The problems started with the late harvest across the Prairies followed by the week-long CN Rail strike in November and then cold weather and mudslides. By the time the anti-pipeline rail blockades hit in February, rail deliveries to port were already close to 650,000 tonnes behind the same time last year, said Mark Hemmes, president of Quorum Corporation, the agency that monitors grain movement.

“The situation that we’re in right now is really something that’s compounding,” Hemmes said March 9. “We’re still 1.28 million tonnes behind the same time last year. A little less than half of that came on because of the blockades.”

For grain companies selling this year’s harvest before the crop is even in the ground, the rail delays have added a level of uncertainty — and some extra costs.

“We’re recovering, but we were already in recovery mode when the blockades started. The blockades just pushed us further behind,” said Wade Sobkowich, executive director of the Western Grain Elevator Association.

“Normally, we see somewhere between 25 and 30 vessels off the West Coast, and that’s how much we need to remain fluid. But right now, there are 50 — about double what we would normally want to see on the West Coast during this period of time. So that’s an indicator that we have not recovered yet.”

That’s roughly the same number of vessels backed up during the peak of the 2013-14 grain transport crisis, he added. Contract extension penalties and vessel demurrage are starting to add up.

“Now we are paying contract extension penalties big time on almost everything and paying vessel demurrage as the vessels are coming in,” said Sobkowich. “It’s been costing us about $9 million a day in contract extension penalties and lost productivity.”

Those costs are likely to trickle down to producers, Hemmes added.

“In the grain business, Canada is always going to be a price-taker, and when incremental costs are added into the system, they eventually make their way back to the producer.”

And these delays aren’t likely to resolve any time soon.

“We’re moving grain again, but we’re moving grain that was supposed to move two or three weeks ago,” said Sobkowich. “There is no added capacity in the rail system — we’re always in a state of rationing — so we’re likely to stay in a perpetual state of lateness for a long period of time.

“Without any extra capacity, we don’t have any real way of catching up.”

Price drop will hurt

Sobkowich expects that these delays could extend right into summer, or even fall, “when we have even more grain to move.”

“What we’re going to see is a larger-than-normal carry-in,” he said. “Normally it’s somewhere in the neighbourhood of seven million tonnes, but we’re going to see a carry-in this year that’s going to be way larger than that.

“We don’t know what the number is, but it’s going to be bigger.”

As a result, grain companies are rethinking their sales programs this year, selling outside the peak price periods at smaller levels than they normally would.

“You want to sell grain in that October to February period — that’s when you get your best price,” said Hemmes. “Typically, as we get into the spring and summer months, you’re going to take a hit of $25 a tonne, if not more.”

Even so, farmers shouldn’t panic yet.

Grain is moving again at higher levels than normally seen at this time of year. And while stocks in country elevators have reached about 90 per cent working capacity, the thing that sets this apart from the grain movement crisis of 2013-14 is the additional storage capacity that’s been built in the countryside, said Hemmes.

“There’s about 1.4 million tonnes’ worth of storage that’s been built out in the country that wasn’t there, and that makes a really big difference,” he said.

But this most recent grain transport crisis has underscored some systemic issues in Canada’s rail system that need to be resolved, Hemmes added.

“Not having a reliable and consistent logistics platform puts the buyer in the position of saying they want to take X number of dollars off the price because they’re not sure we can actually deliver it,” he said. “That reputational impact always ends up having been reflected in the price that you can actually obtain in the global marketplace, and that’s the impact people are most severely concerned with.”

Sobkowich agrees.

“It’s always a question that comes up — is Canada going to be able to deliver?” he said. “Canada isn’t reliable, and when these customers buy, they need certainty of supply.

“We’re starting to see customers getting tired of us not being able to deliver every year we have some sort of rail problem.

“It’s a very real thing, and it’s probably the most costly out of all the different consequences related to the blockades.”

As Canada works to rebuild its reputation, the federal government will need to re-evaluate how it manages the rail transport system, said Sobkowich.

That means “controlling the things that can be controlled,” by resolving labour disputes quickly and enforcing the rule of law around any rail blockades.

“The government should be deeming rail service to be an essential service,” he said. “It should be recognizing in the legislation that the impact to the national economy is very important.”

The post Grain is moving but it will take months to catch up appeared first on Alberta Farmer Express.

“The threat of strikes affecting grain movement is a recurring theme every few years and we need a long-term solution to ensure Canada can meet its export commitments,” Alberta Barley chair David Bishop said in a news release after a tentative deal was reached between CN and striking workers on Nov. 26.

“We still get questions from international customers about the grain backlogs of 2017-18, so we need to have a national conversation about how we can assure them that we have a reliable supply chain,” added Gary Stanford, chair of Alberta Wheat.

The tentative deal, announced just as this edition was going to press, still has to be ratified. But the effects will linger for some time, said the two crop commissions.

“Unfortunately, significant damage has already been done to farmers as a result of the work stoppage,” they said. “It will take time for CN to return to normal levels of service.”

The two farm groups said the federal government should consider making rail transport of grain an essential service.

“Canada’s longshoremen are already prevented from engaging in strikes that would impact the loading of grain vessels and the commissions believe those same provisions should be extended to rail.”

The eight-day strike, which put about 3,200 unionized workers on the picket line, affected not only grain movement, but also shipments of oil, potash, coal and manufactured goods to ports and the United States.

The striking conductors and yard workers had been demanding improved working conditions, including worker rest breaks.

The railway is highly profitable and could afford to improve safety measures, said the National Farmers Union, which supported negotiations over an imposed settlement.

“Nine CN rail workers have been killed on the job in the last two years — this is unacceptable,” the NFU said in a news release. “CN’s cost-cutting measures are padding shareholders’ pockets at the expense of workers’ lives and health.”

The tentative deal brought relief for Prime Minister Justin Trudeau’s government, which was under pressure to intervene and stop the strike. The day before the tentative deal was struck, farmers facing propane shortages dumped wet corn in front of Trudeau’s local Quebec office.

“Now we can hope that things can get back to normal in quick fashion. It’s cost a lot of money to farmers already,” said Markus Haerle, chairman of the Grain Farmers of Ontario.

The strike left at least 35 vessels waiting at the West Coast to load grain shipments, said Mark Hemmes, president of Quorum Corp., which monitors the movement of Prairie grain for the federal government.

Many of the grain-handling facilities on the West Coast are serviced only by CN, he noted.

The north shore of Port of Vancouver’s Burrard Inlet is home to a major potash and coal export terminal as well as grain terminals operated by Cargill and Richardson International that are normally serviced only by CN.

A “trickle of cars” from CP was reaching the grain terminals, but they were “for all intents and purposes shut down” during the strike, said Wade Sobkowich, executive director of the Western Grain Elevator Association.

Teamsters Canada president Francois Laporte praised the federal government for allowing the workers to reach a negotiated settlement with CN.

“Previous governments routinely violated workers’ right to strike when it came to the rail industry,” he said. “This government remained calm and focused on helping parties reach an agreement, and it worked.”

But the impact will linger, said Bob Masterson, chief executive of the Chemistry Industry Association of Canada.

“This is great news but there’s still a number of difficult days ahead,” said Masterson.

Some plants producing hazardous chemicals had slowed production during the strike, he said. Based on past rail disruptions, CN is likely to start moving critical commodities first — such as propane for farms and homes and chlorine for drinking water — leaving other shippers to wait days or weeks for service, Masterson said.

Miners were facing hefty costs due to lost sales and plant disruptions and it could take a week for every day of disrupted service to restore normal operations, said Brendan Marshall, vice-president of economic and northern affairs at the Mining Association of Canada.

The post Make rail transport an essential service, say crop commissions appeared first on Alberta Farmer Express.

“Anything that has been ordered already, companies are honouring those canola contracts,” said Wade Sobkowich, executive director of the Western Grain Elevator Association. “They’re pencilling that grain in, and scheduling deliveries.”

When it comes to new sales, producers have to decide if they want to sell at current prices, which have declined to reflect the new market realities. But grain companies are still buying, said Sobkowich.

“If there’s a slowdown, it’s because of farmers making business decisions to wait and see if they can lock in a price and a delivery period,” he said.

Grain companies are handling the situation in their own way. Sobkowich said he didn’t want to name names, but he knows of some companies that are setting the prices for several months away. They’re also trying to push additional sales into Bangladesh, Pakistan, Mexico, the U.S., and the European Union, which have all previously bought Canadian canola.

“The volumes are limited because China is such a big market, but exporters are trying to make up for a large buyer,” said Sobkowich.

Canola is currently being used to backfill other plant oils. Buyers in China are still in need of oil, but are looking for other varieties to meet their demand. If China buys sunflower oil, for instance, other countries may want to purchase Canada’s canola oil.

“Companies are in a business to make money and so they are searching out the highest-priced markets they can, in this environment,” said Sobkowich. “Hopefully, over time, canola prices will go back up. It’s a very difficult situation and one that is largely out of our control because it seems as though canola is one piece in a geopolitical chess game that involves Canada and China and multiple other countries.”

A waiting game?

Some producers are choosing to store canola on the farm in the hope prices will recover fairly soon.

“If you want to store canola, make sure it’s cool and dry and that you’re monitoring it,” said Keith Gabert, an Innisfail-based agronomist with the Canola Council of Canada. It’s a really valuable commodity. “We would hate to have growers stick an auger in the bin and not have quality grain come out.”

Growers should be fine if they adjust temperatures and moisture levels for long-term storage, said Gabert, adding he’s already had talks with some growers about proper procedures.

“We’ve seen no indication that warming up bins for summer storage is a useful endeavour,” he said. “Continue to monitor it, but there’s no reason to put conditions back into summer storage.

“If you’ve got a cold grain mass, leave it there, and continue to watch and manage it like you would any other valuable commodity in the bin.”

Due to poor weather conditions in September, some of the canola in the province came off with a higher green content.

“In many areas, it was the highest green content that growers had any experience harvesting,” said Gabert. “There is always a little more concern with that material coming off the field.

“When I talk to growers, I like to say it’s a little more alive than they’re used to putting in a grain bin, so that takes additional management.”

Because canola, if not properly managed, can downgrade easily, many are worried about storage issues as the weather continues to warm. However, most are already familiar with storing canola, and shouldn’t have much problem cooling it down, said Gabert.

“The possibility that we’ll have growers hold more grain over in inventory is a real possibility, but I don’t know if it changes any of their practices that they normally would have considered if they were holding grain over for any reason,” he said.

Canola is one of the harder crops to store because of its high oil content and so is a little more difficult to store than a tough cereal grain.

“We know that it’s not the most forgiving crop to store and it takes a little more management. But most growers are already on top of that.”

As far as Gabert has heard, growers are unhappy with the uncertainty of the market, but are not sure what they are going to do about it.

“They know that this is something that will impact canola profits, and they don’t like that.”

If you opt to store and wait, just be proactive, he said.

“If you are keeping grain bins and you’re not entirely confident of what is in those bins, you can move it and take another look or at least partially mark it out of every bin instead of just leaving your bins for last,” he said.

The post To store or sell canola? That is the question appeared first on Alberta Farmer Express.

“Over the past five to six years, the Canadian Grain Commission has built up a surplus of funds based on user fees by handling all grain types,” said Alberta Barley chair Jason Lenz.

The grain commission did consult farm groups, but then ignored the wishes of the majority, added Tom Steve, general manager of Alberta Barley and Alberta Wheat.

• Read more: Grain commission proposes 24 per cent cut to major user fees

“The majority of the respondents felt that the surplus should be used to reduce fees for inspections and those would result in savings to farmers,” said Steve. “The grain commission instead has decided to use those funds on special projects and expansion of their operations.

“That’s why we’re disappointed.”

The groups also don’t like the lack of detail surrounding what the grain

commission calls its “surplus investment framework.”

“Whatever they decide to spend that money on has to show direct benefit back to producers, because it’s producer dollars that helped build those funds,” said Lenz. “What they’ve laid out in front of us so far isn’t in great detail. We’re very unclear about what those dollars are going to go to and how it’s going to benefit producers in the long run.”

The only specific use of the surplus announced by the grain commission so far is $4 million to bolster the harvest sample program. Under this program, producers can send samples to the grain commission for testing and receive information such as the unofficial grade and protein content for cereals and pulses. Under the enhanced program, producers will also receive the falling number and DON (deoxynivalenol) results for wheat as well as dockage amounts for canola.

But the crop commissions want to know about the other $86 million.

“Producers have a right to know what some of that money is going towards rather than them saying this is their wish list,” said Lenz.

“They’ve chosen to take $90 million of farmers’ money and spend it on programming that they have only partially described,” said Steve.

However, the grain commission’s decision won support from two main farm groups in Saskatchewan.

Sask Wheat praised the grain commission for taking “positive steps.”

“Under this framework, the (grain commission) will be able to provide new and enhanced services for producers that will not only benefit producers, but also Canada’s grain system and international reputation for growing high-quality wheat,” said Sask Wheat chair Laura Reiter.

The Agricultural Producers of Saskatchewan also supported the move, saying it wants the surplus to benefit the farmers who ultimately pay service fees.

“Since there was no fair or simple way to refund the surplus fees back to individual producers, our members supported measures to improve services for grain producers,” said Todd Lewis, the farm group’s president.

But other farm organizations want to see a reduction of service fees, which would help draw down the grain commission’s $130 million surplus. (The other $40 million came from higher-than-usual grain volumes in recent years.)

“Grain farmers are the ones who overpaid user fees for years, and the common-sense solution would have been to reduce user fees to draw down the surplus,” said Grain Growers of Canada president Jeff Nielsen, who farms near Olds.

“We welcome the opportunity for further consultation, but fees should have been reduced as a first step.”

The bulk of the surplus resulted from fee increases ordered by the former Conservative government in 2013 to make the grain commission self-sufficient. The agency has since cut its fees twice — once last summer and again in April. It also adjusted the average amount of grain it expects to inspect annually to 34.4 million tonnes (from 23.3 million, which had been the previous 15-year average).

The grain commission has promised to consult with farm groups on how to spend the remaining $86 million. It said its plan is to “strengthen safeguards for producers, improve grain quality assurance programs, and enhance grain quality science and innovation.”

When farm groups met with grain commission officials earlier this month and asked what that means, “we didn’t get a lot of answers,” said Steve.

“We’re now at a period where we don’t even know when the consultation process is going to start,” he said. “They weren’t specific on that, other than that we will be consulted. We’ve already been advocating for reforms of the Canadian Grain Commission and how it will operate. Hopefully, this will start a broader discussion.”

But the Western Grain Elevator Association — which represents grain companies — predicts the costs of new services that are initially paid for with surplus funds will eventually lead to higher service fees for farmers.

“It’s a windfall for the (grain commission) and it is using it to bolster itself,” said Wade Sobkowich, the association’s executive director. “That’s a major, major concern for us and we are astounded that the (grain commission) and the federal government would make a decision such as this.”

On its website, the grain commission acknowledged that most of the farm groups it consulted wanted lower fees, but said “a number of stakeholders, however, did not support this proposal.”

“They said that it is unlikely fee reductions would translate into increased profits for producers; instead any savings would be absorbed by grain companies,” the commission said. “A fee reduction, they said, would not result in any meaningful long-term solutions to current concerns in the sector.”

The fees charged for grading and weighing services on exported Canadian grain are paid for by grain companies, but it’s generally agreed the cost is passed back to farmers in the basis — the difference between the elevator and export price.

The post Farm groups blast grain commission for refusing to give back surplus appeared first on Alberta Farmer Express.

The new elevator to be built in Westaskiwin will be a state-of-the-art, high-throughput facility, said the company’s vice-president of business development.

“Alberta is a province of growth for us,” said Brett Malkoske. “Since we formed G3 (in 2015), we’ve been fairly open about our ambition to build a coast-to-coast grain-handling enterprise in Canada.

“You can’t have a coast-to-coast presence without Alberta.”

Growing demand for Canadian grain has spurred grain companies to invest in infrastructure to capture a greater market share in the Prairies. Right now, Alberta has 90 grain elevators and a total capacity of around 2.25 million tonnes, an increase of about 350,000 tonnes over the past five years.

• G3 has a new CEO

In the past two years alone, work on at least four new grain terminals has begun in Alberta — two GrainsConnect Canada terminals (in Vegreville and Huxley); a Paterson Grain terminal in Bowden; and a Viterra terminal, also in Vegreville.

That’s a sign of the “incredible potential” grain companies see in Alberta’s cropping sector, said Wade Sobkowich, executive director of the Western Grain Elevator Association.

“In the last few years, we have seen more investment being made in elevator facilities,” he said.

“That speaks to the confidence that the participants have in the system in the future of the grains, oilseed, and pulse crops sector in Western Canada.”

And there’s more to come from this company, said Malkoske.

The Winnipeg-based grain company currently has 17 facilities across Canada and plans for eight to 10 more over the next two years, he said, adding the Westaskiwin elevator is the first of several planned terminals in Alberta for G3.

G3’s expansion into Alberta was “a long time coming,” he added.

“It’s been on our radar for a number of years now, but we’re finally able to formally announce that we’re going to build in the area.”

More competition

G3 will actually break ground on two new elevators this spring, with construction expected to be finished in time for next year’s harvest. Both the Westaskiwin facility and its sister in Maidstone, Sask. will have 42,000 tonnes of storage along with state-of-the-art loading and unloading systems to speed up the flow of grain in and out of the facilities.

“Speed is a factor for farmers,” said Malkoske. “Typically when farmers want to deliver grain, they’re very busy, whether they’re still out in the field harvesting or tending to other business matters. So they want to get that grain to the elevator and back as quickly as possible.”

• Closure of loading sites ‘one more nail in the coffin’

Each facility will come equipped with loop-track systems, which allow for continuous loading and unloading of rail cars.

“We’re able to be more efficient with our train movement, and that means greater probability of a train under the spout and more delivery opportunities for local producers,” said Malkoske.

Farmers will also be able to unload in less than five minutes, he added.

“That means quick turnaround times for trucks, getting them back to the farm quickly and predictably.”

These facilities will feed the new G3 Terminal Vancouver, which is slated to open at the Port of Vancouver in 2020.

“If you look back over the last 10 years, yields across Western Canada have continued to grow,” said Malkoske. “Our feeling is that production in Alberta is going to continue to grow, and the natural flow for that production is going to be for export to feed some of the growing markets around the world.”

Sobkowich agrees.

“Last year, we had a drought in certain parts of the Prairies, and we still produced the second-largest crop ever,” he said. “That means there’s more stability for the investment grain companies are making. They know they’re going to be able to turn that elevator 12 times almost every year and that they’re going to have a good-quality crop to sell.”

And that increased investment will give farmers more options for their grain, he added.

“It gives them the ability to shop their grain around to more enterprises and potentially earn a greater return for the crop they grow every year,” said Sobkowich.

“Competition is a good thing. Any time there’s more competition, it works out in the farmer’s favour.”

The post They just keep coming — another new elevator going up appeared first on Alberta Farmer Express.

According to several reliable sources, Viterra had planned to leave too, but changed course — possibly because of a big cut in membership fees.

Losing Canada’s two biggest grain companies would’ve been an even bigger blow to the 51-year-old council, which is credited for playing a key role in canola’s success.

Alberta Canola Producers Commission was quick to pledge its support for the council. Along with its sister organizations in Manitoba and Saskatchewan and their national umbrella group, it praised the council both for its marketing and agronomic acumen.

“The science-based support they provide to company agronomists and farmers will keep canola a profitable and sustainable crop on Canadian farms for years to come,” they said in a statement.

While the growers’ groups are the largest source of the council’s funds, Richardson’s withdrawal from the council, and its much smaller flax and soybean sister groups, will hurt.

“We’re looking for a way of getting better value for the dollars that we’re spending in these industry associations,” said Jean-Marc Ruest, the company’s senior vice-president for corporate affairs. “We spend well over a million dollars a year funding these three organizations.”

The decision to leave was not made suddenly or in a fit of anger, said Ruest.

“We had provided notice to the three organizations — well over a year ago — that our funding commitments would end at the end of 2017,” he said.

Creating a single oilseed council was just one issue, he added. His company questioned how much the canola council spends on market development — something his company is prepared to do itself as an exporter — and a funding model where big companies pay more than smaller ones, Ruest said.

There’s also a cost for staff time to participate in organizations, he said, adding Richardson will continue its membership in other industry associations, including Cereals Canada, the Western Grain Elevator Association, and the Canadian Oilseed Processors Association.

Sources say Viterra shared those concerns and worked with Richardson to push for efficiencies, including merging the canola council, Flax Council of Canada and Soy Canada. Viterra eventually opted to stay, but with a lower membership fee, which according to one source, was to be cut to 15 cents a tonne from 23 cents. The reduced membership fee will apply to other members, too, the source said.

The council has 38 employees and in 2016 received almost $8.3 million from its core funders — exporters, crushers, farmers, and life science firms.

In contrast, Cereals Canada co-ordinates the wheat sector with just six employees and a budget of just over $1 million. The two crops are close in acreage, but wheat is a much more diverse crop with many more end uses, classes, and grades than canola, Ruest said.

The canola council is not endangered by Richardson’s withdrawal, said canola council president Jim Everson.

“We have a very solid value chain; a very solid budget and work plan; and we’re very confident about where we’re going,” he said.

The council’s success in uniting the canola industry is a Canadian comparative advantage, he added.

Markets change and vary with the product and country. Canola doesn’t need as much promotion in the U.S. as it does in a newer market such as Vietnam, Everson said in defence of market development. The council’s agronomy efforts help grain company agronomists, he added.

Richardson holds no animosity towards the canola council, Ruest said.

“We’re disappointed we got to this result, but that doesn’t make us hostile to the canola council,” he said. “We support the canola council. We’ll probably have initiatives where we can work with it.”

His company may even “come back to the fold at some point in time,” he added.

“But that’s a decision for them to make,” he said. “We don’t want to drag people along with us who are reluctant or don’t want to participate. That doesn’t help anything either. It’s OK to have disagreement and different viewpoints on what’s important and what’s not.”

— With staff files

The post Richardson pullout roils canola sector appeared first on Alberta Farmer Express.

When listed grains (wheat, oats, barley, rye, flax, canola, rapeseed) are delivered for payment at a licensed elevator, an elevator operator can issue either a cash purchase ticket or a deferred cash purchase ticket, payable in the year following the year in which the grain is delivered.

Under current tax law, a farmer who opts for a deferred cash purchase ticket is then able to include the amount of the ticket in taxable income in that following year.

The tax treatment of deferred cash purchase tickets “is a departure from the general rule with respect to taxpayers (including other farmers),” the government said after unexpectedly announcing in the March 2017 budget that the measure was under review.

The talk of eliminating the option alarmed many in the grain industry, including KAP members who debated the policy a month later at an advisory council meeting April 20.

“It’s not avoiding taxes (by being able to defer grain sale payments into the next tax year),” said Foxwarren farmer George Graham at the time, who moved the resolution. “It’s just a way to balance out taxes.”

“We all know how tough marketing is and… if you’re going to start timing grain sales because of when you need the income, it’s just going to cause problems,” Starbuck farmer Reg Dyck said while debating the resolution.

Others in the grain industry added their voices to the chorus calling for retaining the system.

Deferred cash purchase tickets help farmers and grain companies, Western Grain Elevator Association executive director Wade Sobkowich, said April 11 on the sidelines of the Canadian Global Crops Symposium in Calgary.

“We’ll be required to pay farmers (who can’t defer payment) sooner than we do today, all things being equal, and therefore the cost of financing will go up (for grain buyers),” Sobkowich said.

“Farmers who defer delivery until the next tax year means we are altering delivery patterns and we may not be taking advantage of peak price periods. Grain companies will have less control as to when they call the grain forward and that can impact their ability to extract revenue from the marketplace. So it can complicate delivery patterns and it can increase the cost of financing to grain companies and all of those costs get shared by the industry.”

Given ups and downs in grain production and grain prices, farmers need tools to even out their income, he added.

The government quietly made the announcement yesterday as part of a larger announcement titled “Additional Tax Support for Canadian Farmers.”

In that document the government also committed to “providing tax relief” for livestock producers who received compensation for having to destroy their herds in the 2016-2017 bovine tuberculosis outbreak in Saskatchewan and Alberta.

Livestock producers in areas where farmers qualified for a livestock tax deferral to rebuild their herds following flood or drought will now also be able to defer a portion of their 2017 proceeds from the sale of breeding stock into 2018.

The post Cash ticket deferral option to remain unchanged appeared first on Alberta Farmer Express.

“Prince Rupert is a major opportunity — when we look at Pacific gateway access, we need a balanced approach between Vancouver and the Port of Prince Rupert,” said AGT Foods president and CEO Murad Al-Katib. “These are very critical elements for the next 40 to 50 years.”

Major grain companies have invested heavily in grain terminals at Vancouver, but more needs to be done, said Al-Katib, who in addition to heading one of the world’s largest pulse trading companies was a senior adviser to the panel that reviewed the Canada Transportation Act (CTA).

“We need to ensure the continued investments and port infrastructure improvements that have been undertaken by large players like Richardson’s, Viterra, and Cargill are continued,” he said. “They’ve done a great job of creating material changes in capacity at ports.”

In his recent economic update, federal Finance Minister Bill Morneau pledged to spend $10.1 billion over the next 11 years on “more efficient transportation corridors to international markets.” The details won’t be known until the next budget, but the goal is to fix congestion and bottlenecks along essential corridors, transportation hubs, and ports that access world markets.

Rail lines to the Vancouver fit that bill.

“My understanding is that some of the areas that could use some attention have to do with the (Port of) Vancouver,” said Wade Sobkowich, executive director of the Western Grain Elevator Association. “We understand that there’s a tunnel and a bridge that need some work. I’m not hugely familiar with the specifics of what they need to debottle them. My understanding is that most of that would fall into Vancouver or just outside Vancouver and that’s where the focus would need to be in terms of debottlenecking the system with infrastructure dollars.”

But fixing problem areas to Vancouver isn’t enough, said Al-Katib. Rather, Ottawa should think strategically and long term, and that means moving more grain, oilseeds, and pulses through Prince Rupert.

“We need to utilize all corridors,” he said, adding, “it’s not just about the railways.”

“We have a tendency in our business where everyone just points at the link in the supply chain directly ahead or behind them,” he said. “Farmers need to plan and market into windows in the entire crop year. We’re not necessarily going to have the infrastructure to move the entire crop in four months a year. We have to use all the ports.”

The federal government should also look at leveraging its infrastructure investment by partnering with the private sector, said Al-Katib.

“One of the things we recommended in the (CTA) report was that the government should be looking at whether they can partner with industry on tax credits that would be aimed at first- and last-mile improvement infrastructure in rail,” said Al-Katib.

The CTA panel, led by former cabinet minister David Emerson, also controversially recommended lifting the revenue cap on CP and CN to encourage them to invest more, such as renewing the hopper car fleet, which is nearing the end of its useful life. Rail sidings, newer locomotives, and track improvements could also boost the capacity of the railways to carry more grain and other bulk commodities.

But the biggest requirement is a new mindset in the entire supply chain — one that encourages participants to work together and ensure everyone profits, said Al-Katib.

“Canada is a major supplier of grains, oilseeds, and pulses to the world and we’re going to grow further,” he said. “If we want to prepare for the next 30 to 40 years, we need to ensure that those infrastructure bottlenecks, policy, information, and surge capacity are all aligned to give us that predictable, efficient access to the world markets.”

And standing still could be costly.

Economists who conducted a study for the Saskatchewan Wheat Development commission found producers could lose about $10 billion if capacity isn’t improved over the next 10 years.

“Farmers uniquely feel the effects of inadequate capacity,” said Harvey Brooks, general manager of the Saskatchewan Wheat Development Commission. “It reduces the on-farm price that they receive when capacity is rationed out.”

Morneau’s budget, which will spell out details of the $10.1 billion in transportation corridor spending, will be delivered in the spring.

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“To ensure success during this crop year, the broader supply chain must work together to collectively harness our energy so that the entire Canadian economy can reap the maximum benefit,” said CP CEO Hunter Harrison. “We have been preparing for this crop year for months and we are ready.

“The grain supply chain in Canada, like most efficient supply chains, works best when demand is well distributed throughout the year. The rail supply chain has returned to normal since the extraordinary crop and winter of 2013-14 and CP has continued to move record amounts of grain. This means there is now excess capacity in the supply chain, including thousands of rail cars in storage ready to move the latest crop.”

Meanwhile CN says it’s “fully prepared to move the coming Western Canada grain harvest safely and efficiently over the crop year. CN has the motive power, freight cars and people to do the job.

“At the same time, the entire Canadian grain supply chain, from Prairie elevators to terminals at West Coast ports, will need to work collaboratively and at full capacity throughout 2016-17 to move the crop,” CN spokesman Mark Hallman adds. “CN will be operating 24 hours a day, seven days a week to do its part.

“CN’s operating plan is designed to enhance rail network capacity and to provide efficient hopper car cycle times between origin and destination. With the assets, team and solid operating plan in place, CN is ready to move its share of the coming crop to market.”

Meanwhile Wade Sobkowich, Western Grain Elevator Association executive director, says overall grain shippers are entering this crop year with an optimistic outlook.

“Many conditions are different than those which existed in 2013, such as less demand for shipping in other sectors and an early acknowledgment of the large crop size,” Sobkowich said.

Back in June, the WGEA sent a letter to the railways and the federal government noting that the Prairies were heading toward a harvest between 63 million and 74 million tonnes with more than additional eight million tonnes carry-over.

“We felt it important to provide both railways with as much advance notice of these projections as possible, so you may ensure enough capacity is available to meet shipper demand for the upcoming crop year,” Sobkowich said.

While the comments from CP and CN are encouraging, disconnects remain between the grain companies and the railways. Sobkowich points out while the railways call for 24-7 operation of grain terminals, that “will do nothing more than result in more sitting around and waiting for cars to arrive, and impose an unnecessary cost burden to the entire industry.” The important element is speedy unloading of rail cars once they are delivered.

“Grain facilities do not sit idle unless it is because they do not have rail cars,” he says. “When rail cars are presented at port terminal facilities, with appropriate notice and with a regular and consistent cadence, they are unloaded by terminal operators in a timely way.”

The grain companies communicate their delivery requirements “to both railways on a regular and frequent basis, so the railways have a good understanding of grain shippers’ collective demand on a week-to-week basis.” The companies need to know “in advance the capacity it will be offering in the various weeks, in each of the corridors.”

Grain companies face penalties from the railways if they fail to load and unload rail cars in a timely way, or if they do not use rail cars provided to the elevator, he said.

“This places accountability on grain shippers to perform.”

Currently, the railways are not held financially accountable if they don’t meet their delivery commitments, he added.

Harrison urged the grain companies to make more use of Thunder Bay to relieve the pressure on the Port of Metro Vancouver.

Sobkowich says grain companies make sales in a way that returns as much value for grains, oilseeds and pulse crops as possible and pointed out the delivery route should be a decision made by the shipper, who is the customer of the railways.

“That is not for the railways to dictate, that is for us to decide,” Sobkowich said.

Thus far, federal cabinet ministers say they are monitoring the situation but for now are leaving it to the railways and grain companies to deal with any issues.

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“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.

“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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