Facts – not politics – should shape Canada’s grain transportation policy
November 25, 2014
Based on recent media coverage and comments by prairie politicians, it is clear that there is confusion around the so-called Fair Rail for Grain Farmers Act, and related quotas, as well as distortions aplenty about the railways ability to move grain.
At the risk of suggesting that facts, and not politics, have anything to do with this legislation or the quotas, let me set the record straight about rail service during the past year.
The 2013-2014 grain crop was the largest ever by a large margin: almost 20 million metric tonnes larger than average, an increase larger than the amount of potash Canada exports in a year. All of this additional grain was destined for export — not for domestic consumption- (just because there is a record crop doesn’t mean we all have a second bowl of Wheaties every morning). Essentially all export grain moves by rail.
As Canadians will know only too well, last year’s winter was the coldest in 75 years. More than 7,000 properties in Winnipeg were at risk of frozen water or sewer pipes — in June! Further evidence of the “polar vortex” included the highest number, and highest percentage, of U.S. flight cancellations in more than 25 years (75,000 by four major carriers) and widespread ice coverage on the Great Lakes (92 per cent, the second-highest level on record).
Railways, like other outdoor operations, are affected by winter. In the depths of winter they are uniquely challenged due to the nature of their component technologies – steel wheels, steel rail, and long compressed air brake systems. No amount of legislation, blame, fire or brimstone will change this fact. Nonetheless, this past winter, both CN and CP set records for moving grain. CP moved 16% more grain than ever before, a record which will hold for a considerable amount of time. Railways make a decent return on grain and we would have moved grain without quotas being set.
Apparently, quotas make such good politics that a simple quota system won’t do. Now Regina MP Ralph Goodale is suggesting that the Order in Council needs to be re-jigged to “reflect sensitivity toward quality variability, corridors west, east, south and north, the needs of shortline operators and producer car shippers, and Canadian domestic consumers and processors, among others”. Who needs commercial markets when you’ve got bureaucratic planners?
This approach, one that is an affront to all things market based, might make for good prairie politics. But, it’s not a solution.
Instead, we must realize that, from farm to customer, we are dealing with ever-changing and evolving global supply chains. These supply chains include on-farm storage; trucks; roads; inland elevators and terminals; railways; export terminals and ports. Last year, it included the seaway and even icebreakers! We need to ask ourselves whether we are taking advantage of all the supply chain options to address the issues faced last winter. For example, if Asia is an important market, why are we not pre-positioning grain there, so that we can move it quickly when demand is high?
It is a fact that rail rates for grain have been largely flat, tracking inflation, for more than ten years. Today, the average rail rate to ship a tonne of grain from the Prairies to Vancouver is about $35. Because of the “maximum revenue entitlement”, these rates are also lower than the average for other commodities and have grown less than inflation. How can we encourage more investment in the grain supply chain?
One hopeful development is the review of the Canada Transportation Act, led by David Emerson. This is an opportunity to look at the bigger picture in a non-political way. Let’s hope this review will lead us to decision making that is based in fact.
President & CEO
Railway Association of Canada