Canada Markets

Canada's business media reports that CN Rail moved 24 million metric tons of grains, oilseeds and grain products in 2017/18, 4% lower than the previous crop year, which they attribute to a frigid winter. This compares to CP Rail's 26 mmt, which is 1% higher than the previous crop year. CP has stated that total supplies of grain to be moved from the prairies will be 83.4 mmt in 2018/19, including the 2017/18 carryout, which is 5% higher than the previous five-year average, while CN's 2018/19 Grain Plan reports their estimated share ranging from 24 to 26 mmt this crop year. Both railways have clearly pledged to notch higher performance this crop year.

The AG Transport Coalition's Weekly Performance Update, as of week 2, shows total shipper cumulative demand for the first two weeks of the 2018/19 crop year at 13,049 hopper cars, up 6% from the same period last crop year, while 1.8% lower than the three-year average. This is comprised of a 9% year-over-year hike in demand for CN cars while a 3.4% increase in demand for cars on CP track.

The attached chart shows the combined CP/CN unfulfilled shipper demand as of week 2, as reported by the coalition. This is comprised of outstanding orders, rejected cars, cancelled cars and shortened supply, as compiled by a group of shippers that make up 90% of Western Canada's grain movement. While far too early to determine any trends, this provides an indication as to early performance relative to recent years.

As of week 2, the combined unfulfilled demand is reported at 960 railcars, with the largest component of 676 cars classed as outstanding orders, making up 70.4% of the total. The 960 cars compares to 843 cars reported for the same period last crop year, while is below the three-year average of 1,107 cars.

Of the total 960 cars of unfulfilled demand, 647 cars or 67.4% are CN cars. This is well-above the 443 cars reported in the same period of 2017/18, while more than double the 314 CN cars that is the three-year average for week 2. The remaining 313 cars of unfulfilled demand are CP cars, which is below the 400 reported for the same two weeks in 2017/18, while less than 50% of the 703-car three-year average.

It's early, and significant harvest pressure is yet to arrive. Yet both companies have pledge better performance over the upcoming crop year and this bears watching. The Alberta Farmer Express reports that the level of service agreements between the railroads and shippers, one component of Bill C-49 or the Transportation Modernization Act, will take a year before the process is in place to accept complaints and enforce agreements, potentially leaving shippers vulnerable for the upcoming crop year.

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

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