Alberta and Saskatchewan are calling on the federal government to intervene to ease a backlog of grain in the Prairies, by brokering deals to ship more by rail and levying cash fines if railways don’t live up to obligations.
The backlog stems from a combination of an unusually ample harvest last year and competing demands for capacity on Canada’s railways, with recent cold weather adding to the shipping pinch. Western Canada farmers netted a bumper crop in 2013, harvesting nearly 40 per cent more grain than the five-year average, according to Alberta. But farmers have since faced long delays getting their product to port and seen product prices slump in the meantime.
Agriculture Minister Gerry Ritz responded by saying all options are on the table, but criticized rail companies for insufficiently addressing the delays.
Saskatchewan wants Ottawa to “immediately” broker service agreements between grain and rail companies to require certain levels of shipping, while Alberta wants Ottawa to bring in fines against railways who deliver “inadequate service.”
It’s not just one industry at fault for the backlog, said Bill Boyd, Saskatchewan’s Minister of the Economy. “I think there’s blame to go around here. I don’t think there’s any individual group that is without blame,” Mr. Boyd said in an interview Monday. Without service agreements, “there’s no obligation, there’s no accountability built into the system.”
Some critics argue grain shippers are being pinched as energy companies move oil-by-rail, leaving fewer locomotives to haul grain cars. Gary Stanford, president of the Grain Growers of Canada, welcomed the provincial proposal if penalties would lead to faster grain shipment, though he isn’t sure how that might work in practice. “They’re private companies. To step in and make legislation, would it really help us in the short term?”
He said the oil shipments, by themselves, haven’t had “much of an effect” on the grain backlog. “There’s a lot more product on the railroad overall,” he said. A locomotive shortage has also led to backlogs, he added.
Alberta says current penalties for rail companies are vague and often lead to lengthy arbitration.
Asked about the two provinces’ proposals, Mr. Ritz responded with a statement saying he won’t let farmers “be held hostage by this poor service” of rail and grain companies.
“The bottom line is that the current level of rail service is unacceptable to farmers, and the railways have not yet put forward a viable plan to address this year’s bumper crop. Our government will not let farmers or our economy be held hostage by this poor service, and we are considering all options to ensure our farmers are able to get their crops to market,” Mr. Ritz said, in a statement released by spokesman Jeffrey English.
In an interview with The Canadian Press, however, Mr. Ritz signalled a reluctance to take “prescriptive” action. “At the end of the day, there’s nothing stopping the grain companies and the railways from negotiating with reciprocal penalties as part of that contract. There’s nothing stopping them from doing that now,” he said.
Both CP and CN say they’re making more cars available, but that a cold snap has hampered efforts because frigid weather requires that trains be kept shorter to ensure brakes function properly.
CN says it made available 3,530 empty grain cars last week, and hopes to average 4,000 per week “as soon as extreme cold temperatures abate.” By April, the railway hopes to run as many as 5,500 cars per week. “CN is doing its level-best to move this 100-year grain crop to export position and world markets,” spokesman Mark Hallman said.
Asked about the call for government-negotiated pacts, he said the company prefers “collaboration” with grain companies. “CN believes increased supply-chain collaboration, involving all stakeholders, not just railways, is the best way to drive a more efficient grain transportation system,” Mr. Hallman said.
Canadian Pacific Railway declined to respond to the provinces’ requests, and couldn’t offer any specific numbers of cars in service. From September to January, the railway says it shipped 17 per cent more grain than the five-year average. “With a record crop size, CP recognizes the urgency currently facing Western Canadian grain farmers,” CP spokesman Ed Greenberg said.
CP CEO Hunter Harrison said last week that the railway is moving grain as fast as it can but often faces delays unloading the product. The Saskatchewan government said Monday grain companies “told us they could quickly move to provide service 24 hours a day if the grain reaches them.”
Grain prices have slumped 20 to 30 per cent for farmers since the fall, Mr. Boyd said, adding buyers are now looking elsewhere. “We see our premium markets, like Japan, being lost as a result” of the backlog, Mr. Boyd said, adding he hopes Mr. Ritz acts quickly to broker a deal with rail and grain companies. “Frankly, I think he’s frustrated with the whole system, too. This is a way to kick-start negotiations,” Mr. Boyd said.
With a report from Carrie Tait