By Rod Nickel
WINNIPEG, Manitoba, Nov 13 (Reuters) - Canada’s two main railways, Canadian National Railway Co and Canadian Pacific Railway Ltd, have done an “adequate” job moving this year’s record harvests to port, the country’s agriculture minister said on Wednesday.
Western Canadian farmers produced the biggest grain and oilseed harvests on record this year, according to government estimates, straining the system of moving crops from farms to ports for export.
Grain handlers have grumbled that railways are not dedicating enough cars for grain, a complaint dismissed by Agriculture Minister Gerry Ritz.
“I‘m not an apologist for the railways, but I do agree with (Canadian National). Putting more cars on the freeway at rush hour doesn’t make it more efficient,” Ritz told reporters in Winnipeg, Manitoba.
He said the growing volume of oil moving by rail could become a problem for farmers and grain handlers by displacing crop shipments, but that it was not yet an issue.
Canada is the world’s second-largest wheat exporting country, and the top shipper of canola. Richardson International, Viterra and Cargill Ltd are its largest grain handlers.
“We’ve moved record amounts of grain in the middle of a record harvest in Canada in September and October,” CP Rail Chief Operating Officer Keith Creel said in webcast comments from a Goldman Sachs investor conference in Boston.
“In fact, order of magnitude, about 20 percent more than we’ve ever moved before.”
CP and CN say they have each dedicated about 5,500 cars per week to hauling grain this autumn, a higher than usual number and the equivalent of more than 500,000 tonnes each.
“The issue is that Western Canadian farmers have grown the biggest grain crop in history, and the supply chain - country elevators, rail, and port terminals - cannot move a whole year’s crop in 3 months. It is not physically possible,” said CN spokesman Mark Hallman.
Ritz said he did not see any quick fix for smoothing the flow of grain from the Western provinces to ports on Canada’s West Coast and Great Lakes. He suggested the government should rethink a cap it imposes on the revenue that railways can earn from western grain.
“I think in a market-driven economy, that needs to be looked at. You’re competing with oil, with potash, with coal, with timber on the rail lines - and then there’s a cap on one commodity. Guess which one the railways aren’t going to haul?”
The Canadian government implemented the grain revenue cap in 2000 after it eliminated a subsidy for grain movement by rail called the Crow Rate.
Ritz acknowledged that crops moved into the storage and handling system more gradually in past years, when the Canadian Wheat Board had a marketing monopoly on most western wheat and barley. The Conservative government stripped the CWB of its monopoly, effective August 2012, a change that puts more stress on the logistics system in autumn, but it also gives farmers more immediate cash flow, he said.
A new Canadian law this year forces railways to reach service agreements with shippers that request them and could impose penalties on the railways if they fail to meet their obligations.