CN and CPKC railroads detail their plans to provide Canada’s agricultural communities with the best possible service. But a port strike and continued episodes of wet weather can derail those plans.

CN and CPKC railroads detail their plans to provide Canada’s agricultural communities with the best possible service. But a port strike and continued episodes of wet weather can derail those plans.

By Andrew Joseph, Editor

Both of Canada’s major railways—Canadian National (CN) and Canadian Pacific Kansas City (CPKC)—have published their annual grain transportation plans, coinciding with the start of the 2023–24 crop year on August 1, 2023.

This is done because of a Canadian legislation-mandated promise to submit their plan to the Federal Transport Minister annually.

The two railroads each provided their first annual grain plan in 2018–19, and like now, it is based on consultation with their own key stakeholders and reflects the valuable feedback they have provided to create a more robust grain supply chain.

Before we look at plans for 2023–24, we should examine the goings-on of the two railroads during the 2022–23 season.

Item 1: Both railroads have easier access to pick up and deliver grain in Mexico, the US, and Canada.

Item 2: Canadian Pacific has merged with the Kansas City Southern Railroad, including the Kansas City Southern Mexico subsidiary. The triple-country rail service is now known as the CPKC.

Item 3: Via a partnership, CN, Union Pacific, and Grupo Mexico are now known as Falcon Premium, a three-country intermodal service.

Although this CAAR article will refer to the former Canadian Pacific by its new corporate identity as the CPKC, because we are only interested in the Canadian grain aspect of the partnership, Canadian National will be referred to as CN (and not by its partner name of Falcon Premium).

Tracy Robinson, the President and Chief Executive Officer of CN, said: “As we outline in this year’s plan, Canadians need a balanced approach to performance measurement that considers all parts of the supply chain.”

CAAR agrees, which is why this article examines the role of the railroad, the impact of the BC port strike, the continued pull of Transport Canada, and whether or not the weather trumps all.

2023–24 Crop Prediction

To determine what resources will be required for the transportation of the upcoming Canadian harvest season, the railroads must first estimate the size of the crop yield. And each railroad has its own unique way of calculating it.

For the 2023 harvest, CPKC noted that Agriculture and Agri-Food Canada predicted a crop harvest of 95.7 MMT across the country, based on Statistics Canada seeding reports and an assumption of a return to average yields across the past five years.

[Editor’s Note: One MMT equals 1 million metric tons, or 1 billion kilograms. One MT is one metric ton, which equals 907.18 kilograms or 2,000 pounds. Both MMT and MT are used in this article.]

Per CPKC, this crop yield means approximately 73 MMT for the western Canadian crop.

This number is down slightly year-over-year, but CPKC said the shortcoming will be “offset by increased carry-out from the current crop year, which is anticipated to be approximately 10.7 MMT.”

Grain customers are estimating western Canadian crop yields in the 60 to 70 MMT range.

CN provided its guesstimate differently, focusing solely on Western Canada. It predicted that the production of the six significant grains, peas, and lentils will be 73.7 MMT—down by 0.2 MMT from last season but up relative to the three-year average production of 67.7 MMT.

That doesn’t mean that CN predicts a larger Western Canada crop yield than CPKC—CN’s numbers include peas and lentils, while CPKC’s data is solely for grain.

In other words, comparing the provided data would be like comparing apples and oranges.

In the same way that Canadian food labels are required to have a comparable numeric for calories, vitamins, minerals, etc. per serving that doesn’t require a Ph.D. in calculus, both the CN and CPKC railroads should be made to ensure the data each provides in these annual grain plans aligns with the other company to provide an easily understandable data stream.

If Canadian legislation can’t be created to resolve this, how about CN and CPKC get together and decide how to measure their data? As long as everyone uses the same language and methods of measuring, each grain plan becomes a more valuable commodity.

Otherwise, it’s just more red tape and obfuscation.

Considering measuring the predicted crop was the first item this writer wanted to examine, he can only hope the two railroads find common ground on other items of interest.

Hoppers!

Well, this one is tough to mess up for the railroads—just how many rail cars will each need to move grain as required during the 2023–24 season?

According to its grain plan, the CPKC railroad will move 685,000 MT per week when the Port of Thunder Bay is open, almost always from April and continuously until the middle of December.

CPKC also said it would move 525,000 MT per week during the winter.

For the CPKC, this movement is up slightly over the numbers seen last year. The 2022–23 season saw 683,900 MT between April and December and 523,800 MT during the winter.

That’s 1,100 MT and 1,200 MT more, respectively, or a total of 2,300 MT more grain, predicted to be moved by CPKC in 2023–24 over last year.

That’s not inconsequential, and it means more grain is being picked up and moved even though it expects a slightly lower yield. In other words, CPKC expects to be more efficient in the upcoming season.

We should note that CPKC said that it prefers to report its grain movement by volume rather than carloads, as new high-capacity hopper cars coming into service mean the average CPKC hopper car as of March 2023 now carries 97.6 MT, while older cars have less carrying capacity, as noted in a 2018 average of 93.2 MT.

And what about CN? For the upcoming year, we can expect more of the same as what it offered this past season—the same as it was for the 2022–23 season.

It will move up to 7,800 cars—744 thousand MT—of bulk grain and grain products per week outside of the winter, and during the winter, up to 6,250 hoppers, or 595 thousand MT.

Capacity

As noted above, CN doesn’t have plans to move any more grain than it did last season—36 million MT.

CPKC, however, is looking to make some inroads over last year, when it moved 30 million MT. For 2023–24, CPKC said that it will drive 33 million MT, which is three million more metric tons than last year but is three million short of what CN moved last year and said it will again move this year.

In other words, CPKC is playing catch-up.

However, an essential factor in determining whether or not CN or CPKC will be able to meet these promises to move grain and grain products later this season is the lengthy west coast port strike that went on in July and into August.

Even though the port workers’ strike has been resolved, there is no getting around the fact that transportation of all goods was disrupted for over a month. The strike has caused a backlog—a supply chain disruption that will mean a trickle-down delay in pick-ups and delivery of railroad cards up to and including the 2023–24 grain shipping season and beyond.

p>And both railroads agree—even with a strike resolution—it will affect the upcoming grain movement.

Everything that was supposed to be moved in and out of port but was not because of the strike, will still have to be transported.

Since there are only so many rail cars available—grain hoppers or otherwise—and only so many hours a port worker is capable of safely working per day, there will be a delay in transporting for the foreseeable future.

Note that this is not just for ag-related commodities; this delay affects all items being moved, and if we listen to CPKC, the delays will continue into 2024.

It means patience. It means not scheduling shipments to leave Canada until later in the season. Although that is simple enough to state and do, we must be cognizant that the delay will also negatively impact the lives of populations around the globe, as they may have to struggle through a grain shortage.

A so-called Act of God also come into play in the railroads’ ability to move grain—rain.

Last year, rainfall in Vancouver caused a ripple effect of grain delays. What? Rain in Vancouver? Pundits are aware that Vancouver sees rain some 165 days a year.

And when it rained in Vancouver, the Port of Vancouver would stop loading grain. Along with smothering productivity and causing additional fees and late penalties for grain exporters, the delays also cause agents to cut the grain price just to be able to come out even or ahead on grain deals with their customers.

This means Canadian farmers get nickel and dimed on every bushel.

When it rains and dock workers in Vancouver are not allowed to move grain, this causes the railroads to have to stop and sit en route to the Port of Vancouver because there are already hoppers there awaiting the rain to stop so they can be off-loaded.

And there, across the Canadian prairies, thousands of MT of harvested grain—wheat, barley, canola, et al—cannot be shipped to hungry consumers worldwide.

And, if not stuck in rail grain hoppers, the grain sat longer in our grain elevators.

Hey… It’s not like this is something the railroads enjoy doing—waiting.

Keith Creel, the President and Chief Executive Officer of CPKC, said, “Delays in grain loading in Vancouver cause significant ripple effects throughout the supply chain, backing up trains and interrupting the smooth, efficient, balanced cycling of railcars from in-country elevators to the port and back.

“The Government of Canada, along with the grain terminal operators, unions, and other stakeholders, must resolve this constraint, as grain terminals at other ports have, to safely maximize Canada’s ability to export grain to international markets, especially during the winter months when rain and snow are frequent in the Vancouver region,” he continued. “This is a major constraint on Canada’s ability to export more grain to the world.”

CN noted that during last year’s rainy fall season, when the Port of Vancouver was in the midst of not loading or off-loading grain, its farmer grain deliveries dropped by some 30 percent every week because of the port delays.

The railroad said that there was a point during last season where it was holding back 20-grain trains en route to the Port of Vancouver to avoid adding to the rail congestion already in place.

It isn’t as though Vancouver has a monopoly on rain. Cities and countries worldwide seem to have no issue loading grain when it rains.

CN noted, “There is no reason that wet weather should impact modern grain terminal operations. Multiple solutions to this problem are in place in the US Pacific Northwest, which is an area with the same issue [frequent rainfall events].”

And yet, despite training for stevedores and for grain companies that have learned how to do it safely, the Port of Vancouver—after 18 years—is still reluctant to have its workers load grain in the rain.

Rain is a Pain for Stevedore Gain

It’s a no-brainer that grain should not get wet until the consumer desires it.

Humans have transported grain by ship from one growing locale to another for thousands of years.

And, during such transports, the grain will sit in a dry hold. However, should grain get wet as it is being loaded into a ship, that soggy grain will begin to rot while at sea—not ideal for a hungry customer base that has spent a lot of money on the shipment.

To keep the rain out of the grain being moved onto a ship, stevedores would place tarps over the holds to keep it dry.

However, in 2005, Transport Canada said this was not a safe system. It’s because after the grain had been stored in the hold, the stevedores would have to climb onto the hatch covers to remove the tarp. Consider that the tarp would be covered in rainwater and could pose a slipping hazard for the workers, possibly falling 20 feet into a hold.

It took three years, but by 2008, a Canadian federal judge agreed that the tarp system was unsafe, and that Transport Canada must find an alternate method for stevedores to load grain into a cargo ship safely.

It’s 2023, and no one can agree upon a safe method to move grain in the rain. As mentioned, other ports worldwide move grain in the rain, but Canada does not believe that any of those methods will provide a safe work environment for its port workers.

We now mention two organizations you may be familiar with that revolved around the 2023 BC port strike.

One proposed solution was to use a feeder hole, where a worker inserts a pipe into a hole in a ship’s hatch cover to feed grain.

However, the International Longshore and Warehouse Union Canada (ILWU)—representatives of stevedores and port workers—has stated they do not want their members to use the feeder hold method because workers can still slip and fall into the hatch. They want a safety harness or some other method to protect workers from falling in.

But the B.C. Maritime Employers Association (BCMEA)—representing shipping companies, stevedoring firms, and terminal operators—said that the feeder hole method is safe.

They aren’t saying they don’t care; instead, they point to the workers setting up safety pylons and tape to warn the stevedore when they get too close to an opening.

Whether or not the BCMEA will admit it, it appears as though it expects the workers to acknowledge that there is still some risk to performing their job and that they need to police themselves—to be more aware—of places where they could fall into the hold.

Regardless, the worker safety issue has yet to be resolved, so moving grain in the rain is still a no-go at the Port of Vancouver.

We can expect more grain delivery situations to occur during the 2023–24 season.

Because of the backlog caused by the month-long BC port workers strike, grain moving through the docks will probably be delayed.

Although much of Canada is in the midst of drought-like weather creeping through, the west coast of North America is not immune to receiving excess amounts of wet weather. Case in point: Hurricane Hilary pounded California in August 2023—the first tropical storm to ravage the southern California coast in 84 years.

Even though the worst of it has been spent as of August 21, Environment Canada indicated that the weather system will bring a lot of rain into the provinces of BC, Alberta, and Saskatchewan.

Even with what one can only hope is a generational West Coast weather system, Vancouver will continue to see its fair share of precipitation for the rest of 2023 and beyond. This means that grain will not be able to be offloaded from trucks to port storage facilities or loaded from port storage facilities into ships.

This will lead to many CN and CPKC rail cars being held back from delivering to the port for fear of overloading during a rain delay.

Delays in offloading grains at the port also delay recycling the empty hopper cars back to the farmers.

With the rail cars being delayed back at the co-op farmer storage silos, it also plays havoc with other intermodal shipping, such as trucks being delayed—and possibly being used by other customers when farmers need them.

And it isn’t just grains. With grains being delayed, it causes further delays in other commodities Canadians need and what customers buy.

It’s one big mess. We can blame the railroads if you wish, though now that they offer greater capacity, it is prudent to acknowledge that they are still susceptible to the whims of Mother Nature. So too are the ports. So too is Canadian agriculture. And so are our global customers.

Read the Grain Plans of CN at https://www.cn.ca/en/your-industry/grain/grain-plan/ and CPKCS at https://www.cpkcr.com/content/dam/cpkc/documents/english/pdfs/2023-2024%20Grain%20Service%20Outlook%20Report.pdf