Canada Markets

I'm currently in the early stages of watching the online video of industry presentations to the Canadian Senate conducted on Wednesday as this government body takes their turn to explore the positives and negatives associated with Bill C-30, the Fair Rail for Grain Farmers Act prior to the act becoming law.

One key takeaway so far comes from comments made by Mark Hemmes, president of Quorum Corporation, an independent third-party charged with monitoring railway performance since 2001. While there have been some positives in terms of shipments in recent weeks, Hemmes suggests that the bumper crop of 2013-14 on the Canadian prairies has yet to challenge the system and must do so in the weeks to come. The overall system is working to catch up to last year's performance, despite the fact that prairie production increased close to 20 million metric tonnes over the previous year to 75.6 mmt.

Primary elevator shipments from the prairies in week 39, or as of May 4, totaled 980,000 metric tonnes, close to the 1 mmt target set by the federal government's Order in Council. West coast terminals unloaded a record 6,740 cars during the same week. This consisted of 4,867 cars at the Port of Vancouver, which was a record for the port, while an additional 1,873 cars were unloaded at Prince Rupert, which came close to a record for unloads.

The terminals are reported to have run out of cars occasionally in the past few weeks, which suggest that capacity is not an issue and they can do more. There are currently reported to be 24 ships waiting to be loaded in Vancouver and an additional seven in Prince Rupert, which is abnormally high but far below the numbers reached over the winter months.

The concern is that total shipments to date out of the terminals are behind last year's volume, despite the 33% increase in prairie crop size. As noted on the attached chart, shipments from west coast terminals, shown by the red line for 2013-14 and the blue line for 2012-13, have tracked closely, with cumulative shipments just 255,000 metric tonnes, or 1.6% above year-ago volumes. Cumulative shipments from Thunder Bay, however, are 686,000 mt, or 16% below year-ago levels. This is shown on the chart by the green line for 2012-13 and the purple line for 2013-14. In total, shipping from these terminals is reported to be 3% behind year-ago levels.

All eyes will be on railway performance over the balance of the crop year as the industry strives to whittle away prairie stocks prior to the arrival of new crop. Failure on the part of the railways would leave the industry in a position where even an average crop in 2014 will force all involved to re-live this year's challenges over again.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

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