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ANTIPATHY between the grain farmers on Canada’s prairie provinces and the country’s railway duopoly has a long history. As long ago as 1915, a cartoonist depicted Canadian Pacific and Canadian National as two men milking a cow labelled Alberta, Saskatchewan and Manitoba. The relationship has come a cropper again.
Near-perfect weather in the 2013 growing season, combined with an increase in the area planted, produced a bumper crop last year. Wheat production jumped by 38% from 2012 levels to a record 37.5m tonnes; canola rose by almost 30% to a record 18m-tonne harvest. Production of barley, oats and soya beans also increased.
Yet even before the last combine harvester came in from the field it was apparent there were transport problems. Rail cars did not appear when promised, if at all. Grain began to pile up in barns and inland grain elevators. Cargo ships to take canola to China and Japan and wheat to Mexico, Japan and Iraq were left stranded in port, totting up demurrage fees. Wade Sobkowich of the Western Grain Elevator Association, an industry group, says that orders for 60,000 railcars-worth of grain have not been filled and 53 vessels are waiting for grain in west-coast ports. There is talk—God forbid—of a Cheerios shortage if a backlog of oat shipments to American cereal manufacturers does not clear.
For farmers, it’s not funny. They are not paid until they deliver grain to an inland elevator and because most elevators are currently full, the farmers have to store grain on the farm. Grain deteriorates when stored this way, so they will be paid less for it once they do get it to market. Richard Gray of the University of Saskatchewan estimates the crisis will end up costing farmers between C$2bn and C$4bn. Demurrage fees are paid for by grain companies that contract the ships, but that cost is eventually passed on to the farmers, too.
The railways blame the weather. Even by Canadian standards, this winter has been extreme. Once the temperature drops below -25°C, they must run shorter trains because it’s harder to pump air down the full length of the train to keep the braking system working. And they must run them slower because extreme cold can freeze switches and damage tracks. “You could say this is a one-in-a-hundred-years crop and a one-in-a-hundred-years crop winter,” said David Miller of Canadian National to a parliamentary committee.
The farmers aren’t buying that explanation. They claim the railways lack the capacity to deal with unexpected events like a record harvest or prolonged cold weather because they have reduced crews, locomotives and cars in a bid to make higher profits. The farmers also charge that the railways are favouring more profitable shipments of petroleum products—although still a small part of their business, oil shipments have increased by 28,000% between 2008 and 2013 because pipelines are running at full capacity.
The underlying problem, say farmers, is that the railways wield all the power. Of the 340 inland grain terminals on the Prairies, only six are served by both railways and another 22 are within 30km of both. Without the threat of competition, grain shippers are sceptical that the railways will negotiate decent service contracts: no firm has sought such an agreement under rights granted in legislation last year.
Under pressure from Gerry Ritz, the agriculture minister and a farmer himself, the railways have promised to make more railcars available. Farmers want the government to ensure that if the railways were to violate service commitments and get fined, the money would go to them, not to the federal government as is now the case. In the meantime, the grain piles up. It looks likely that one quarter of the 2013 crop will still be in the inland grain elevators when farmers start planting this year’s harvest.