By Alex Binkley
With the 2016 Prairie harvest likely to approach the size of the record 2013 crop, grain companies and railways want to avoid the chaos of 2014 that cost farmers at least $2 billion in lower prices and lost sales. “The big difference this time is that we’ve known since June that, baring a disaster, we would have a large crop,” says Cam Dahl, Executive Director of Cereals Canada. “If it’s not a record this year, it will be close.”
While harvesting has begun, it will be into the fall before it’s complete and a better estimate of its size is available. For now the grain trade is predicting 70 to 75 million tonnes. “It will be a good test of the grain handling and transport system,” Dahl adds. “This size of the crop is becoming norma,l not an outlier.”
Wade Sobkowich, Executive Director of the Western Grain Elevator Association, says,“Overall, grain shippers are entering this crop year with an optimistic outlook. Many conditions are different from those which existed in 2013, such as lower demand for shipping in other sectors and an early acknowledgement of the large crop size.” WGEA predicted in June the harvest could be between 63 and 74 million tonnes with an additional eight million tonnes carryover. “We felt it important to provide both railways with as much advance notice of these projections as possible, to ensure enough capacity is available to meet shipper demand for the upcoming crop year.”
Both CP and CN say they’re ready and the rest of the supply chain has to do its part.
“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,” says 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 2016-2017 to move the crop,” spokesman Mark Hallman adds. “CN will be operating 24 hours a day, seven days a week to do its part.”
While the comments from CP and CN are encouraging, disconnects remain between the grain companies and the railways, Sobkowich says. 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 railcars once they are delivered. “Grain facilities do not sit idle unless it’s because they do not have railcars,” he says. “When railcars 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 railcars in a timely way, or if they do not use railcars provided to the elevator,” he points out. “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 said.
Harrison urged the grain companies to make more use of Thunder Bay to relieve the pressure on the port of Vancouver.
Sobkowich says “the grain companies make sales in a way that returns as much value for grains, oilseeds and pulse crops as possible.” The choice of delivery route is “made by the exporter/shipper, who is the customer of the railway company. Grain companies will use their facilities to the extent that it makes economic sense and provides the best return for the grain industry. That is not for the railways to dictate, that is for us to decide.”
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.