After moving a record 61.5 million tonnes in the last crop year, the question now is whether faced with the prospect of a smaller crop, the grain transport system will fall victim to railway reductions.
Given the railways set new grain movement records five years running, there’s no reason why they can’t move a smaller crop this year, said Mark Hemmes.
But there’s a caveat, said the president of Quorum Corp., the government’s grain movement monitor.
“One of the things I’ve heard from people is the railways will start to cut back on resources,” said Hemmes. “They don’t want to get into a situation like they have in the past where all of a sudden in May all the (grain) sales fall off the map and there’s nothing to move and they have a bunch of locomotives and a bunch of crews and they’ve got to lay people off. Then they’ve got people on Wall Street screaming at them… ”
In their 2021-22 grain plans, the railways say they will deliver more grain cars than last crop year even though western Canadian production will fall.
The plans, which the railways are obliged to file with Transport Canada, state both have invested millions of dollars in locomotives, new hires, and higher-capacity cars to boost handling capacity.
Despite those promises, grain companies are wary, said the executive director of the Western Grain Elevator Association, which represents the main grain companies.
“The railways always move it,” said Wade Sobkowich. “The issue is, when do they move it?
“The issue is, how much can we move between September and March (2022)? Regardless of the size of the crop, those tonnes are going to want to move in that period of time because that’s when we get the best price for our grain, and prices, broadly speaking, have never been better… This year that’s going to be more important than ever (due to reduced grain production).”
CN’s goal is to spot 6,900 cars a week outside the cold winter months compared to 6,750 last crop year, including private cars. CP is aiming to deliver 6,000 cars a week in roughly the same periods versus 5,850 last crop year, not including private cars.
“Both CN and CP have increased their weekly capacity estimates from last year so that’s good,” Sobkowich said. “Hopefully that means we are going to move more of the crop in the first half of the (crop) year.”
CN’s plan, prepared earlier this summer, was based on an expected western crop of 73.8 million tonnes and total available stocks of 80.7 million compared to production and stocks last crop year of 77.8 million and 88.3 million tonnes last crop year.
Production estimates range from 45 million to 60 million tonnes, one industry observer said.
Since 2013 the “new production normal” has ranged from 70 million to 75 million tonnes, Hemmes said. Before 2013 it averaged around 55 million to 60 million tonnes, he said.
“I would say if we do 55 million tonnes in a drought like this we came out of it pretty good.”
Canada’s grain system, which has seen several years of investments in rail, elevators and ports, is obviously working well. Rail service was generally good in the crop year that ended July 31, thanks in part to railway investments, mostly good weather and the absence of work stoppages and blockades.
COVID-19 also helped by triggering higher demand for Canadian crops while a slowing economy freed up rail capacity to focus on grain shipping.
“Once COVID hit in March of 2020 the railways were on a roll and the sales just kept going,” Hemmes said. “We didn’t slow down in the summer (of 2020) except for maybe a week or two. They just kept hammering grain.”
That ended the 2019-20 crop year with a bang and got the most recently completed crop year off to a good start. There were concerns shipments could slow as stocks hit rock bottom but as it turned out, B.C. forest fires stopped CP and CN from moving grain to Vancouver for one and two weeks in July, respectively.
In fact, only 3.3 million tonnes of grain moved to Vancouver, Canada’s largest port, in July — the lowest volume in at least five years, Hemmes said.
Still, in total grain shipments to Vancouver were up 16 per cent to 35.9 million tonnes versus 30.9 million in 2019-20, he said. Grain shipments to Prince Rupert fell 16 per cent to 5.3 million tonnes compared to 6.3 million the previous crop year.
Although Thunder Bay was “going gangbusters” early in the crop year, grain shipments to the inland port of 8.5 million tonnes were down seven per cent from 2019-20’s 9.2 million, Hemmes said.
Grain movement to Eastern Canada hit 4.1 million tonnes, versus 3.8 million in 2019-20.
It’s almost certain there won’t be a sixth consecutive record year of grain movement given drought across much of Western Canada.
While five back-to-back records is a great accomplishment, there’s still room to improve, Hemmes said. For example, sometimes this past year railways delivered grain trains out of sequence, resulting in delays loading ships at Vancouver, he said.
In 2014-15 the railways moved 49.7 million tonnes of grain, which was a record. The next crop grain movement was just 1.4 million tonnes lower at 48.3 million tonnes. However, every year since then, a new record was set with grain movement in 2020-21 up 27 per cent versus 2015-16. That’s an average of 5.5 per cent a year over the last six crop years (see table below).