Canada Markets

A recent DTN 360 Poll on recent Federal Government measures announced to address Prairie grain movement was posed as follows:

New measures have been announced to tackle the grain logistics headache the Prairies face this crop year. Canada's federal government is proposing that more railway data be collected for the Grain Monitor Program, and that it be reported weekly instead of quarterly. The goal is to shed light on the entire supply chain's performance. Do you think this initiative has merit?

DTN readers responded as follows:

13% said absolutely. Improvements to the supply chain can only begin when we have complete knowledge and clarity of our current situation.

34% said possibly, although success will only come if all supply chain participants are fully committed to make positive change.

50% answered no, it does not. Improved data will point out what we already know and supply chain participants cannot be forced to perform

3% responded that they were undecided.

This move on the part of the government will undoubtedly be the first step of many to address this issue as the negative impact to the western economy continues to grow. This week, Premier Brad Wall of Saskatchewan named a committee of government officials to study this issue and will have meetings with supply chain members to start this week.

In a presentation to the Canadian House of Commons Agriculture Committee on Wednesday, a CN spokesman suggested the record crop, 20 million metric tonnes above the five-year average that nobody seen coming, took not only the railways off-guard but the entire industry. Issues were compounded with the polar vortex which brought extreme weather in December and January, reported to be the coldest December/January since 1949/50.

This weather resulted in the need to shorten trains in order that the air supplies are able to operate the brakes throughout the length of the train. This requires more engines, more staff, and more train "meets" on the tracks. Capacity issues were not restricted to grain, but also resulted in delayed potash movement, a shortage of batteries delivered to Canadian Tire and issues across all commodities.

The CP spokesman also reiterated the size of the crop and the fact that the entire incremental production resulted in an exportable surplus. CP's September through November movement was suggested to be a record 20% above the five-year average.

Both spokesmen suggested the complexities surrounding the addition of assets to meet short-term needs. While railways expect to meet the future growth of the Prairie industry, the sudden unexpected production increase this crop year made it impossible to react, nor would it necessarily make economic sense as these assets could then be underutilized with the return to an average-sized crop next year.

So far this issue has had a cost of $2 billion tied to it and will be dead centre on the radar for a long time to come. Both railways claim they can perform given the return to better weather, while the agriculture industry will remain skeptical and will continue to study potential enhancements that will address such things as the lack of accountability and the lack of competition.

The House Committee meeting can be listened to online and the response from the rail industry from a barrage of questions from the agriculture committee is most interesting. As suggested to me by one grain industry participant, the railways are in a monopoly position, and they know it.

DTN would like to thank all who participated in this poll. DTN's current poll asks what will be your largest consideration when developing your cropping plan for the upcoming crop year. You can share your thoughts on your DTN Home Page in the lower right corner.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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