The grain needs a train: Billions of dollars at stake on the prairies

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Jordan Heath-Rawlings Right now, the world really needs grain. And the good news is Canada has it. In fact, we have a lot of it. It is shaping up to be a bumper crop on the prairies this year, which is great both for farmers and for the economy in general. And it’s good for the world’s supply, since the ongoing war in Ukraine is still impacting commodities. So it’s all positive here, except for one little problem. Right now that grain is in the prairies, it needs to get to where it’s going, which means it needs to travel out west to a port in British Columbia and then onto a ship and then on to wherever. And it’s the first step in all of that that is the problem. For the past few weeks, there simply have not been enough trains available to actually take all that grain to port. And as we have all learned the hard way over the past few years, it only takes one screwup at the beginning of a supply chain to create massive billion dollar headaches for everyone involved. So where are the trains? What happens to the grain that can’t be moved? What happens to the farmers who have contracts to sell that grain? What happens to the companies who bought that grain and you get it. Where did this screw up come from? Who owns it? Who fixes it? And how much time do they have? I’m Jordan Heath-Rawlings. This is The Big Story. Lindsay Campbell is a reporter with Ipolitics Dot CA who covers, among other things, Canada’s agriculture sector. Hi, Lindsay.

Lindsay Campbell Hi, Jordan. How’s it going?

Jordan It’s going really well. How are you?

Lindsay Campbell I’m great. Thank you so much for having me.

Jordan You’re most welcome. And I’ve got to start you with what might sound like a dumb question, but can you just explain, for those of us living in the center of the universe who don’t get out to the prairies much, how Canada’s rail system works for exporting goods like grain? Who does it do they use the same tracks? How does it all come together from the end of August up until now?

Lindsay Campbell In the next week or so, producers at west will be wrapping up their harvest and hauling out crop. So from there, producers will truck their harvest to a green elevator. After that, it’s picked up, and then it’s transported in rail cars to either the port of Vancouver, prince Rupert or Thunder Bay. We predominantly rely on the two big rail companies, CN and CP, to do this. And then from the port, it’s put on a vessel, and when it’s put on a vessel, it’s based on a date that the green companies agree on ahead of time. So this is typically decided on two to three months ahead of time based on the farmer coming to the green company, and the company’s kind of deciding when it should go out based on the right time harvest and what the other demand looks like from other producers and the demand for vessels. So that’s sort of how it works.

Jordan Well, it sounds like a pretty time directed process where things have to be somewhere at a certain time in order for everything to function correctly. So how is that working in general?

Lindsay Campbell Good question. Green producers and the folks representing them are a little bit anxious right now. There’s sort of a few red flags or alarms that got set off over the past few weeks and months. So under the Liberals Transportation Modernization Act, our two main rail companies have to submit plans ahead of harvest season to provide the sector and the federal government as the regulator, a sense of what they’re going to be able to do, how they’re going to be able to move commodities to market, and sort of forecasting any sort of difficulties. So in July, both companies submitted those reports and the sector kind of started raising their eyebrows when they saw that in CNS report at that time in July, it was indicated that the rail company would have some difficulty meeting with the supply was and committing to moving all of that to export markets. So based on that. The sector kind of released a plan asking the federal government to create more transparency within the rail companies to figure out why exactly that is. And would hope that if they had implemented some of these requests. That they would be able to find some sort of policy solution. Or solution in general to figure out how exactly we are going to move this crop to market. So that was the first red flag, and then the second red flag was there are these weekly reports put out that track if the rail companies are meeting their commitments to move commodities to pours based on how many cars were requested ahead of time. Most recently, in last week’s report, it found that CP was only providing 60% of what it had initially committed to in terms of rail cars. And in the report, it noted that it was the third consecutive week that CP was not meeting its commitments.

Jordan Do we know what’s causing the lack of capacity and what’s causing CP not to meet their commitments? Is it weather? Is it just simple demand, mechanical problems with the tracks? Like what are the companies say?

Lindsay Campbell Yeah. So in my story that I wrote last week, I had reached out to both CP and CN because CN hadn’t met all of its commitments either, but was doing better than CP. So CP didn’t really give me a straight answer. They just said, we’re on top of it. We’re going to get things on track. CN attributed its shortfalls to a washout and said that sometimes things get off track if a main line is going to get lost during a wash out. But, you know, talking to folks in industry I’m hearing that there could be labor shortages, which we know is a big issue across all sectors right now. I’m hearing that the companies could be prioritizing other contracts where it could be getting more money from. And we don’t know if that’s a for sure thing or not, but that’s something that I’ve heard talking to sources and that’s, I think, why the sector wants more transparency. They’d like to know what exactly is happening here. They want plans from each of the companies to kind of know like, OK, here are the shortcomings and this is what we can do to actually address this issue and ensure that commodities are making it to export markets.

Jordan What happens when they don’t? What happens when there aren’t enough trains to get the grain to the ports?

Lindsay Campbell Economic losses, for sure, that could be the result of producers not getting peak prices in global market because they’re not getting the crop there on time. Farmers might not even be able to get peak prices domestically. And farmers who don’t deliver their products don’t get paid as long as it’s sitting there in the green elevator, the farmers not getting paid for that. And let’s say you miss a boat or you miss your deadline to get it on a boat, it’s millions and millions of dollars to try and arrange to get your product on another boat. So green shippers have to pay contract penalties on empty boats waiting at ports. There could be lots of staff waiting around for no trains at support elevators. So are you going to have to cut staff or staff being paid for doing nothing? These are all these little things to think about.

Jordan So taking all of those things together into consideration, do we have any idea or any guidelines for what kind of money we’re talking about here? You mention tens of millions of dollars. What is it if you total it all up? Do we know?

Lindsay Campbell I mean, at this point we don’t know. But based on what happened in 2013 and 2014, there were losses of $5 billion in the prairie economy alone. With inflation and how much everything is nowadays, it would probably be around that, if not more. And just thinking about the green market export value, it was 24.5 billion and 2021. So you take at least 5 billion off of that. That’s a lot of money.

Jordan Is there a clock ticking on that grain that you mentioned sits in elevators? Like, I’m trying to get a sense of if it can just wait a couple of weeks until there are enough trains or if at some point the grain goes bad and it’s a wash for the farmers.

Lindsay Campbell It’s a good question. So it depends on if the grain is stored properly. So if it’s stored properly, then it could last until next summer. But we don’t really know and we don’t have reason to assume that the green elevators are designed to hold green up until then. So what I’m told by folks in the sector is that it’s really crucial that we get this timing right, because all the boats that come into the port are timed based on Canada’s harvest season, and there are several other countries that harvest at other times right? So we really need to get the timing right because the boats have other places to be. And if our rail companies can’t fulfill their commitments, then buyers may go to other countries. It may put Canada’s reputation as a reliable trading partner in question. I’m also hearing that one of the producers I spoke to for this story said, yeah, I do all this work ahead of time and I do what I can, but it doesn’t matter if I’m able to grow a good crop if I can’t get it to market. It’s frankly embarrassing for me, and it’s embarrassing for me to do these deals upfront with international buyers and then have stuff like this fall through.

Jordan What did we do last time to fix the bottleneck? You mentioned that we saw this in 2013, 14. What do we do and can we do it again?

Lindsay Campbell So I believe at that time, the Conservatives had their own legislation that they had introduced a year after it was called the Farewell for Grain Farmers Act. And it’s that minimum financial penalties on the rail companies to say, if you don’t fulfill this commitment, meaning this threshold by these dates, then you’ll face financial penalties. I believe both of the companies, CN and CP combined, paid or were fined. I know at the very least, they were fine around $150,000 for not meeting those commitments under that legislation. So the Liberals didn’t renew that legislation. I believe it expired in 2017. And then they introduced their own legislation, the Transportation Modernization Act, in 2018. And it’s not clear to me that we have these same financial penalties in place. Speaking to the Conservative agriculture critic, he seemed to think that it would be a good idea to do something like this to hold the rail companies to account. But it’s not exactly what the sector is asking for either, though.

Jordan What are they asking for then?

Lindsay Campbell They, I think, would just like the Federal Government to put some stronger public pressure on the rail companies so that more people know about this. And they also have the four pronged plan that they had asked the Federal Government to implement that would ask the rail companies to do a little bit more in terms of making sure that everyone is aware of what the challenges are and how exactly we can meet them. What’s going on behind the scenes there. The Federal Government too, claims that they’re in frequent contact with the company and had sent letters earlier this year to both of them, just reiterating the importance of meeting export commitments and the demand in that sense. But it doesn’t really seem like the sector is satisfied at this point. So they’re waiting for the federal government to make a move. The government is saying that it’s already put pressure on them earlier, but those representing the farmers say it’s not enough.

Jordan And in the meantime?

Lindsay Campbell In the meantime, I guess the clock is ticking because this is our harvest season.

Jordan How long does it go for?

Lindsay Campbell Our harvest season is wrapping up right now, but it will take the next few weeks for that commodity to get shipped. We have a little bit of time, but one bad week is one thing, two bad weeks is another thing. Three bad weeks is a really, really bad thing because, you know, we have very fragile supply chain and everything needs to work out on time. Because it’s not just Canada that we have to think about. It’s all of these other countries that have their own harvest season, as I mentioned. So, last question.

Jordan We just did an episode on Saskatchewan’s booming economy. A lot of it obviously driven by commodities, especially grain. And if we can’t fix this, you mentioned one or two weeks is not the end of the world. But in the big picture, what does this cost that economy that’s the hottest in Canada right now down the line? If they can’t fulfill contracts that they’ve already committed to?

Lindsay Campbell I mean, we can look at what it costed the prairies last time around. But I would say if this becomes a regular thing, we really need to think about how we can do things differently. And if Saskatchewan wants to rely on export buyers as a way to kind of jumpstart its economy or fuel its economy.

Jordan Lindsay, thank you so much for explaining this for us. We’ll see what happens, I guess. We’ll see what happens. Thanks so much for having me. It was really great. Lindsay Campbell reporting for Ipolitics CA. That was the Big Story in this space. Starting today, we’ll be passing along some feedback from listeners. We’ll be thanking listeners for story ideas and we’ll be letting you know what we have planned for the coming days, weeks and months. First, I would just like to thank everyone who filled out our listeners survey. We got so many amazing responses, including one that said, I was there, Walter Cronkite. I will contrast that with a recent review titled Ay So self-important that ended with the words, dude, you are no Walter Cronkite. The people have spoken on both sides of the equation, clearly. I’m just hosting a podcast. You can find that podcast at the Victorypodcast CA. You can talk to us anytime on Twitter at the Big Story FPN. You can email us hello at thebeststorypodcast CA, and you can listen to the podcast anywhere you get it. And you can compare me unfavorably to your favourite news anchor by leaving a review. The Big Story’s lead producer is Joseph Fish. Ebyan Abdigir is a producer. Stephanie Phillips is our showrunner. Braden Alexander is our sound designer. And I am Jordan Heath Rawlings, not Walter Cronkite. Have a great weekend. Stay safe. We’ll talk Monday.