WESTERN PRODUCER — The national supply chain task force final report recommends strengthening provisions that would improve grain transportation, including some within the most recent legislation.
There has been concern since summer about capacity to move this year’s crop. Grain shippers met with transport minister Omar Alghabra in Winnipeg after the task force report was released Oct. 6 and heard the government is taking the 21 recommendations seriously. The minister has said Canada will develop a national supply chain strategy.
Greg Northey, vice-president of corporate affairs at Pulse Canada, said the report strongly reflects the input from shippers and the issues at play, specifically railway market power.
The recommendations are grouped into immediate and long-term strategic response.
One is to “immediately undertake actions to ‘unstick’ the transportation supply chain.” Another calls to “expand the 30 kilometre interswitch distance across Canada to give shippers more rail options and to address shipper-railway power balance issues.”
Port congestion, labour shortages and capacity constraints are also identified.
Northey said the goal of farmers and grain shippers is to grow crops and export them to drive gross domestic product and grow the Canadian economy.
Railways and shipping lines have very different goals that are more focused on operating ratio and stakeholder goals, Northey said.
“That’s just a reality. We need to recognize that a lot of the things that we face as far as the stickiness in our supply chains is just down to different goals, different focus for our service providers. The only reason that exists is because they are monopolies.”
He said the report does offer some solutions to add accountability and increased competition through things like extended interswitching.
Shippers had access to that when the Fair Rail for Grain Farmers Act was in force but lost it to longhaul interswitching when C-49, the Transportation Modernization Act, was passed. Although shippers were initially positive about provisions within that bill, they later found some would not work.
For example, Northey said, “the barrier for entry to (longhaul interswitching) to a shipper is just way too high and, to be blunt, will likely never work.”
Service level agreements and reciprocal penalties also don’t work when railways have market dominance, he said.
“It’s not a good substitute for true market conditions.”
Northey pointed to the rail service review in 2009, the Emerson report in 2015, C-49 three years later and now the supply chain task force report as indications the industry as a whole is continually looking for ways to improve the situation.
The latest report recommends further strengthening of the Canada Transportation Agency, which was also addressed in C-49.
That legislation gave the CTA own motion powers, but it still has to ask the minister for permission. And the type of data the agency needs to conduct its own investigations still isn’t available, he said.
“Ideally what they’d see is exactly what’s happening as far as performance from the railways and they could just intervene when they need to, but they don’t have that,” said Northey. “They weren’t given the tools to actually make that effective. This supply chain task force report actually corrects a lot of that. We would suggest it actually identifies really clearly those things in C-49 that had so much potential but we just didn’t get there.”
Northey also said the report identifies a need for more visible data and metrics.
For the pulse and special crops sector, it flagged container shipments as an area of concern.
The sector has been struggling with supply for two years, Northey said, and that has damaged export ability.
“The main thing they drive towards is that there needs to be real scrutiny on what the shipping lines have been doing and they direct either the competition bureau or the CTA to look at that,” he said. “Obviously, we’d like to see that really heightened.”
This is an issue for all Canadians because containers supply consumer goods and often drive inflation, he said.
Costs for containers are between 140 and 200 percent higher than they were pre-pandemic and that’s actually lower than mid-pandemic when they hit $4,000.
They were $800 and are currently between $2,000 and $2,500.
While the industry is happy to see rates drop, the fundamental structure of that industry remains.
Meanwhile, Northey also offered an update on the Canada’s Ready four-point campaign that 10 agricultural organizations launched in late July to draw attention to the fact that the coming crop had to be moved.
Calling the 2022 harvest the most important in a generation, the groups said they wanted increased transparency throughout the shipping logistics systems heading into the season.
The first point asked for detailed plans from the railways on how they intended to move grain based on a template provided by the grain sector.
The railways are required to file plans by the end of July and Northey said these plans always fall short in terms of whether there are crews, power and surge capacity through the fall.
That didn’t change with this year’s plans, he said.
The groups also wanted to see an industry/government labour council to track the expiring railway collective agreements; there are 12 at both railways expired or expiring in 2022. This is still ongoing and the groups are to meet with the federal labour minister Oct. 24.
Third, the groups asked for monthly capacity updates from railways and container lines. Northey said while CN Rail does publish a weekly grain report and issues monthly updates, there could be more details. CP Rail and the container shippers do not provide updates.
Finally, the groups wanted more support for performance measurement programs, like the Ag Transport Coalition, to gauge how plans are being met.
“It’s been a real mixed bag so far from a performance standpoint. CP has dropped below a threshold that we like to see, which is 85 percent order fulfilment,” said Northey.
“We’re seeing a sort of weakness in their capacity to move the crop and they’re not even meeting the goals that they published in their grain plan in fact as far as the amount of hopper cars they’d deliver each week.”
CN has been above 80 percent.
Northey did point out that CP has had much higher demand from the grain sector so far this fall while CN’s demand is still quite low. CP is about 1,500 orders behind.
“Either way, the size of the crop was not a surprise to anybody and the timing of the crop was pretty clear early on,” he added, saying it’s up to the railways to execute.
At recent standing committee on agriculture meetings where MPs are studying global food security, several witnesses have pointed to the need for improved transportation and supply chain infrastructure to move Canada’s crop and better feed the world population.
Evan Fraser, director of the Arrell Food Institute at the University of Guelph, and Dr. Steve Webb, CEO of the Global Institute for Food Security at the University of Saskatchewan, both said investment in infrastructure to alleviate bottlenecks is critical.
Fraser said he had heard a Port of Vancouver executive recently speak about the extraordinary logistical challenges of moving the crop to port.
“But then he made the very obvious point that as you move back up east out of Vancouver and into the Rocky Mountains, you end up with these tiny umbilical links between the prairies and world markets,” Fraser said. “The absurdity just struck me, well not the absurdity, but the fragility of that image of Alberta, Saskatchewan and Manitoba and how all of the food production in this enormous area the size of Europe is going through essentially a small number of rail lines and through a couple of passes.
“There has to be a way of reducing the bottlenecks that emerge in that system, because, as we just heard, the system buckles. Every couple of years it buckles.”
Mark Walker, vice-president of markets and trade at Cereals Canada, told the meeting that this year’s cereals harvest was going to be 56 percent bigger than last year, which was a poor year, and rail times were down by weeks.
“We have half the capacity we did this year compared to last year,” he said Sept. 28.
