Canada acts to increase rail grain movement
March 10, 2014
by Ron Sterk
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OTTAWA — The Canadian government has ordered Canada’s railways to double grain movement over the next four weeks “to ensure the livelihoods of farmers and our overall economy.”
Canada’s Transport Ministry on March 7 announced an Order in Council under section 47(1) of the Canada Transportation Act setting minimum volumes of grain that Canadian National Railway Company and Canadian Pacific Railway Company are required to move, effective immediately.
Under the Order, the railways are required to increase volumes of grain shipped over the next four weeks to a combined target of 1 million tonnes per week, which will more than double the current volume, according to the Transport Ministry. The railways are required to report grain shipments to the Transport Ministry weekly.
“For the past several months, the bumper crop of grain produced in Canada has not been moving fast enough to Canadian ports,” Minister of Transport Lisa Raitt said. “This issue affects more than just our farmers – it affects trade and Canada’s ability to supply our markets around the world. We are taking this action to more than double grain shipments in order to preserve the integrity of Canada’s transportation system and our reputation as a global supplier.”
Agriculture Minister Gerry Ritz said the government will introduce legislation when Parliament returns to establish measures to ensure Canada maintains a world-class logistics system to ship agricultural products more efficiently. He called on all parties in the grain supply chain to work together to ensure timely movement of grain.
“The current grain logistics system is not meeting demand and today our government is taking concrete action to ensure the livelihoods of farmers and our overall economy,” Mr. Ritz said. “By making the Order in Council and working to introduce legislation, our government continues to act in the best interests of our farmers while ensuring Canada maintains our global reputation as a reliable grain shipper.”
Western Canada’s combined crop production of 76 million tonnes in 2013 was 50% above average, which put “significant pressure” on the grain handling and transportation system. The Transport and Agriculture Ministries said in a joint statement announcing the Order in Council.
“Today’s action builds on previous steps the government has taken to improve the performance of the entire rail supply chain in order to help farmers get their crops to market,” the ministries said. Those steps include improving the frequency of reporting and expanding the performance data collected under the Grain Monitoring Program, implementing marketing freedom for western Canadian wheat and barley growers, and investments through grain research and industry groups to improve supply chain efficiency, reliability and innovation.
Rail logistics problems have slowed movement of grain and oilseeds to export terminals as well as to U.S. processors and millers, with some U.S. oats millers running out of supply. Slow arrival of previously purchased grain has led to historically high cash basis levels for wheat and oats, and has kept canola oil prices higher than expected considering record high canola production in Canada last year. Similar, but said to be slightly less severe, rail logistics problems have been ongoing in the United States due to a combination of large crop production, severe winter weather and demand for rail resources from the booming shale oil industry mainly in the Upper Midwest.