Railroad Lockout Remains for CPKC

By Chris Clayton, DTN Ag Policy Editor, and Mary Kennedy, DTN Basis Analyst

This article was originally posted at 7:18 a.m. CDT on Thursday, Aug. 22. It was last updated with new information at 7:15 a.m. on Friday, Aug. 23.

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MINNEAPOLIS and OMAHA (DTN) -- Canadian officials ordered the lockout to end on the country's two major railways Thursday, but the main union involved late Thursday said workers will take down picket lines for Canadian National (CN) but the work stoppage will continue for the Canadian Pacific Kansas City (CPKC).

Canadian Labour Minister Steve MacKinnon announced late Thursday afternoon that the government will get involved in the railway shutdown that has brought Canada's two largest railways to a standstill. MacKinnon said freight shipments for both railroad would start back "within days."

"Under Section 107 of the Canada Labour Code, I've directed the Canadian Industrial Relations Board to assist the parties in settling the outstanding terms of their collective agreements by imposing final, binding arbitration," he told a press conference. "I've also directed the board to extend the term of the current collective agreements until new agreements have been signed, and for operations on both railways to resume forthwith."

However, the main union involved -- Teamsters Canada Rail Conference (TCRC) -- posted on social media early Friday morning that workers would take down picket lines for CN, but not CPKC. "Workers will begin returning to work on Friday."

But the TCRC added, "The work stoppage at CPKC remains ongoing pending an order from the Canada Industrial Relations Board (CIRB). Despite the Labour Minister's referral, there is no clear indication that the CIRB will actually order an end to the labour dispute at the CPKC."

A meeting is set between the railroad and union officials on Friday.

It's the first time the two largest railroads in the country have shut down at the same time. The action immediately raised concerns among agricultural groups on both sides of the border about disruptions to supply chains and the further dragging down of prices for farmers in the process.

MacKinnon noted millions rely on the railways every day: "Workers, farmers, ranchers, commuters, small businesses, miners, chemists, scientists. The list goes on and on, and the impacts can't be understated, and they extend to every corner of this country," he said. "Our railways have impacts on the water we drink with the shipment of chlorine, and they help grow the food we eat, with potash mined for fertilizer.

"It is the government's responsibility to ensure industrial peace in this critically vital sector."

He added the government will also examine why there have been repeated conflicts in the railway sector and the conditions that led to parallel work stoppages in what the country is seeing. He said Canada is a trading nation: "Our government will do everything in its power to preserve the stability and certainty that our railways and entire economy are renowned for the world over."

The Canadian government's response followed a chorus of pleas from industry groups in both Canada and the United States asking the federal government to intervene, DTN Basis Analyst Mary Kennedy noted early Thursday.

The two railroads reportedly handle 40,000 carloads of freight per day. This includes grain, oil, meal and other commodities. A prolonged strike will be detrimental to Canadian commerce. It will also stall any cross-border traffic normally engaged by U.S. Class 1 railroads.

HITTING CANADIAN HARVEST

The Wheat Growers Association of Canada was pleased that the federal government "has finally listened" and invoked binding arbitration.

Gunter Jochum, a farmer in Manitoba and president of the Wheat Growers Association, told DTN on Thursday he just started harvesting this week, but harvest is ramping up across southern Canada. Ideally, the rail stoppage ends quickly. Grain markets already weren't looking very good before the rail lockout.

"All I can say is this transportation problem is not going to make it any better," Jochum said. "If anything, it will make it worse. Our basis will widen. Our elevators have told me that within a week or so they will be filled up. They will not want to buy anymore grain because they really won't have any space."

Committed shipments also will be in limbo for customers, involving millions of tons of grain.

"It's really shocking to the ag industry and we're the ones that are the most concerned." Jochum said. He added, "We depend on the railways to move the majority of goods that we import and export. This is unprecedented territory. We've never been at a point like this. We have $1 billion goods a day that get moved by rail."

Alberta's premier and ministers in the provincial government called for the federal government to intervene and enforce binding arbitration, or "Section 107" of the Canadian Labour Code, to go into effect.

Jochum said he was expecting an announcement from Canadian Prime Minister Justin Trudeau. "Hopefully you will hear 'Section 107,' which basically means enforcing binding arbitration and then everybody can go back to work."

So far, there has been little impact on fuel costs, but Jochum said a full rail stoppage is going to catch up to other industries. "It puts all kinds of pressure on the economy as a whole so there just isn't any upside to this at all."

U.S. AG IMPACTS

Mike Seyfert, president and CEO of the National Grain and Feed Association, said a lot of grain elevators in Northern states are harvesting spring wheat, which is often shipped out to the Pacific Northwest (PNW) for export. Those rail routes typically cross into southern Canada, then drop back into the PNW.

"So, for those folks served by the CPKC in particular, that route is now shut off to them," Seyfert said. "So, they're not going those shuttle trains moving."

He added, "I think there is going to be a pretty good impact as this goes on."

There are already going to be impacts with the early shutdown of shipments by some processors. Even if the lockout is short, it's going to cause some problems for ethanol plants or other commodity processors.

"You're still going to have some ramp-up because everything is going to be out of position, and it's going to take time," he said.

Seyfert also noted all eyes were on the Canadian government to see if it would force binding arbitration. In 2022, it was a tough call for the Biden administration, but officials did not hesitate to step in to avoid a shutdown of the U.S. economy, Seyfert said.

"The Canadian government approach to this has been very different from the U.S. government approach two years ago," he said.

Seyfert said NGFA has been fielding calls from U.S. officials and members of Congress in both parties looking to gauge the impacts of the lockout. Pointing to the volume of cargo carried by CN and CPKC, Seyfert said it's hard not to affect trade.

"They are operating in the U.S. and in Mexico, but the longer it goes on, the harder it is not to have impacts across the border."

NGFA had released a statement on Thursday calling on the Canadian government to end the lockout.

"We strongly urge the Canadian government to act swiftly to stop these disruptions and protect the stability of the North American agricultural economy," the group stated.

Mary Kennedy can be reached at Mary.Kennedy@dtn.com

Follow her on Twitter @MaryCKenn

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

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