Grain is flying off the Prairies now that it’s not competing with other sectors for space on the rail network.
“We’ve always said that the terminals, the grain companies, and the processors feel that they can move more,” said Steve Pratte, manager of policy development at the Canadian Canola Growers Association. “This year, we’ve had almost unconstrained ability to get rail service, and all parties in the supply chain have shown that they can actually move significantly increased volumes of grain.”
It was shaping up to be a tough year for grain movement following a late harvest, weather delays, derailments, a strike, and blockades.
“Then all of a sudden, the pandemic came to the forefront, and grain started to move,” said Pratte. “Our supply chain is just blowing the doors off what we’ve typically done. It’s been a bit of a silver lining.”
CN and CP Rail have broken records for grain shipments lately, each moving around 2.7 million tonnes of grain in June alone. If all goes well, the sector is on track for a record year for grain movement.
“This could have been the worst year we had since 2013-14, but the one bright spot I can see coming out of COVID is the fact that railway capacity really opened up for grain,” said Mark Hemmes, president of Quorum Corporation, the federal grain movement monitor.
“For grain movement, it’s all really good news. The trajectory is off the charts. They’re just pounding it out to the coast.”
But how long it lasts is unknown.
“Everybody is a little bit guarded about what’s going to happen when this economy opens up again and the railways start getting back some of that traffic that they lost,” said Hemmes. “At some point of time in the future, we will be back to that point where we’re competing for railway capacity.”
CN recently announced it will be spending $750 million on its western Canadian rail network, but that isn’t likely to address the systemic issues that have caused grain movement backlogs in the past, he added.
“You have to keep in mind that the things that they have planned are improvements to their entire network, and every time they do that, it benefits everybody,” said Hemmes.
“But does it mean that there’s going to be an appreciable increase for grain? Not necessarily. Their container traffic is increasing. Their coal traffic is increasing. Oil by rail is increasing. So if their capacity increases by five per cent but their traffic base increases by seven per cent, what have they actually done?
“They’re just basically increasing their total capacity to match what their traffic base is increasing by. In all likelihood, it’s a wash.”
Challenges at port
CN’s investment will cover upgrades, maintenance, and expansions across B.C. and Alberta, including new double-tracks en route to Vancouver and new sidings between Edmonton and Prince Rupert. Both railways have been spending an increased percentage of their revenue on network infrastructure in recent years, said Pratte.
“For CN back in 2013, they were reinvesting 19 per cent of their revenue back into the system, and in 2019, it was 26 per cent,” he said, adding technology and automation account for an increasing portion of that investment.
“It’s difficult to look at a $750-million spend and directly relate it back to the grain industry. But we’re running on a shared network — what’s good for the goose is good for the gander.”
But that reinvestment likely isn’t enough to offset the real challenge facing western grain movement — a bottleneck at Vancouver. To reach grain terminals on the city’s North Shore, trains must go through the 3.4-kilometre-long Thornton Tunnel, which connects to the lone rail bridge (which is only a single track) over Burrard Inlet.
“There’s a suite of little things they’re doing to add incremental capacity and efficiencies there,” said Pratte. “But at the end of the day, all that grain going to the North Shore has to go through that one tunnel and over that one bridge. There’s one way in and one way out.
“It’s all good to be able to get the grain off the Prairies. It’s all good to be able to get it up and over the Rockies. But when you get into Vancouver, that’s where the system grinds down.”
Those last-mile challenges are what Hemmes looks at when considering how these investments will help grain movement.
“What are the projects in Vancouver that are increasing access to specific parts of the port? What are they doing to increase capacity in the throughput to the North Shore?” he said. “You’ve got G3 coming up there. You’ve got other terminals expanding. Yet you’ve got a corridor going over the North Shore that is pretty constrained right now. How are they going to adapt to all of that?”
The federal government is funding some efficiency improvements at the port, while railways and grain companies have also invested money. But addressing the North Shore access bottleneck would be the key as “that’s a pretty severe constraint,” said Hemmes.
“You’ve got all of these companies that are running terminals on the North Shore that have spent literally hundreds of millions of dollars in their expansions, and it’s all kind of tentative because there’s a fixed throughput as that infrastructure exists today. That’s something that’s really top of mind.”
As well, investments in other parts of the rail system will likely taper off as both CN and CP have taken a hit to their balance sheets because of the pandemic, and capital investments over the next year or two are expected to be down.
“That upward trend of increased spending is going to tail off because of flattened revenues and uncertainty moving forward,” said Pratte.
“They’re using this time now to invest in the network to get themselves poised and ready for the next upturn in the economy, so hopefully we just see a one- or two-year dip in that investment before getting back to that increased investment.
“As the farm community and as western Canadians, we need to be looking forward as far as maintaining those investments and increasing that capacity, to the benefit of everybody.”