Ottawa steps in to ease grain backlog
Andrea Janus, CTVNews.ca
Published Friday, March 7, 2014 11:41AM EST
Last Updated Saturday, March 8, 2014 10:14PM EST
The federal government is compelling railways to start clearing a backlog of grain across the Prairies, and says it will issue stiff penalties if they fail to meet minimum weekly shipping targets.
Transport Minister Lisa Raitt announced Friday that the government has issued an order in council, which comes into effect immediately, that will force Canadian National Railway and Canadian Pacific Railway to move 500,000 metric tonnes of grain each week, which is double the current volume. That target would require each railway to move about 5,500 cars worth of grain per week.
The railways will be required to provide documentation of the shipments, and if they fail to meet the targets, will face daily penalties of up to $100,000. However, the railways have four weeks to ramp up operations to hit the new targets.
The order is good for 90 days, but is renewable, Raitt said, noting that it is vital not only for Canadian farmers but also for Canada’s trade relations that grain keeps moving.
“This is not an action that we take lightly,” Raitt told reporters in Winnipeg. “But as I said earlier, we have to demonstrate that Canada can maintain an efficient transportation system that is capable of moving our grain to market.”
The opposition parties have been calling on the federal government to take action to ease the backlog, which has been the result of a higher-than-expected grain yield and a prolonged cold and snowy winter.
Farmers, however, have accused the railways of abandoning their crops in favour of shipping a more lucrative product: oil.
This year’s grain crop -- at 76 million tonnes -- was a third bigger than last year and 50 per cent higher than average, Raitt said. The elevator system is operating at more than 90 per cent capacity, she said, which leaves little room for farmers to deliver their grain into the system.
And winter weather has constrained railway operations, with fewer grain cars added to trains, which are running at reduced frequency.
When asked by reporters about the rail companies’ response, Raitt acknowledged that they were not told of the order before Friday’s news conference.
“I’m sure my phone is ringing right now,” she said.
Rail companies respond
Canadian Pacific spokesperson Ed Greenberg said the company was “disappointed with this unfortunate order in council.”
“CP believes the actions of the federal government raise more questions than they answers and only focusses on the railways and not the entire supply chain,” he said in a statement. “CP's position remains that moving grain from the farm to the port is a complex pipeline involving many parties and requires all participants of the Canadian grain handling and transportation system to work together, which requires a 24/7 commitment similar to the railways.”
Greenberg also said CP has already been moving record amounts of grain, and “expects to transport 240,000 carloads of Canadian grain this crop year, a more than 20 per cent increase over last year's record.”
CN also released a statement, saying it will “do its part to meet the challenge of moving this 100-year record grain crop,” but called the challenge “unprecedented.”
Meanwhile, the Grain Growers of Canada said it “welcomed” Raitt’s announcement, and said the new measures “should help to alleviate” a backlog that it says has grown to some five million tonnes of grain.
“The situation has meant lost income and cash flow problems for farmers unable to sell last year's harvest, while also affecting the national food chain as millers, maltsters and oat processors run short on supply,” the statement said.
Agency president Gary Stanford said “we will work with members, government and other stakeholders to ensure a long-term solution so that we do not find ourselves in this situation again in the future.”
The opposition criticized the government Friday, saying the railways had already promised to increase grain shipments. Liberal MP Ralph Goodale also asked whether farmers would be compensated for their losses.
“The system designed by the government has imposed costs and losses of $5 billion over the last five months,” Goodale said Friday in the House. “Will farmers get any of that money back?”
Ritz pushes for regulation
At the same news conference, Agriculture Minister Gerry Ritz said the railways have “dropped the ball,” and announced that the government will introduce legislation when Parliament resumes in two weeks to “further address Canada’s grain logistics issues.”
“This legislation will put into law clear and achievable solutions to ensure Canadian shippers have access to a world-class logistics system that gets Canada’s agricultural products and other commodities to market in a predictable and timely way,” Ritz said.
“You’ve all heard of back to work legislation, this will be get to work legislation.”
The legislation is currently being drafted, he said, but said it is not being designed to address the current backlog, but to ensure that grain “moves well year on year.”
Canada needs a system “with the capacity to move what is grown,” he said.
The Forest Products Association of Canada also called for a “broader long-term fix to ensure Canada’s reputation as a reliable supplier of goods.”
FPAC president and CEO David Lindsay noted that the Canadian forest products industry exports $28.5 billion of product each year and is actively pursuing new markets.
“We have made tremendous strides into new markets such as Asia, and this has supported jobs and growth, especially in rural Canada,” Lindsay said in a statement. “However our export agenda is being constrained by insufficient transportation capacity.”
However, CN said in a statement that Ritz’s call for more regulation is both ill-advised and seriously counter-productive.
“More regulation would lead to adversarial relationships within the supply chain, at a time when collaboration is essential,” said Claude Mongeau, CN president and chief executive officer.
“Sound policy calls for exactly the opposite: a more collaborative and commercial framework is what Canada needs to support a world-class grain growing sector.”
With files from The Canadian Press