It’s been obvious for almost six months that there was going to be a problem with moving last year’s bumper crop of cereals, oilseeds and special crops. Bumper crops on the Prairies are not unique and occur every few years, and the transportation system seems to cope.
In the past, railways found extra cars, scheduled more trains and just spread out the delivery schedule into the following year. The Canadian Wheat Board and grain companies regulated the flow into the system so that it was more or less fair to all growers. Weather delays and shipping delays were just an accepted hazard of moving grain. But this time around, the system seems particularly clogged; it seems a perfect storm has hit grain transportation.
One can usually tell when an agricultural issue becomes critical. That’s when politicians seem to come out of the woodwork — all professing outrage and demanding that something be done. Government ministers with senior bureaucrats in tow, along with reps from producer organizations, hold news conferences and media events where they pontificate about the seriousness of the problem. Invariably, demands are made that railways pick up the slack and then an announcement is made that a study will be made to find out what is causing the problem. Nothing much really happens after that, because everyone figures time will resolve the problem. The reality is that is what usually happens, and growers know the story. Curious as it might seem, the underlying hope is that next year will see an average crop and this year’s clogged system will just be a memory. History does repeat itself.
The fact is the grain transportation system from country elevator to railway to terminal elevator has over the years been fine-tuned to accommodate an average crop. All the folks involved in that system know there is no profit to be made in an overbuilt system with excess capacity. It’s the same logic that governs urban highway planning; there is little point in building roads to solve a one- hour traffic jam.
But to be fair, this last year has seen some extenuating circumstances that has caused something of a perfect storm to aggravate a backed-up system. Two of them have little to do with the grain industry, but their impact has been major on moving grain cars to port.
The first has seen an explosion in the use of tanker cars to move petroleum products across North America. That movement has been particularly profitable for railway companies, being they can charge full fare for that movement. That’s different from moving grain cars where there is a government-regulated cap on how much profit railways can make on moving that commodity.
Although railways have commented that they treat all shipments equally, one can’t help but suspect that there is going to be some priority with higher profit shipments — it’s just business and human nature.
The second has been a campaign of logistics rationalization that has been occurring with the CPR. It seems that railway was one of the least operationally efficient railways in North America. Last year, a new CEO was hired who was determined to make the railway more efficient — no problem with that approach. But that initiative has seen huge layoffs and the sidelining of many dozens of locomotives in favour of longer trains. It might seem simplistic, but fewer locomotives and fewer engineers would probably mean fewer trainloads of grain cars will be hauled. That change might have worked in an average year, but not this year.
Despite the political grandstanding and plans for studies of every kind, I expect nothing will change the pace of rail shipments to the coast. The railway companies are not going to increase shipments, unless there is some significant financial incentive to do so. Besides, even if they could, rail cars and terminal capacity have their own limitations.
The fact is the whole system would need to be expanded to export more grain. The question for those who make decisions on expansion is will there be more crop to move consistently over the coming years. At this point, all is conjecture — yes, yields have been increasing, but incrementally. More land is going into continuous cropping, but some of it is marginal. Climate change is helping production, but it’s variable. Do those changes rationalize the investment of hundreds of millions in transportation infrastructure — maybe? Perhaps what needs to be considered are more temporary measures that could be implemented when bumper crops occur — more on that the next time.
Will Verboven is the editor of Alberta Farmer.
— Ahead of the Heard