A look at some of the issues Canada’s Big-2 railroads are most concerned about and what they have planned for the winter of 2023-2024.

by Andrew Joseph, Editor

In our previous issue, we examined the 2023–24 Grain Plan for both the Canadian National Railway Company (CN) and the Canadian Pacific Kansas City Limited (CPKC) railroad.

Not to be confused with the Grain Plan, CPKC released its 2023-2024 Winter Contingency Report, and in early October, CN released its 2023-2024 Winter Plan—its plans on how each will keep its customers happy with timely pickups and delivery throughout these winter months.

These plans are submitted to the Canadian Minister of Transport, a requirement of the Canada Transportation Act.

Both railroads state within their reports that the plan is to keep their customers happy and to ensure they remain profitable.

But as Scottish poet Rabbie (Robert) Burns once quipped, "the best laid plans of mice and men often go awry.”

We certainly don’t wish ill on CN or its competitive track, CPKC, but it appears as though neither railroad can win for trying.

In recent years, since both came under criticism from the Canadian agricultural sector about needing to prepare to handle the pickup and delivery of grains better and to further transportation points, they each have worked hard to increase their capital purchases to be a good transportation option.

Right now, only CN and CPKC—the Big 2—are involved in Canadian rail transportation, and each recently got a bit larger in its reach across North America.

In March 2023, Canadian Pacific acquired the Kansas City Southern Railway Company for US$31 billion, including the Kansas City Southern Mexico railroad subsidiary. The acquisition and merger made it easier for Canadian grain et al. to be transported along the Gulf Coast into the US and Mexico.

Not to be outdone, CN also sought to expand its reach by forming Falcon Premium intermodal service—that includes CN, the US-stationed Union Pacific railroad, and the Mexican railway, Grupo Mexico. Although it operates from Mexico, it will enter the US via Eagle Pass, Texas, and then follow a central eastern route through Chicago and Detroit.

From Detroit, it will enter Canada and head east towards Toronto, Montreal, and Moncton before terminating in Halifax. Via Chicago, Falcon Premium will enter Canada into Winnipeg, Regina, Saskatoon, Edmonton (and a spur line off-shooting to Calgary), and into BC, where it splits into two lines—to a Vancouver hub and one farther north in Prince George.

Railing Against the Rails
Despite the triple-country accessibility now more easily afforded by CN and CPKC, we should note that they are still beholden to fickle weather and other sources beyond their control.

For example, train rails are made from steel, which expands as it gets hotter, leading to rail curvature (aka buckling, aka sun-kinking).

However, the railways are manufactured using metal alloys that are not as quickly affected by the sun, but still, some older rails could be prone to sun-kinking, though we’d wager the Big-2 are ensuring that is not the case.

While trains can still travel on sun-kinked rails, provided they aren’t too severely warped, the entire train must pass over them at a reduced rate of speed, which means longer trips and delays. A more extended journey for a passenger train will delay the rail usage of a freight train, which must also reduce its speed.

And, unless remedied, the sun-kinked will only get worse. Warped rails can be immediately corrected by shimming. Later, when it thaws, machine surfacing and lining the rail will provide a more lasting solution.

There’s also the rail issue seen after a wet autumn followed by a quick drop in temperature. When this happens, it can freeze the precipitation between the ballast (the stone bed between the ties that support the rails). If the rain freezes between the stones, the rails can shift when the ice thaws.

See? It’s not incompetence but rather a confounding Mother Nature.

In 2020, new train speeds based on temperatures were introduced in Canada.

Now, train speed restrictions are based on how cold it is, instead of the old way of restricting a train’s speed based on a winter date range—as long as a railway’s winter operations plan is set up according to the order’s specifications.

The speed rule, introduced by then-Federal Transport Minister Marc Garneau, “takes into account that different regions of the country can experience very different temperature ranges on any given day.”

It considers the wide range of temperatures that could hit anywhere in Canada outside the November 15 to March 15 period in which the previous speed limit order was to be in effect.

While this doesn’t directly affect agriculture, it still does. The speed limits were placed to prevent speeding during frigid times by trains carrying more hazardous cargo, such as fuel, which every farm needs.

Below -40°C, CN stops its night operations to ensure the safety of its employees as well as to reduce the risk of derailment. It will also reduce the length of transporting cars to provide a faster stop during colder weather.

But that’s just the weather. What else is there that could be a hindrance to the trains running on time?

Strikes and Other Labour Issues
How about strikes?

Although CN released its 2023–2024 Winter Plan almost two weeks before the week-long St. Lawrence Seaway strike, we can be sure that the plan did not have a contingency for that event.

Neither did it have one for the 13-day BC dock workers strike, except to work faster and harder to try and make up for lost time. Except it can only move as quickly as the rail traffic and Canadian federal laws will allow.

The 2023–2024 Winter Contingency report from CPKC discussed proposed Canadian legislation prohibiting replacement workers during a strike.

The CPKC report reads: “The federal government has committed to [introducing] legislation by the end of 2023 to prohibit the use of replacement workers during a strike or lockout.

“If implemented, such a policy will incentivize more frequent labour disruptions in the federally regulated transportation sector, undermining the reliability of Canada’s supply chains.

“This policy risks damaging Canada’s national economy and international reputation as a reliable trading partner. Freight transportation is vital to the supply chains that are integral to the day-to-day lives of Canadians.”

CPKC implies the Canadian economy will weaken if businesses cannot find additional workers during a strike.

That’s true only because a strike will cause economic hardships all around.

The report continues: “Prohibiting the use of replacement management workers would directly contradict the government’s own stated policy objectives to improve the strength, resilience, and reliability of Canada’s supply chains.”

It’s also true that with a prolonged strike and the ability to find workers to cross a picket line, the supply chain delays will only cause a greater stain on Canada’s global reputation for being able to supply products on time.

However, this writer wonders if getting in different labour personnel to replace striking workers is feasible with the written declarations of CN and CPKC wanting their operations to run safely.

It appears to contradict CPKC President and Chief Executive Officer Keith Creel, who wrote: “This report describes our plan to safely and reliably transport goods and resources, including grain and grain products, during the challenging Canadian winter.”

There’s that word” safely.” Untrained, unskilled workers are not how a railroad should be operated, and neither should they be utilized at silos, docks, or any other place where materials are picked up and dropped off for rail transport.

Another issue that CPKC raised within its report is that of extended interswitching.

Interswitching is an operation performed by railway companies when a carrier picks up train cars from a customer (the shipper) and delivers them to another carrier that does most of the rail transportation.

Extended interswitching is, per Transport Canada, a temporary pilot extension of the interswitching limit in the Prairies that supports rail competition and will provide regulated access to additional railways. This, said Transport Canada, will also enhance shipper leverage to help secure better rates and service from their local carrier.

In other words, they are trying to limit the power of the Canadian duopoly, which, depending on whose side you are on, is either a good thing or a bad thing.

Canada announced in its Budget 2023 that it was returning to the extended interswitching project it had cancelled in 2017, replacing it with long-haul interswitching in 2018.

The resurrected extended interswitching project will now expand the regulated interswitching distance from 30 to 160 kilometres in Manitoba, Saskatchewan, and Alberta.

CPKC, and we suspect CN, fear that the temporary 18-month pilot project may become permanent again.

Mary-Jane Bennett, a former member of the Canadian Transportation Agency, wrote in a March 8, 2023, article for the Financial Post—but quoted in the CPKC report: “Interswitching is inefficient... It wouldn't correct problems with the supply chain; it would amplify them.”

In a May 18, 2023, Financial Post article, but also quoted in the CPKC article, Murad Al-Katib, the President and Chief Executive Officer of AGT Food and Ingredients Inc., was quoted: “I’m concerned it’s going to have ripple effects... We’re not in favour of supply chain measures that benefit very few shippers yet can have [a] very serious impact on the supply chain.”

Al-Katib has built his Canadian startup into a global billion-dollar value-added pulses, staple foods, and ingredient company. He also serves as Chair of the Government of Canada National Agri-Food Strategy Roundtable and the Economic Development Regina Board Chair.

The report states that extended interswitching should be mothballed (again) because of “the market distortions it facilitated, especially with respect to allowing US carriers to solicit Canadian traffic without the reciprocal ability for Canadian railways to do the same in the US.”

CPKC said that at the time of the initial demise of extended interswitching, Transport Canada also saw that it was harming Canadian shipping, and that’s why they developed long-haul interswitching “as an alternative so that shippers would have access to competing railways up to 1,200 km away, but without the damaging consequences of cost-based (and in some cases non-compensatory) regulated rates under extended interswitching.”

Again, this isn’t to thumb our collective nose at CN or CPKC—we acknowledge that regardless of whatever plans CN and CPKC may publish, they are still slaves to the weather and other outside sources.

That strange combination of SNAFU is something our farm customers should be aware of, even as our retailers await delivery of products slowed down by supply chain disruptions.

The CN 2023–24 Winter Plan
Tracy Robinson, the Chief Executive Officer at CN, is undoubtedly aware of all the factors that work with and against her company.

“Winter conditions bring unique challenges to every part of the supply chain, from production to market,” she explained. “CN’s Winter Plan seeks to anticipate those challenges, mitigate their impact, and facilitate quick recovery.

Robinson continued: “But the resiliency and reliability of Canada’s end-to-end supply chain require us all to work together—coordinating our planning and aligning our execution. The Canadian economy, our customers, and Canada’s position as a reliable trading partner need and expect this level of collaboration.”

Instead of focusing on going from Point A to Point B, Robinson acknowledges that from Point B, delivered products will often continue to Point C through Z and to partners in the global community. For that reason, she is keenly aware that the performance of CN (and the CPKC) plays a massive role in how Canada is perceived on the global stage—dependable in delivering products on time.

According to Robinson, CN’s Winter Plan focuses on working safely—that’s every company in the 21st century—collaborating to meet customers’ demands, improving network performance, and enhancing network resiliency.

It seems it’s a rewording of what they usually do, which is fine.

Some of the highlights of the 2023–2024 Winter Plan include:

• Enhancing the scheduled operating plan. According to CN, the operating program that the railroad launched in 2022 delivered the best railcar velocity since 2016, as well as “strong, consistent traffic movement.” The company expects further enhancements to the plan and will provide incremental improvements.
• Locomotive initiatives: The addition of 57 high-horsepower locomotives purchased in October 2022, along with the modernization of 60 DC-traction locomotives, and CN’s locomotive reliability initiative are expected to support a more dependable and more fuel- and carbon-efficient fleet. This magazine discussed CN’s modernization of the Dash-9 locomotives, bringing CN’s modernized fleet to a total of 110 locomotives;
• Rolling stock acquisition: CN added 800 new high-capacity boxcars and 500 high-efficiency hopper cars in 2023. The railroad said that it will be adding 750 new grain hopper cars to its fleet;
• People: Staff resourcing for 2023–24 will align with anticipated customer demand, which means it will have enough fully-trained people to handle all areas of the railroad system.

The CPKC 2023-2024 Winter Contingency Report
CPKC’s report offers an introductory welcome “to who we are” after its acquisition of the Kansas City railroad aspects.

It also discussed the weather but was confident in accessing its prowess as a pioneer in winter weather transport since 1881, carving out a reputation for timely delivery even through the steep mountain ranges of Alberta and British Columbia.

We have already previously discussed many of the concerns of the CPKC in this article, such as extended interswitching and replacement workers during a strike.

However, the CPKC report also takes umbrage with the Port of Vancouver, which was at the forefront of a 13-day strike by its dock workers.

For CPKC (and CN), its trains cannot unload grain cargo at the Port of Vancouver if it is raining or snowing.

Yes, the grain in trains sits idly when it rains.

Why? If precipitation gets into a cargo hold while the grain is being loaded, that grain gets wet and begins to rot. Does anyone want any rotting grain?

Aside from many in the eastern part of Japan saying they love natto, a food type created from rotting, fermented soybeans, there aren’t many other global takers. Even then, natto is made from a controlled wet “rotting” of the soybean.

As such, the Port of Vancouver avoids the possibility of a wet grain load by not allowing it to be loaded when it rains or snows.

This lack of movement harms productivity and causes extra fees and late penalties for grain exporters who cannot get the grain to their clients.

This penalty is then paced down along the supply chain to the agents selling grain on behalf of Canadian farmers, who are now forced to shave money—i.e., profit—from every bushel of grain.

Now, considering that Raincouver, er, Vancouver, sees an average of 169 rainy days a year—that’s a lot of time when the port cannot be used.

The Weather Network noted that although the Vancouver International Airport receives an average of 1,153 mm of rain annually, east of Vancouver, the city of Abbotsford, British Columbia, averages 1,483 mm—300mm, 30 cm, or 12 inches—more.

Regardless, for an average of 169 days a year, the Port of Vancouver is quiet regarding grain shipments.

For the railroads, it creates a backlog of grain trains stuck on the tracks, causing, said the report, “cascading delays throughout the grain supply chain.

The report continues: “This interrupts the balanced and efficient cycling of railcars from the in-country elevators to the port and then back for re-loading.”

CPKC complained in its 2023–2024 Winter Contingency Report that the Port of Vancouver situation is unique and that other port terminals in the US Pacific Northwest have special infrastructure and practices in place to safely load grain during rain or snow. [You can read our October 2023 CAAR Communicator, page 5, for more on how other ports work with grain in the rain.]

“The Government of Canada must show leadership to resolve this issue by bringing together all stakeholders to find safe and pragmatic solutions. The full potential of Canada’s ability to export grain to the world will be limited until this is resolved.”

Summary
We have outlined some of the main issues CN and CPKC identified as problematic that come into play in allowing the two railroads to complete their deliveries on time.

Like anything with multiple parts, some are more significant issues than others.

In the past few years, the two railroads have undergone procedures to increase their train operation employees, from drivers and brakemen to conductors and those watching the line.

Both have increased the number of locomotives, have looked to green alternative trains, and have purchased many more grain hoppers capable of carrying a larger capacity of ag yield, allowing each train to haul more with less overall weight—fewer grain cars are required—which means greater fuel efficiency.

It all creates a lessening of their carbon footprint—certainly, a reduction for the farmer’s carbon footprint if they look at what happens after the grain is cut.

Another issue that needs to be discussed is that the agricultural sector is not the only customer for either rail operator. Ag has to share the rails with other industries, including but not limited to oil and gas, construction, forestry, mining, and many consumer goods such as automobiles.

When a strike occurs in Canada and there is an inability to move product at a port, the railroad companies can still deliver the product to other non-striking ports in Canada or points in the US close to the border.

However, that takes a lot of logistical engineering on the part of the product owners and still relies on the ability of a railroad operator to get the product to its new destination within a newly created timeline.

It still means that cars may not be available when a customer wants them, and even when they arrive, they may not be at the number initially requested.

While the train operators believe they have enough locomotives at any given time to satisfy the needs of their time-sensitive customers, it still means they have to quickly redeploy resources when factors such as labour strikes or poor weather cause delays to the transportation project.

And, aside from the weather, labour strife, and other ancillary issues, CN and CPKC have improved the way they go about their day-to-day operations—many changes, it could be argued, were due to listening to the legitimate complaints of the Canadian ag industry.