After record crop, grain industry faces transport challenges

Ask Alberta grain grower Gary Stanford about his biggest desire for the coming year and the answer might surprise you: He wants more locomotives, rail cars and oil pipelines.

A record crop of wheat and other grains in Western Canada in 2013 has highlighted the weaknesses in the transportation system that moves the commodities from fields to foreign markets.

The grain industry says it needs more trains to meet global demand and capitalize on strong prices, and that the rise in moving crude oil by rail is creating new competition for track space and locomotives.

Mr. Stanford, who farms near Lethbridge, Alta., and is president of the Grain Growers of Canada, said farmers have no alternatives to shipping by train. Building new pipelines, he says, would relieve some of the pressure on the railways.

The bumper crop that followed the season's good weather has kept rail companies busy. Canadian National Railway Co. and Canadian Pacific Railway Ltd. say they have handled 20 per cent to 26 per cent more grain in 2013 than they did on average over the past five years, and more crops are moving on the rails than ever.

"We are working to have the resources in place to respond to this record crop year," said CP spokesman Ed Greenberg.

The railways say the massive crop – not the growth of crude-by-rail – is the reason growers are sitting on so much grain.

"The challenge of moving such a large crop is not a rail car capacity issue," said Mark Hallman, a spokesman for CN.

"The issue is that western Canadian farmers have grown the biggest grain crop in history, and the supply chain – the country's elevators, rail and port terminals – cannot move a whole year's crop in three months. It is not physically possible."

Canadian National's oil-by-rail business is growing, but is expected to account for just 2 per cent of all rail car loads in 2013.

To meet increasing demand from all industries, CN has spent about $100-million in the Winnipeg-Edmonton corridor, extending sidings, doubling some tracks and expanding yards.

CP, which began a top-to-bottom shakeup in 2012 under new chief executive officer Hunter Harrison, has been running longer and faster trains, reducing the amount of time cars sit in terminals while eliminating 4,200 jobs. In a bid to boost the company's efficiency, about 400 locomotives and 2,700 rail cars of all types have been taken out of service in that time.

But now the railways don't have enough capacity to handle the record crop, said Wade Sobkowich, executive director of the Western Grain Elevator Association. He says the western Canadian harvest is 33-per-cent bigger than a year earlier, but exports at the end of November were just 2-per-cent higher.

Mr. Sobkowich said he expects some of the 2013 crop will still be in elevators and farmers' bins by the time the 2014 crop is being harvested, and that the delays are hitting grain handlers' bottom lines.

Companies that sell the crop to overseas buyers must pay about $10,000 for every day a ship waits at port to be loaded.

And this season's backlog has left as many as 15 to 20 ships anchored each day awaiting trains. Mr. Sobkowich says the slow movement of grain means handlers face late penalties and default if they cannot fill an order.

Editor's Note: An earlier online version of this story incorrectly said Canadian National Railway Co. has been upgrading its Winnipeg-Calgary rail corridor. In fact the improvements target the Winnipeg-Edmonton corridor.

RAIL SHIPMENTS

Western Canada saw a record crop of wheat and other grains in 2013, creating competition for track space and locomotives. Numbers are Canada-wide, year-over-year changes for October, 2013, compared to October, 2012.

Grain by rail

17% – Rise in number of grain rail cars

13% – Rise in grain shipments by rail, by weight

Oil by rail

33% – Rise in number of rail cars bearing fuel oil and crude

34% – Rise in fuel oil and crude shipments by rail, by weight

Source: Statistics Canada