March 7, 2018 / 11:49 AM / a month ago

CN Rail apologizes for Western Canada grain backlog, vows improvement

(Reuters) - Canadian National Railway Co apologized on Wednesday for delays moving Western Canadian grain and its new interim chief executive said the company would spend more than C$250 million ($193 million) this year to improve its infrastructure.

FILE PHOTO: Railcars stand idle at the Canadian National (CN) railyards in Edmonton February 22, 2015. REUTERS/Dan Riedlhuber

CN Rail has struggled with capacity constraints amid growing demand to ship Western Canadian grain.

Transport problems, affecting both CN and smaller rival Canadian Pacific Railway Ltd, have left rural grain storage sites brimming with grain as they wait for trains. Farmers say they are unable to sell as much of last year’s crops as they want, crimping cash flow ahead of planting in the world’s largest canola-exporting country.

Transport problems extend to railroads and trucks in the United States as well. Railways have blamed harsh winter conditions in part.

CN on Monday installed Jean-Jacques Ruest as its interim chief executive after Luc Jobin stepped down abruptly.

“We apologize for not meeting the expectations of our grain customers, nor our own high standards,” Ruest said in a statement on Wednesday.

Ruest added that the company was directing additional workers and equipment to clear grain backlogs.

“I think they’re feeling a bit embarrassed that they dropped the ball,” said Lynn Jacobson, president of farmer group Alberta Federation of Agriculture. The poor service is a result of service cuts made by the railways in past years, he said.

Grain handlers, who move crops by rail and ship to customers, are paying penalties for delivering grain late to waiting vessels of C$11,000-C$13,000 per day, said Wade Sobkowich, executive director of Western Grain Elevator Association. Its members include Cargill Ltd [CARGIL.UL] and Richardson International.

The backlog is untimely for farmers eager to sell their wheat and canola before spring and who fear prices will fall once sowing season begins, Jacobson said.

In a statement, CP said its year-to-date grain shipments were up 3 percent over the previous year, and weather is now improving.

Railways have already improved grain flow by some measures, according to data compiled by the Ag Transport Coalition, a group comprised of Canadian farmers and grain-handling companies.

As of Monday, about 3,700 rail cars stuffed with grain had not moved in 48 hours or more, marking a sharp decline from mid-February.

Reporting by Yashaswini Swamynathan in Bengaluru and Rod Nickel in Winnipeg; Editing by Maju Samuel and Tom Brown

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