CNS Canada –– Inability to secure rail cars destined for the U.S., particularly Minnesota, is seen to be hurting oat producers as quantities of old crop continue to sit idle.
Last year’s record-large crop continues to tie up Canada’s two main railways, which also face government regulations requiring them to carry over a million tonnes of grain each week.
Most of Canadian National and Canadian Pacific Railway’s deliveries, however, are to the West Coast and to ports in Eastern Canada, not to the U.S., said Lorne Boundy of Paterson Grain in Winnipeg.
“The most efficient run for a railroad, to keep their numbers up, is to a port terminal,” he remarked.
This is problematic for oats, he explained, as the bulk of the crop is processed at plants in Minnesota, with a few more sent on to Iowa.
“There’s no one that can take 100 cars in one hit and turn them back fast,” he said.
Even before last year’s record harvest sparked new legislation in Canada, he said, finding cars had become tougher over the last few years. He attributed this to railways are moving more goods overall now compared to 10 years ago.
“You look out the window here and you can see a lot more cargo cans and oil tankers. The commodity mix being hauled is changing with the railroads,” he said.
Railcar certainty to the U.S. is needed to jumpstart oat movement, he stressed.
Right now, a lot of oats, particularly in central and northern Saskatchewan, are just sitting around in danger of collecting mildew, he said.
“Especially anything that was swathed. There’s higher mildew damage in swathed product,” Boundy said, adding that most of the carryover in the Red River Valley has disappeared.
Some stakeholders have looked at trucking oats but the economics don’t add up, he noted. “You need 300 trucks or more for a 100-car train.”
As for prices, Boundy said nearby contracts should stay relatively steady for now, but mills are starting to struggle on the quality side.
“The market’s being ruled by freight.”
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.