Don’t blame the trains

Farmers waiting to deliver grain

(May 8, 2018)  Prairie grain farmers live and die by the prices and delivery opportunities for their grain.  On both counts farmers have a strong sense of being short changed.  When the price looks good and the basis is low, the elevator is often plugged.  When the basis is high making the offered price lower, the elevator has space for deliveries.

This smells like the bad old days when farmers brought grain to the elevator only to have the agent tell them there was no space for their number one wheat but there was still room for lower priced wheat if they wanted to take less.  Now farmers are again finding elevators plugged when the price is high. The important question becomes: are farmers being short changed by the railways or by the grain companies?

This past winter the grain companies have been telling farmers and pretty much anybody that would listen that the railways are not delivering rail cars.  They claim poor rail service is why elevators are plugged so farmers cannot deliver their grain and ships are waiting at port.  High basis costs and lower prices are sometimes blamed on the railways as well.  Is rail service for grain shipments really that bad? If it is then our grain exports should show it.

There are objective numbers about grain shipments and exports from Canada.  According to the Canadian Grain Commission, as of crop week 39, which ended April 29, 2018, overall grain exports are only down a tiny 2.1% compared to the same week last year.  Remember that last crop year, the Canadian Transportation Agency found the railways delivered 7% more grain than the previous year – almost a new record.  In 11 of the 39 crop weeks overall exports are seldom down more than 1% and most of the missing export volume is accounted for by increased domestic use and the fall of canola and pulse exports.

However, the real eye-openers are the numbers for wheat.  Up to April 29/18 total wheat exports are up a blistering 14.75% compared to last year.  The CGC also reports that in every week of the 2017-18 crop year Canada exported substantially more wheat than in the same period for the previous crop year.  Claims by elevator agents they have no room ring hollow when their grain companies are moving more wheat than ever to export position.

Even barley exports are up 66.8%.  Smaller crops like soy beans are down 10%, while lentils, peas, and other pulses are down more than 50%, mostly because of Indian tariffs.  Canola is down 5.4% and durum is down 10% after the private trade bungled quality assurance.  It is these last two crops which account for the biggest part of that overall 2.1% drop in export grain shipments. It is the grain companies who are responsible for customers turning away from prairie canola, durum wheat, and pulse crops.

It is notable the private trade has bungled quality assurance on the grains with poor export numbers.

Without a single-desk marketer to manage logistics and deal with quality assurance there is no way prairie farmers will receive full value for their grain and customers will get what they want – when they want it.  So there is little evidence for blaming the trains, at least this time.

In spite of what you may read in some of the business press, the year-to-date export numbers from the Canadian Grain Commission show the railways are doing their job.  So farmers and their former customers are the ones being short changed in many ways by the grain companies.

Oil by Rail is Trivial
Oil by rail is another excuse used by grain company apologists to divert attention from their poor management. The National Energy Board publishes monthly figures for oil shipments crossing the Canadian border by rail.  The highest shipment month since 2012 was December of 2014 at 27,913 cubic meters (m³) of oil per day.  As of February 2018 oil by rail is down to 21,306 m³ per day.  It sounds like a lot of oil, but it is only 163 oil tank cars a day.  This is a drop in the bucket compared to the roughly 1,300 grain cars a day that moved last year’s grain crops to port.

Most oil still goes south into the United States to be refined.  Grain goes west to the Pacific.  Adding oil transport to rail does not use the same tracks or mountain passes as grain – at least not for now.  Scaling up rail operations to meet extra demand for shipping oil south is a matter of adding extra locomotives and crews.