CN Rail CEO sees grain backlog extending into 2015

Wed Mar 19, 2014 7:48pm EDT
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By Solarina Ho

TORONTO (Reuters) - A record-shattering Canadian harvest, combined with one of the most frigid winters in decades, has created a grain-handling backlog that will not be cleared until next year, the head of Canadian National Railway Co (CNR.TO: Quote) said on Wednesday.

"It will take more than the summer, continue into fall, into next year," Claude Mongeau, chief executive of the country's biggest railway, told Reuters.

Delays in moving the 76 million tonne crop, nearly 50 percent higher than average and 20 million tonnes higher than the previous record, have angered farmers and prompted Canada's Conservative government to order railroads to dramatically ramp up shipments or face penalties.

That move, along with a break in the extreme winter chill, has helped CN Rail spot an average 4,320 grain hopper cars per week over the last two weeks, up from an average 2,964 cars per week in February, the company said earlier this week. Spotting means to place a rail car in position for loading or unloading.

CN has already hired more crews and added locomotives and 1,000 additional hopper cars since last fall to cope with the surge in volume, Mongeau said, adding that the assets are in place for CN to outperform its record pace last fall of more than 5,000 cars per week.

A deep freeze between December and February, which saw one of the worst Decembers in Winnipeg since 1893 and the worst January in Saskatoon since 1955, drastically hampered CN, said Mongeau.

The combined government target for CN and its rival, Canadian Pacific Railway Ltd (CP.TO: Quote), is 11,000 cars a week. Grain companies have said they would like to see 13,000 rail cars per week.

"To go to 11,000 is a tall order. And it's not just a tall order for the railroads," said Mongeau, noting that rate would surpass the rail industry's peak in the last decade of 9,800 cars a week.   Continued...

CN Chief Executive Officer (CEO) and President Claude Mongeau speaks during a news conference at Tobique-Plex arena in Plaster Rock, New Brunswick, January 8, 2014. REUTERS/Mathieu Belanger