Transport situation depends on crop outcome

Just a few months ago grain grower organizations and politicians of every stripe were railing against the railways

Just a few months ago grain grower organizations and politicians of every stripe were railing against the railways about poor service. Allegations of conspiracies favouring oil over grain were thrown about. The Feds introduced legislation that was supposed to force the railways to mend their evil ways or face punishing fines. Heck there were even threats of legal action against the railways. What a difference a few months can make as was predicted by your humble columnist.

The railways said they could deal with the grain shipping backlog with the arrival of spring and better weather conditions. Rail car shipments were ramped up dramatically and growers were able to ship a record 4.5 million tonnes in June. Can that pace be kept up, one would suspect that it could, as long as railways keep grain movement as a priority. Besides there is a real incentive to continue the pace, the more grain that is shipped the more profits for the railways. The question is can the related grain handling infrastructure keep up the pace. There are still ships waiting for grain in Vancouver harbour so the need for more grain remains a priority.

The interesting part is that whilst grain shipments increased dramatically, the railways continued their oil rail tanker shipments at a steady if not increasing rate. With more tanker car loading facilities being built in western Canada that sector will put more pressure on railroad capacity. It does cause one to ponder whether bad winter weather conditions were the only reason grain shipments were down to west coast ports. It may not be a conspiracy but it could be a state of mind – that being grain shippers are a captive group and they can be put off if cutbacks have to be made. Shipping oil by rail faces real competition from pipelines and railways may want to give that sector a priority to keep them happy. What is clear is that the railways can step up grain shipments significantly, all it takes now is the will to continue the pace.

The elephant in the room is the impending size of this year’s grain and oilseed crops. Last year’s surplus is still not yet completely through the system, so another shipping problem could be in the works. At this point another bumper group may not happen considering the damage done to seeded acreage by excessive moisture. This is specific to parts of Manitoba and Saskatchewan, it’s been said that up to 3 million acres may not produce any crop. It all boils down to how crops can recover during the growing season.

It is amazing how seemingly damaged and drowned crops can come back given favourable growing conditions. Interestingly the main hope for that is the continuation of global warming, that being will that reality stave off any killing frost to say the end of September at the least. Be that as it may, without a longer growing season a bumper group is unlikely.

The exception may be in Alberta where excessive moisture has not been as big a problem. But the problem may be the other factor, too much heat, and that may impact canola yields, especially in southern areas. Market analysts feel a solid average crop is the likely outcome for Alberta crops. If that is the case, rail shipments could be back to normal in just a few months. When that happens there is every danger that improving the grain shipping infrastructure will once again be put on the back burner until of course the next crisis. The problem is this issue seems to want to constantly repeat history.

Thankfully political posturing by the usual suspects will fade away. One ponders what the fate will be of the usual studies that are launched whenever there is a crisis. One expects that the studies will be half-hearted as there seems to be no real vision or drive to make any radical changes to the shipping infrastructure. I expect any study will recommend incremental changes which is what has been occurring over the past 40 years.

The railway companies will probably engage in much “I told you so” rhetoric and they would be right to do so. What might encourage them to continue their high shipping pace would be a revised formula that provides significant financial incentives for achieving certain rail car volumes. They have proven that they can step up the pace; it would seem fair that they be given some added incentive to keep it going.