Move Is To Prevent Months-long Grain Bottleneck That Plagued North America Last Winter
Canadian railroads have reduced the number of railcar orders farmers will be able to place this crop season in a bid to manage rail congestion and prevent the kind of months-long grain bottleneck that plagued North America last winter.
The move by Canadian National Railway Co. and Canadian Pacific Railway Ltd. to set limits on total railcar order requests by grain-loading facilities is a change from previous years, when the loading facilities were able to place an unlimited amount of railcar orders.
CN, the country’s biggest rail company, will allow grain shippers to place a maximum of two weeks’ worth of railcar orders, while CP will give shippers up to four weeks of orders. For smaller shippers, CN said orders can’t be bigger than twice the car capacity that each grain-loading facility can handle.
The changes follow the Canadian government’s move last winter to order Canada’s two main railways to carry more than 1 million metric tons of grain a week to alleviate a backlog that plagued last year’s bumper crop. That directive expires at the end of this month.
CN said the changes were made in response after dealing with a number of “phantom” railcar orders during the last crop year when farmers were able to place unlimited railcar requests.
“The accumulation of so-called unfilled orders reached an unprecedented level, well beyond the capacity of the overall supply chain, not just of CN’s communicated rail capacity,” CN spokesman Mark Hallman said.
The Canadian Grain Commission placed 21,189 railcar orders last crop year, where 15,604 cars were delivered, 3,108 orders were carried over into the next crop year, and 2,477 orders were canceled.
In addition to the amount of railcar orders that farmers can make, CP has launched a dedicated train service for larger-capacity grain shippers, said company spokeswoman Breanne Feigel.
Both Canadian railroads say that new rules on railcar orders won’t affect their ability to deliver their minimum grain allotments to market.
CN’s changes took place in September, shortly after the start of the Canadian crop harvest, while CP’s new rules took effect at the end of October.
“CN believes these changes will improve end-to-end grain supply chain logistics, ensure the supply chain stays in sync, and make the grain supply chain more efficient, transparent and accountable,” said Mr. Hallman.
Last winter, a railcar shortage led to shipment delays of Canadian grain to the U.S. and abroad, as millions of tons of barley, wheat, canola and oats were stuck at elevators and farms across the Canadian prairie provinces. Later that June, CP, along with BNSF, was ordered by the U.S. Surface Transportation Board to disclose their respective grain railcar backlogs each week following complaints by U.S. farmers over lengthy car delays.
Canadian government officials weren’t immediately available to comment.
While it is unclear if the changes will cause additional delays for farmers getting their grains to market, the Canadian Grain Commission said that they are working with both railroads to ensure that railcars are delivered to farmers with minimal delay.
“We are directly engaged with CN, and they are bringing the backlog down,” said Rémi Gosselin, a spokesman with the Canadian Grain Commission. “We are going to meet with CP in the coming weeks, and we will try and build on past discussions about bringing the backlog down.”
Grain shipping has been one of the more profitable businesses for Canadian railroads in recent quarters. During a third-quarter conference call with analysts, CN chief marketing officer JJ Ruest said grain revenue was up 50% compared with the same period last year.
Source: David George-Cosh, The Wall Street Journal