By Alex Binkley
Total farm production costs have risen almost three times more than the freight rates for delivering Prairie grain to waiting ships or United States destinations, says a Canadian Pacific executive. “The costs of all major inputs have far outpaced increases in CP’s freight rates,” Robert Taylor, Assistant Vice-President of North American Advocacy, told a recent meeting of the Ottawa chapter of the Chartered Institute of Logistics and Transportation in North America. “The cost of using rail is an ever decreasing proportion of farm input costs. The cost of all farm inputs such as fertilizer, seeds, machinery and fuel rose between 2002 and 2014 by 58 per cent while rail rates increased only 22 per cent,” he added. Thanks to higher grain prices and increased yields, farm income has risen by 160 per cent to $11.8 billion since 2000, he said.
CP and CN are both opposing calls for tighter regulation of grain freight rates and service levels under a review of the Canada Transportation Act. It’s to report by the end of the year on what action the federal government should take to avoid a repeat of the grain transportation chaos during the winter of 2013-14.
However, Mark Hemmes, the federally-appointed Grain Transportation Monitor, says CP is being selective in the numbers it uses to make its case. The railway’s statistics cover all agricultural products, he notes. When only Western Canadian grain crops are considered, farm input costs have risen on average by 6.3 per cent annually, “as opposed to the 4.3 per cent annually that CP suggests.” In other words, the gap between total costs and freight rates in the grain sector are not as wide as CP suggests.
As well, the operating costs of the railways have been rising by only a modest 1.9 per cent a year since 2002 “without taking into account productivity improvements,” he added.
Taylor says that CP now is spending about $1.5 billion a year to upgrade its network across the country and during the next four years will inject record levels of investment into the system. The result is increased productivity and “competitive rates to our customers.”
While the size of the grain harvest has grown during the last two decades, a wide variability in annual production caused by weather conditions complicates efforts to improve efficiency, he said. For example, following the bin-busting crop of 2013-14 crop year, production fell sharply in 2014-15. “The variability makes annual capacity planning a considerable challenge.”
Hemmes points out that the rest of the grain industry has also been making major investments in their facilities to improve productivity. Grain companies spent $763 million during 2013 and 2014, port terminals $304 million and country elevators $284 million. As well, $175 million has been spent on new country elevators while farmers have spent $44 million new machinery and equipment and expanded on farm storage.
Outgoing Agriculture Minister Gerry Ritz says he plans to push the Trudeau government to toughen the regulations controlling the railways. Ritz was the prime mover behind getting the CTA review to focus on grain transportation first and then other issues in the rail, airline and marine sectors.
Taylor also noted that CP has sharply reduced its train accident frequency from 1.69 accidents per million train miles in 2012 to 1.24 so far this year. The company is making full use of its Safety Management System to find ways to detect problems in its tracks and equipment before an accident occurs.
In a previous CILTNA session, John Coleman, Professor Emeritus at Carleton University, urged the railways to think outside the box on how to use existing technology to improve safety rather than focusing just on new devices. When it comes to technology, rail and trucking industries are slow at innovating, he said. “Virtually all the technology likely to be adopted by the rail industry in the next 10 years has already been developed.” The challenge was to make better and innovative uses of the technology already available, he added. Among his suggestions was using wheel heat detectors rather than relying on visual brake inspections and basing track safety standards on measures other than geometry.
Executives and managers of North American railways generally haven’t a background in technology and the companies don’t have “research departments or other sources of technological expertise dedicated to their own companies’ interests.” The result is they lack the ability to see other potential uses for technology they have already acquired.
“The railways probably should make technology management someone’s primary job,” he said. Currently, it’s a secondary job for managers. It and research and development “are not often high on the list of corporate priorities and executive focus.” Government regulatory initiatives usually distract the railways from making fuller use of the technology they have to improve the safety of their operations, he added. While the deadly Lac-Megantic crash is still widely remembered, there have been at least eight other serious derailments during the last two years involving dangerous and hazardous goods, he said. These events further reduced the credibility of the railways’ claims to be operating more safely, he noted. “The railways are in a bit of box. They will have to innovate their way out of it.” In response to a highly critical report from the Transportation Safety Board on the Lac-Megantic crash, as well as pointed criticisms of Transport Canada’s ineffectual role in improving rail safety, the federal government is under considerable pressure to force improvements in the rail sector, he added. That explains the interest in positive train control in the United States and proposals for converting the railways to electronic rather than air-activated brake systems for trains, he noted.