Strong grain movement last year belies fundamental imbalancesSeptember 9, 2016Hub EditorialAs the 2016 crop starts to come off fields across Western Canada, many farmers have transportation at the forefront of their minds. Over the last crop year, grain moved well along major corridors. Will that success carry into the fall, though? The railways have stated publicly that they’re committed to working with shippers to move a large harvest – but fundamentally, the relationship remains the same and change must occur for long-term success. First, grain movement for the 2015-16 crop year was uniformly strong. Rail largely responded to demand in 2015-16 (ending July 31), according to Ag Transport Coalition (ATC) reporting, as both CN and CP supplied 87% of total hopper car orders to Western Canadian grain shippers in the week they were ordered. As in previous years, some corridors fared better when receiving cars the same week they were ordered. The federally-appointed Grain Monitor reported that mainline bulk grain movement to Vancouver and Thunder Bay were similarly strong. The number of bulk grain cars unloaded at major ports was up 10% over the 5-year average, and the actual tonnage of grain carried was 12% over the 5-year average. Other system metrics also indicated a relatively fluid system. Why such a strong year for grain movement? An overall decrease in railway car-loadings and pronounced downturns in bulk commodities like oil products, minerals, potash and coal contributed to the service received by the grain sector.The system will be tested this fall, though, with a big harvest expected. The major grain companies informed government and the railways in late June of their early Western Canadian crop size estimates. Those numbers are significant: a minimum of 63 million tonnes, an average size around 68 million tonnes and a potential high-end of 74 million tonnes. While it isn’t the 78 million tonne figure from 2013-14, farmers still rely heavily on rail to move their grain, and changes are required to ensure a large crop this year and even larger crops in future years can get to market in a timely fashion. In order for the reliable, efficient rail transportation farmers need long-term, two fundamental changes to the railway-shipper relationship must occur. 1. The definition of “adequate and suitable” accommodation in the Canada Transportation Act must be strengthened.Canada’s canola farmers and the grain industry as a whole cannot capitalize on global market opportunities when the ability to get product to port is, in effect, governed by the railways. Railway service, therefore, must be demand-driven, not supply-driven. 2. Shippers should be allowed two-way performance penalties within Arbitrated Service Level Agreements.Contracts are the key to all commercial relationships, and penalties through railway tariffs have bound Canada’s grain shippers. This effectively means that everyone except the railway pays if they don’t perform – from farmers to the grain company, from port terminal to the customer abroad. Shippers need a legislative backstop for railway penalties, and a two-way penalty would accomplish that.What’s happening to address these changes?In order to address these issues, the grain industry has been focused on the accelerated review of the Canada Transportation Act and the delivery of the report in December 2015. Currently, the government is consulting on a vision for transportation moving forward and using the report as one of the inputs. It is now up to the government to decide if and how they will choose to address the recommendations of the review report against what producer groups and the grain sector have clearly told them. There has been progress. Earlier this year, the federal government extended interswitching limits another year to August 2017. This increases the potential access of an elevator to the lines of a competing railway – where just 48 elevators have direct access under the previous 30 km interswitching limits, 261 elevators have potential access with extended interswitching of 160 km in place. Seeing these limits extended permanently is another priority for shippers.There is still work to be done and producers and industry must remain vocal about rail transportation issues, even in the midst of positive grain movement. The entire sector is critically reliant on railway transport and its performance truly affects all other stakeholders in the grain supply chain – beginning at the farm gate. For more on CCGA’s policy work regarding rail transportation, visit our Transportation page, or click the “Transportation” keyword below. Want to help affect change? Speak to your MP about the importance of rail to your business.