“What it really comes down to is that some farmers can be waiting about three months extra to receive the value of their grain and some of them are receiving 30 to 40 per cent less value for it as well, so it really hurts both ways, this rail problem,” said Franck Groeneweg, president of SaskCanola and representative for Canadian Canola Growers with the Grain Growers of Canada.
A record bumper crop that is between 30 and 40 per cent greater than in 2012 puts pressure on the logistical system, says Groenweg.
“You have the railways that need to be taking this crop from the Prairies from the elevators to the coast, and mainly to the west to Vancouver and Prince Rupert. With that much grain to move and also competition from other commodities like oil, it puts a lot of pressure on the service they can put together,” he said. Although CN Rail has spent $100 million in Western Canada over the last two years to increase the flow of freight, shipping oil by train is also increasing.
The backlog, he explained, also adds costs for port terminals in that companies have a hard time filling vessels at port and are forced to take a bigger margin on grain.
“We have port terminals that have a hard time to fill boats at the coast, and we’ve got elevators in the country that are full of grain and are waiting on rail cars,” he said.
“I think top of mind with most producers right now is absolutely this rail transportation issue. I think it’s a very significant issue right now and I think it’s preventing us at this point from capitalizing on the big crop that we did have this last year,” said Levi Wood, president of Western Canadian Wheat Growers. He noted the issue will be on the minds of those attending the organization’s convention in February which both International Trade Minister Ed Fast and Agriculture Minister Gerry Ritz are scheduled to attend.
“I think it hasn’t all completely played out yet, but it is an issue for sure,” said Wood. “If you look at the facts of it, basically prairie grain production was up more than 30 per cent, but realistically if you look at the pace of rail shipments, it’s roughly the same as last year,” he said. “We have more crop, and a finite amount of transportation.”
“I think that it is certainly having an effect. It is definitely a factor on prairie grain farms right now,” said Wood. “You’re seeing contracts being delayed so people who thought they were being delivered in December, haven’t been delivered yet and that can have a pretty significant impact because you’re trying to plan out your cashflow for the year.”
He noted some farmers have a limited window of time to deliver their grain, and steep price discounts show that grain companies are having a hard time moving crops as well.
“At the port side we have a backlog of ships waiting for that grain to some extent and when they wait, that leads to penalties being paid by the companies for having those ships waiting and those costs just get reflected right back in the price bid to farmers here,” said Wood.
As of last week the Canadian dollar was trading at about 90 cents U.S. There’s a good and bad aspect to where the dollar stands, says Groenweg.
“The good thing is that most of our crops are priced in U.S. dollars, so as the Canadian dollar goes down it supports the grain prices, so that’s one thing that gives a little bit of relief on grain prices,” he said. “It hurts on the other side because all of our farm equipment, fertilizer – that is priced in U.S. dollars as well.”
Premier Brad Wall said the backlog that has left bumper crop grain still sitting on some fields is increasingly serious. In 2013, Saskatchewan had a record harvest pulling in about 20 million tonnes more than the previous year. It is rumoured that only 27 per cent of rail cars are arriving at terminals and elevators on time and that some railways are leaving cars at the terminals for a longer-than-average period of time.
Agriculture and Agri-Food Canada predicts grain and oilseeds production to top 80 million tonnes this year, which is an increase from 71 million tonnes recorded last year. About 38 million tonnes are destined for export.
Last week the federal government and industry leaders announced they will be cost sharing for a $3 million, five-year study dedicated to identifying the causes of the backlog and finding solutions. The group consists of the federal government and producer groups, Grain Growers of Canada, Canadian Canola Growers Association, Inland Terminals Association of Canada and Western Grain Elevators Association. But that may be too little too late for some producers who have been waiting for months to get their crops to port.