’re not going to compete.”