CN and CP have moved a lot of grain this season—but could they do better?
By Andrew Joseph, Editor
While the adage “if it ain’t broke, don’t fix it” is true, the opposite is as well.
Over the past few years, the lack of success by the Canadian railways—Canadian Pacific (CP) and Canadian National (CN)—to consistently move grain from farm to port on time has caused the ag industry to howl in legitimate complaint.
These complaints have called for an overhaul of how Canada transports goods to the ports—and while there was no re-inventing of the wheel involved, both CN and CP listened, and have attempted to rectify the situation.
Both CN and CP do move a lot of grain and other ag products across Canada, from silos to national and international ports from coast to coast—not to mention a host of other goods from differing industries. But the ability to provide delivery on time has caused some farmers and traders to worry that their customers would look elsewhere in the global ag sector for a provider that could deliver on time as expected.
When the farmers requested grain hoppers to pick up and move their product, on too many occasions over the past few years, the railways sent too few train cars, or the ones that were sent arrived later than expected.
Either scenario was and is a nightmare for farmers. Farmers work with traders, and as such, all sales come with a delivery date. Failure to provide the product within the specified delivery date creates penalties for the trader and the farmer, which affects their margins, not to mention creating a negative reputation for the shipper with its oft-time international clientele.
Was all of this ultimately the fault of the two railways? Yes, because they accepted the business without having the means to carry it out in a timely fashion effectively.
And then there is the issue of locale. Although harvests occur during warmer weather, oft-times transportation of grains happens during the much colder winter months. While it’s easy for the work crews to wear warmer clothing, the railway equipment they help power across the country is more demanding.
When temperatures dip below -25C, a railway train’s speed, length, and weight must all be curtailed. Less combined with slower equals a reduced shipping capacity for CN and CP.
And because this is Canada, the beautiful reality is that winter storms can also impact rail service.
Slowdowns, shorter trains, and even full-out incapacitation by inclement weather conditions add to the anxious mood of Canadian farmers and traders and the railway duopoly.
Cries to add more cars to the next available train is not practical from a safety or fiscal standpoint for the railways, which are mindful of the communities they move through.
While not an excuse, both CN and CP are also responsible for shipping non-ag products, too, including mining, and energy-related goods. However, both railways refuse to offer this as a reason for any delays within the ag sector.
While there are a lot of x-factors to consider without casting blame, and without admitting fault, both CN and CP listened to the complaints and then worked to rectify the situation.
The first step would seem obvious. But unfortunately, both corporations would have to improve trains, grain hoppers, and train crew conditions. So build more and hire more—which we can agree involves a heavy outlay of money.
Adding to a company’s infrastructure is simple enough in theory, but the reality is that CN and CP faced a global economic shutdown caused by Covid-19. The main problem was getting hold of the materials needed to construct new train cars. Not only were the mines shut down for a while, but then there was a supply chain issue in delivering ore to smelting facilities. And then there was the inability to get microchips (still on backorder for many companies and industries), and then getting the parts made to construct the grain cars.
And let’s not forget; you need people to do much of that work—Covid caused a reduced workforce by choice and edict. And when they could go to work, many facilities instituted a specific separation distance between employees, which ultimately meant fewer people working in an area at one time. Less production.
And it still depends on whether one can get the materials needed for manufacturing, of course.
And yes, it’s 2023. Covid hasn’t been a “thing” for most people for a couple of years, now. People are working, so there shouldn’t be any issues iin building the grain hoppers—except there are. Whether CN or CP had placed orders for more hoppers in 2021, manufacturing was delayed due to the Covid-related economic shutdown. And delayed or not, they all have to be fulfilled eventually.
That’s where we are now. There is no supply chain snarl-up with cargo ships awaiting loading and off-loading in a port. The snarl-up is the backlog of order fulfillment. It’s okay, though. We understand that every segment has experienced its fair share of economic setbacks and delays.
Like it or not, the trickle-down aspect of Covid has played havoc within the ag industry.
We aren’t sure just what pull CN or CP had in getting the metals needed to construct the needed new train cars, but both railways seemed to have made great strides in adding to their railway inventories.
Despite a slow start to the 2022-2023 grain shipping season, we should acknowledge that the two railways have moved, as of mid-February 2023, over 30 million tonnes of Canadian Prairie grain since the summer of 2022, making this season one of the largest grain hauls on record.
What a difference a few months make.
In September of 2022, with the harvest only a few weeks old, grain exports were already concerned that CN and CP would be unable to keep up with the demands of the expected bumper crop.
Based on past performance, and with global grain deliveries already diminished owing to the sanctions placed against Russia for its invasion of Ukraine—and Ukraine being unable to adequately get its significantly reduced grain yields to hungry customers—grain buyers and traders were nervous about Canadian order fulfillment.
Fearful they wouldn’t get grain to port on time, farmers and traders grumbled to Canadian grain lobbyists. And rightly so.
Early in this season, a report from the Ag Transport Coalition showed a “notable decline” in the railroads’ ability to provide hopper cars to ship grain.
All told, during the week of September 4, 2022, CN and CP could only supply 83 percent of all hopper cars ordered. The two railways could provide 94 percent of the grain hoppers requested just one week previous.
While CN’s order fulfillment numbers were more significant, for that one week of September 4, CP was only able to provide 74 percent of the grain hoppers requested—4,362 of the 5,861 hoppers. But why?
The Calgary, Alberta-headquartered CP has come to the end of a five-year $500 million investment plan involving the purchase of 5,900 brand-new high-capacity grain hopper cars.
But these aren’t your daddy’s grain hopper cars—instead, they are a newly-designed hopper that is shorter, wider, and lighter than the older version. It means that a 7,000-foot grain train can now carry 16 percent more grain than it did in the past. Each new grain hopper can now hold 102 tonnes, nine tonnes more than the old cars.
If we do the math on a 7,000-foot grain train:
- New hoppers: 118 cars @ 12,040 tonnes;
- Old hoppers: 112 cars @10,400 tonnes.
CP stated that from August through mid-December 2022, and from April to July 2023, it would supply 6,000-grain hopper cars, depending on demand. During the winter months—such as when the Port of Thunder Bay is closed—CP said it would supply 4,350 grain hoppers per week, depending on market demand.
CN was also improving itself. The company said that it had added 850 employees as of July 2022—primarily as part of its operating crews; added 500 new conductors whose job on freight trains is to help ensure the safe arrival of cargo to its endpoint; added 57 high-horsepower locomotives to the fleet to have some 1,950 locos. It was also poised to take delivery of 800 new boxcars in early 2023, and 500 high-efficiency grain hopper cars during the 2022-2023 season.
Peter Przednowek is in charge of CN’s grain unit. He told The Financial Post recently that by the start of February, CN had moved 15.2 million tonnes of grain since the summer, nearly 1.5 million tonnes more than it had done as an average over the past three years.
CN’s progress includes the delays it experienced from the cold snap and snowstorms shared within western Canada in late December 2022, when Prairie grain fulfillment fell to a mere 52 percent, according to data from the Ag Transportation Coalition that tracks train shipments.
Even though December was rough, Przednowek said that CN had the second-best November, December, and January ever. The 2022 western harvest at 74.8 million tonnes is believed to be the fourth-largest ever. Something is working.
And while CN can undoubtedly be lauded for its efforts, CP did it better, shipping a record 2.29 million tonnes of grain in January 2023 alone. The railway said it transported 15 million tonnes of grain since the summer, 45 percent more than the previous year. We should note that the last year’s numbers were skewed by a smaller harvest owing to the 2021 drought. Of the 15 million shipped, it expects to send an additional 25 million tonnes by August 2023.
Again, we understand that the performance of the two railways have been uneven at times and have not consistently achieved a 100 percent hopper delivery rate, but performance has improved. Przednowek said that CN suffered a washout that took out the railway’s main line into the Port of Vancouver for an entire week.
A fire also burned down a bridge cutting off central access in northern Alberta. So even if there wasn’t a lot of grain moved from that area, other rail lines had to be used, causing more traffic on the grain train rails.
And if that wasn’t bad enough, because the Port of Vancouver rarely loads grain during wet weather, the rainy autumn saw many delays to CN and CP train loads.
Weather, fire, foreign economics, war, Covid, supply chain delays, and a shortage of workers aside, grain exporters were still feeling the pinch, as delays in getting the grain out to their customers ate heavily into their margins.
Przednowek opined that farm businesses could help themselves and the railways if they spread the wealth, so to speak.
Rather than pushing the grain harvest out west or down through the Rockies, Przednowek said that grain companies could help these corridors by instead moving grain east to the ports of Thunder Bay or St. Lawrence.
According to CN, the railway said it could transport 67,000 tonnes more grain per week during non-winter periods if there was a more balanced network of port utilization. But is the suggestion viable?
For those farmers and agents, the CN suggestion of greater utilization of the eastern corridor only makes sense if they have more customers shipping to Europe or Africa.
And, if CN is suggesting that they should work harder to get more customers on those two continents, it will upset more than a few grain businesses that might suggest they mind their own business.
Shipping to the west coast’s Port of Vancouver is being done because farmers and traders have plenty of customers looking for Canadian grain in the Asian markets. Canadian farmers and traders can realize a higher price for the grains by getting to the Asian market quickly after the earlier Canadian harvest, rather than waiting later when the harvests from other countries could flood the market and lower the price.
Canada federal Transport Minister Omar Algahabra’s supply chain task force has recommended—amongst its 21 recommendations—that there should be more competition in the rail industry, to remove the perceived duopoly of CN and CP.
The task force suggested that in times of need (order fulfillment), CN trains should be allowed onto CP tracks and facilities, or CP trains onto CN properties.
While not part of the task force’s railway solution suggestions, experts said that CN and CP should be forced to lease their tracks to upstart railways. If that sounds familiar, Canadian telecommunications companies were encouraged to lease their lines to upstart communications companies to break up the duopoly.
For now, this season’s grain shipment appears to be a win-win for both CN and CP.
However, we recognize that even a fictional number, such as a 94 percent grain hopper fulfillment rate for either the CN or CP company for a week or a month may seem great, but for the Canadian farmers and traders, it still represents the loss of six percent of possible profits and an additional loss of six percent respect in the eyes of the international economic and agricultural stage.
Late Breaking News:
- On March 17, 2023, Minister Alghabra, announced an investment of up to $23 million to Global Agriculture Trans-Loading Inc., under the National Trade Corridors Fund, for a project that will expand rail capacity in Surrey, BC. The funding will allow Global to add: a three-track rail spur; new container lifts; railcar pushers; conveyor belt systems; and bagging equipment. These infrastructure improvements will double their operations and help move agricultural products and grain between different modes of transportation more efficiently, hopefully reducing delays and bottlenecks in the transfer process.
- Also, in mid-March, the U.S. Surface Transportation Board okayed the merger of Canadian Pacific Railway and Kansas City Southern with conditions that needed adherence, allowing it to become the first railway connecting Canada, the U.S., and Mexico. Development can start as early as April 14, 2023.
- In the late morning of Saturday, March 18, 2023, a train with 14 attached cars derailed in the town of Port Colborne, Ontario.
According to the Niagara Regional Police Service, the train was traveling from the Sugarloaf Mill to the Robinhood Mill when—for reasons not yet determined—the last three grain hopper cars became dislodged from the track and tipped over.
No one was hurt, but the three hoppers spilled a large amount of Ontario wheat in a privately-owned parking lot. Vaccum trucks were called in, and the wheat removed.
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