Earlier this month, the Western Producer reported on the Western Grain Elevator Association estimating that the 2016/17 prairie crop could be the second largest in history, while possibly the largest. WGEA members estimated the prairie crop to range between 63 million metric tons to 74 mmt, which compares to the 76.8 mmt crop produced in the four western provinces in 2013/14.
It is interesting to note that since this July 14 article, the Saskatchewan crop condition index based on the Saskatchewan government's condition ratings has increased in winter wheat, spring wheat, barley, flax and canola. The crop condition index for durum and oats declined only slightly.
The discussion surrounding this year's potential quickly gravitates to the ability of the railroad's ability to move it, with the extreme challenges of 2013/14 fresh in many minds across the industry.
The Manitoba Co-operator quotes a letter from CP's CEO Hunter Harrison to Canadian Transport Minister Marc Garneau stating "CP Rail is ready and willing to get Western Canada's 2016 crop to market." The media has also reported on a recent presentation by Mark Hemmes of Quorum Corporation, the industry monitor, who is confident that the railways will meet the challenge.
Wednesday's Statistics Canada Railway carloadings, May 2016 report highlights a significant slowdown in the movement of many commodities, which may prove supportive for grain movement. In total, the volume of all commodities move in the month of May was 27.7 mmt, down 8.2% from May 2015. While the movement of wheat was lower than the same month last year, so too was the movement of coal, potash, fuel oils and crude petroleum. Statistics Canada reports that the movement of coal, potash and fuel oils and crude petroleum moved on rail has fallen year-over-year in each of the past seven months.
The attached chart shows the number of cars shipping fuel oils and crude petroleum between January 2005 and May 2016. The industry reached a high of 17,371 cars shipped in January 2014, while more recently has plunged from 13,427 cars per month in December to just 6,566 cars in May. Movement in May was 36.9% lower than seen in the previous month, and 33.1% below May 2015, and the lowest since November 2011.
While May shipments of crude were adversely affected by the Fort McMurray fire, the slide had begun months earlier. Both railways are noting this slowdown as affecting lower earnings in the latest quarter, while a CN Vice President is noting fierce competition from pipelines. Railway executives are failing to see a quick turnaround, as reported in today's Calgary Herald.
DTN 360 Poll
The current DTN 360 Poll addresses this very issue and asks if you think the railways are positioned to haul a large crop off of the Prairies if required this fall. You can weigh in with your thoughts on this and other future DTN 360 Polls at the lower-right side of your DTN Home Page.
DTN would like to thank all for their involvement in past polls.
Cliff Jamieson can be reached at email@example.com
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