Transport Minister Lisa Raitt and Agriculture Minister Gerry Ritz announced measures being taken by the federal government to move more grain through the transportation system and maintain Canada’s reputation as a supplier to world markets.
Minister Raitt announced an Order in Council (OIC) to take immediate effect, setting out minimum volumes of grain that Canadian National Railway Company and Canadian Pacific Railway Company are each required to move. The Order, under section 47(1) of the Canada Transportation Act, also requires the railways to report to the Minister of Transport on weekly shipments.
The railways will be required to increase the volumes carried each week, over a period of four weeks, to a combined target of 1,000,000 tonnes per week – more than doubling the volume currently being moved. The Order creates direct legal obligations on railways and will result in penalties for non-compliance of up to $100,000 per day.
Agriculture Minister Gerry Ritz announced that the Government will introduce legislation when Parliament returns to establish measures to ensure that agricultural products get to market more efficiently.
CN President and CEO, Claude Mongeau responded to the Order in Council by promising that “CN will do its part to meet the challenge of moving this 100-year record grain crop. Our assessment shows that an upper limit of around 5,500 cars per week may be achievable, but only if all members of the supply chain work together closely. This is broadly in line with what was mandated by the government in its Order in Council. But we all have to recognize that the challenge we jointly face is unprecedented, and will require a new level of collaboration to succeed.”
Last year’s prairie grain crop was by far the biggest in Canadian history. As a result, CN has to move 10 million more tonnes of export grain, or 50 per cent more than for any other crop. To put this in perspective, 10 million tonnes is equivalent to twice the amount of export potash CN handles, 25 per cent more than the total amount of lumber it moves to export, and almost as much coal as it moves to export in a year. “No supply chain in the world can reasonably be expected to handle a 10 million tonne increase in traffic on such short notice. It takes eight months to on-board and train a crew member, and seven to eight months to acquire cars and locomotives,” said Mongeau. The exceptional challenge of moving this year’s record grain crop was made more difficult by the extreme winter conditions CN experienced across much of its network this year. “Our Western Canada employees have spent the last three months working day and night in the most frigid temperatures we’ve seen across the prairies in at least the last 50 years. Despite the best efforts and personal sacrifices of our employees, we have not been able to keep up with a normal winter grain flow during this polar vortex,” said Mongeau.
The difficult weather conditions added to the pressure, and caused a shortfall of around 10,000 carloads (around one million tonnes) compared to a normal winter grain flow. Given this 100-year grain crop, CN would still have a large backlog of grain to move even if it performed at the best level achieved in its history. Indeed, even after a very slow start in August, when grain elevators decided to ship at least 10,000 carloads less than the available rail capacity, CN has moved approximately 10.5 million tonnes of grain out of prairie Canada so far this crop year. This throughput is on par with the average to-date performance over the last five crop years. CN’s grain performance to date benefited from record spotting performance from September to November, until extreme cold weather hit much of North America in December.
CN has indicated to the federal government its intention to ramp up towards 5,500 cars delivered to country elevators each week, as soon as weather conditions permit and a strong Thunder Bay program starts. CN will have the resources – locomotives, cars and crews – in place to support this record weekly spotting level. This level of performance can be sustained, provided that there is strong collaboration from all partners in the supply chain – grain companies, country and terminal elevators. Critical factors will include: use of all sale corridors; timely loading and unloading of grain cars; and encouragement from the federal government to act in a collaborative, as opposed to accusative, manner in the grain supply chain. “Hard work, joint objectives and a true spirit of collaboration will be essential to the industry being able to meet the very aggressive targets that have been set today by the federal government,” said Mongeau.
CN believes that the Minister of Agriculture’s call to introduce more regulation for grain transportation is both ill-advised and seriously counter-productive. “More regulation would lead to adversarial relationships within the supply chain, at a time when collaboration is essential,” said Mongeau. “Sound policy calls for exactly the opposite: a more collaborative and commercial framework is what Canada needs to support a world-class grain growing sector.”
In an open letter, Canadian Pacific’s CEO, Hunter Harrison, commented that “moving commodities like grain has been severely impacted by harsh winter temperatures not seen in more than 60 years, including the coldest December/January since 1949/1950. We know “winter happens every year” which leads us to conduct extensive winter preparations. Despite these preparations, sustained cold below -25 degrees C is a tipping point for railways, as it is for other modes of transportation. The last three months have been exceptional, with 49 days below this temperature in the Canadian central prairies vs. 25 days on average. When the weather is this cold, we must take steps such as reducing train lengths to continue to move freight and ensure the safety of our employees and the communities in which we operate.
Distinct from operating conditions, Western Canadian farmers last year produced an extraordinary grain crop of 80 million metric tonnes (MMT), 27 per cent above the previous 2008/09 record and 37 per cent above the five year average. This increase was not forecasted by anyone, including grain growers themselves. CP is moving more grain than ever in its history. This crop year CP has moved more grain than the previous year, itself a record for grain movements in Canada. In February alone, despite the weather, we managed a 15 per cent increase in grain shipments.
Moving grain from the farm to the port is a complex pipeline involving many parties. Canada’s largest ever grain crop and this winter’s weather created the “perfect storm.” To improve the situation, all of us in the grain supply-chain must be accountable for our respective pieces on a 24/7 basis. We can’t move trains out of the prairies if rail cars haven’t been loaded and we can’t return empty cars back to the prairies if trains are sitting idle waiting for port terminals to unload them.
The grain supply chain will return to very high levels of performance over the coming weeks when these extreme cold temperatures lift. In the meantime, we need all the parties to step up and provide commitments and exert additional effort. We’ll do our part. We expect to move 240,000 carloads of Canadian grain this crop year, a more than 20 per cent increase over last year’s record. We are having productive discussions with governments. With their help, I am confident that we will tone down the rhetoric and move forward with a coordinated transportation system for the betterment of all Canadian shippers, including grain producers. Let’s do this together!”