Ahead of the Heard
The ongoing scrap between the railways, the government, the grain industry and grain growers seems like history repeating itself – these disputes go back almost 130 years ago. Back then the railways were accused of price gouging on freight rates for moving grain and cattle. Nowadays the railways are accused of not moving enough grain in a timely manner. In a previous column I noted that last winter’s grain shipping backlog situation was not unusual as it occurs whenever there is a bumper crop on the prairies. Once such crops move through the system, movement goes back to normal. That appears to be what is happening again, but it seems the various actors in the process want to throw their weight around with conflicting allegations and even a lawsuit. One might suspect that perhaps the system is dysfunctional when it comes to communication and cooperation.
One of the problems, and this is not unique to this situation, is that no one likes being coerced into doing something by regulations and fines. The government has a long history of sticking its nose into grain transportation with regulations and subsidies. To be fair in some instances in the past there was some justification to government actions. One would have hoped that history would have encouraged the parties to create a consultative process that could resolve disputes. Some entities were created over the years but it always seemed to be an adversarial process. That approach seems to have continued if statements on the present grain shipping are any indication.
The government opened the scrap by stating that CN had not shipped the required 5,000 railcars of grain per week and was imposing a significant fine as per their regulations. That requirement was part of legislation the federal government passed earlier in the year to deal with the shipping backlog. Both CN and CP had stated that such regulations were not needed because delays were due to weather related conditions that slowed movement. Both railways proved their point by exceeding the mandatory shipments for the past six months.
CN countered stating that grain shipping companies were not placing enough rail car orders to meet the target shipping numbers. Their point being that they were ready to ship the grain but with fewer orders it was not their fault, therefore they should not be fined. They also claimed that the grain terminals were reducing their throughput capacity by not working weekends. That would all seem to be hard to argue against. The grain shippers then weighed in and said that was not the case and had no idea what numbers CN and the government were using to come up with their deferring positions. Grain growers stated that surplus crops were still not shipped and a new crop was just around the corner. One suspects that the truth lies somewhere but communication is the problem. Of course in such a politically charged atmosphere no one wants to admit that they may be wrong. All sides seem more intent on scoring points. Some observers have noted that short of honest figures, the number of ocean freighters waiting in Vancouver is the best indicator of whether or not shipping is on schedule.
One expects that the government, grain shippers and the railways will continue wrestling with the real story. The railways may have the upper hand if this year’s crop is below average and shipping demand falls significantly. If that is the case you can expect the railways to show pictures of empty grain cars sitting on railway sidings. However the railways are biting back at another annoyance stemming from federal legislation that being the change in interswitching rules from 30 km to 160 km. The idea was that would see Canadian grain moving more over nearby American railroads. CP launched a lawsuit against the federal government alleging that regulation would cause them to lose millions of dollars in potential revenue. That’s debatable of course, if CP stayed competitive there would be no interest from American railways, besides their own grain shipping infrastructure is at its limits. However, the CP legal action is another indication how exasperated the railways are with the federal legislation and they intend to fight back.
In the meantime the government last spring launched another study into what needs to be done to resolve the never-ending grain shipping problems. No doubt that study will regurgitate what was suggested in previous studies. One is baffled as to what can be done to resolve the entrenched attitudes of the stakeholders involved in grain shipping.