The backlog of crop shipments that has raised tensions between the railways and grain industry has clogged West Coast ports with ships waiting to be loaded.
For several days there have been as many as 35 ships at anchor around the Port of Vancouver and another handful at the Port of Prince Rupert awaiting trains to arrive with wheat, canola and other western crops destined for overseas buyers.
Robert Lewis-Manning, president of the Chamber of Shipping in Vancouver, said the slowdown in rail shipments means vessels are being forced to wait up to a month before their holds are filled with grain. One vessel arrived on Dec. 31 and had to wait until last weekend for its cargo, he said.
"We're seeing a lag effect of congestion in the supply chain on land, largely related to rail, now starting to impact the coast," Mr. Lewis-Manning said by phone. "And you could see this could back up even further. I have little doubt that there are vessels en route to Canada and when they get here and there's no place to wait they're going to be loitering off the coast, and that's a situation we don't want."
Canada's two major railways say they are working to reduce the backlog of shipments of commodities, including coal and sand used to drill for oil and gas. Canadian National Railway Co. and Canadian Pacific Railway Ltd. say a cold and snowy winter followed a rise in shipments, which strained their networks.
As complaints from a range of customers rose, CN's chief executive officer Luc Jobin stepped down on Monday. Robert Pace, the chairman of the railway, expressed dissatisfaction with the pace of improvements in service and said a search is on for a new CEO who will "energize the team."
CN said on Wednesday it is taking steps to move the crop to ports, including deploying extra crews and trains, and offering incentives for employees to delay retirement or return to work.
"We apologize for not meeting the expectations of our grain customers, nor our own high standards," said JJ Ruest, CN's marketing chief who was named interim CEO on Monday.
A grain-industry group that tracks movements of hopper cars from Prairie elevators to ports says CN supplied just 17 per cent of the rail cars ordered by grain companies in the most recent weekly reporting period. This compares with 50 per cent at CP. According to rail company data, CN's grain carloads are down by 13 per cent this year, compared with a 9-per-cent drop at CP.
Mr. Lewis-Manning, who represents the West Coast marine industry, said he has heard complaints from all parts of the supply chain about rail service. "At the moment we're hearing more concerns about Canadian National Rail," he said by phone.
"In winters where we see bad weather, which of course isn't unusual in Canada, we'll see a week or two where that congestion builds up. But it usually alleviates itself once the weather clears itself up. But this is more than that. We know there is another factor at play. We think it's rail capacity," he said.
Typically, a ship that can hold up to 100,000 tonnes of grain will make two or three trips from anchorage to a berth to take on grain before it has fulfilled its order. These movements are hampered by congested waters. Cargo owners – grain sellers – pay the daily costs to have the ships idle, which can cost tens of thousands of dollars a day, in addition to contract extension penalties levied by the overseas buyers.
Farm groups and grain companies are urging the federal government to speed the passage of legislation in the Senate that will give exporters the ability to seek compensation from railways that violate contract terms. The Grain Growers of Canada says the poor rail service by all railways could force farmers to default on loans.
It's a situation that resembles the winter of 2013-14, when harsh weather followed a record crop. Poor rail service sparked a public battle between the railways and the grain industry, and resulted in temporary laws that imposed weekly minimum grain shipments on rail companies. However, the grain industry notes the current crop waiting to move is average size, and they say poor planning and misplaced resources by the railways led to the current backlog.
Farm Credit Canada, a Crown corporation and the largest agricultural lender with a $33-billion loan portfolio, said it is working with some clients who are expecting cash-flow problems due to rail service. But the Crown corporation has no plans yet to allow cash-strapped farmers to delay payments, which happened in 2014.
"FCC began hearing concerns about grain movement in the first week of February and has been closely monitoring the situation since that time. There tends to be a lag time between slow sales and loan-repayment issues," said Michael Hoffort, chief executive officer of Farm Credit Canada. "Should normal grain shipments not resume, FCC will implement a broader customer support program, leveraging the lessons from 2014."
The farm group that administers the federal government's agriculture loan guarantee program says there has been no significant rise in defaults nor demand for loans.
"That's up to today. I can't speak to what's going to happen two, three weeks from now," said Dave Gallant, director of finance at Canadian Canola Growers Association, which runs the advance-payments program.