Canada orders railways to boost grain shipments to ease logjam

Fri Mar 7, 2014 4:59pm EST
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By Rod Nickel and David Ljunggren

WINNIPEG, Manitoba/OTTAWA (Reuters) - Canada's government took the drastic step on Friday of forcing the country's two major rail companies to each ship at least 500,000 tons of grain per week to ease a massive backlog that is hurting farmers.

Record crops of wheat and canola, along with frigid weather, have overwhelmed Canadian National Railway Co (CNR.TO: Quote) and Canadian Pacific Railway Ltd (CP.TO: Quote), resulting in overdue orders for tens of thousands of grain cars.

"Farmers are becoming increasingly frustrated by the continued poor performance of the railways. The railways dropped the ball. This situation is not acceptable," Agriculture Minister Gerry Ritz said in Winnipeg.

The governing Conservative party has a strong rural base in Western Canada, where the grain transportation bottlenecks are the worst. Still, ordering the railways to make minimum grain shipments is seemingly at odds with the right-leaning government's pro-market philosophy.

"There must have been a lot of political pressure because this government is not one to quickly intervene in the marketplace, for sure," said Paul Earl, acting director of the University of Manitoba's Transport Institute.

He added that he could not recall Canada ever taking such a step before.


The railways, which have blamed delays on the unusually cold winter and the sheer size of last year's bumper harvest, can be fined up to C$100,000 ($90,000) a day if they do not meet the minimum shipping requirements.   Continued...

A Canadian National Railway Co. train reverses along one of the tracks at the CN MacMillan Yard in the north end of Toronto, February 20, 2004. REUTERS/Mike Cassese