Grain transportation: Canada’s Ready for answers
Even before the combines started to roll in August 2022, there was a growing general concern from the Canadian agricultural industry that the rail companies are not prepared to transport the 2022-23 grain crop about to be harvested. Partially, this is because the railways indicated through their annual grain plans that they do not expect to meet the winter demand for transport to western ports. In addition, the agricultural sector recognized that the rail service offered over the crop year of 2021-22 was far below demand, if not for the 2021 drought drastically cutting crop yields. The lower yields meant elevators had excess storage capacity to accept deliveries as contracted despite the rail service not meeting export expectations. However, concerns regarding the readiness of rail service are not new. Over the last decade, the agricultural sector has experienced such regular disruption of rail-based transportation, that the sector mentality now defaults to a lack of confidence in domestic rail service capacity claims.
The current state of Canadian rail transportation services is not acceptable to support the growth of the agricultural sector, and this has motivated ten major agricultural industry groups including the Alberta Wheat and Barley Commissions to come together through the Canada’s Ready campaign. The campaign calls for greater clarity into how the railways develop rail service plans for grain and for the railways to make more detailed commitments to how grain moves to export markets throughout the year.
The disruptions to rail transportation of grain during the crop years of 2013-14 and 2017-18 highlighted extensive and ongoing shortfalls in the rail transportation system. Lobbying efforts by the provincial and national organizations that represent farmers led to an update of the Transportation Act. Included in these updates was a requirement for railways to produce an annual grain plan designed to provide stakeholders, regulators, and policymakers with an assessment of the railways’ capabilities to transport the grain required to move each grain year.
When implemented, the indication was that the plans should provide transparency into the railways’ assumptions underlying their service and capacity offerings. The industry expected plans would include quantifiable service and performance targets for grain, so grain shippers could facilitate their own supply chain planning, ultimately minimizing disruptions for farmers. However, having received the railways’ fourth grain plan on August 1, 2022, the agricultural industry’s expectations continue to not be met. Railways continue to claim billions of dollars of annual investment, but this has not led to incremental capacity increases for grain exports. Railways simultaneously claim that they have the capacity to move farmers’ grain to market and also warn that service capacity for western ports will be lower than the expected demand during the winter months of the year. The railways’ plan to meet export demands seems to assume that grain will be re-routed through eastern or southern routes, away from western ports where the greatest concentration of global market demand for Canadian grain resides. Expectations like these indicate a lack of concern by railways for efficiently transporting farmers’ grain to market.
Farmers need a rail system that works for Canada and drives the growth of Canada’s industries into where market opportunities exist, rather than dictating where agriculture should refocus market development.
Exporters of grain in Canada know that most years it is rail service that determines how much grain is exported. More information needs to be available so that the industry does not overcommit to deliveries, which results in penalties passed on to the farmer through lower grain prices. Railways need to share their forecasts of demand by principal commodity group (i.e., bulk grain versus processed grain products) for each month and each destination corridor (i.e., West, East, or South), as well as details on their calculations of maximum sustainable supply chain capacity. Before we can start improving rail shipments in Canada, everyone needs to understand how much grain can move to each port monthly and what is causing these limits.
Further performance improvements on railway service is going to require accountability for all players through defined targets for both the railways and grain shipping industry. These include targets to minimize the time that it takes hopper cars to travel from an elevator to the port and back again, and targets for how many trains of grain can be expected to be loaded and moved to each port per month. Performance against these targets must be reported on monthly to ensure that any source of disruptions can be identified and addressed.
As the reports provided by the railways are not meeting the expectations of the agriculture industry as a means to measure and improve shipping performance, the commodity organizations are calling on Transport Canada to amend the requirements of the grain plans to include more detail. As we enter into another year of limited rail service through the winter months, the farmer continues to ask how we address the ongoing problem of insufficient rail service. Changes to the reporting requirements will not be the answer alone, but will be a step towards the answers needed.
For more information on the Canada’s Ready campaign visit canadasready.ca.