Canada’s Grain Backlog Eases for First Time This Season

Canada’s grain backlog is easing for the first time this season as railways respond to a government order to increase shipments.

The number of outstanding rail-car orders dropped 12 percent to 68,802 as of April 6, from 78,154 a week earlier, said Mark Hemmes, president of Quorum Corp, an Edmonton-based company appointed by the federal government to monitor Canada’s grain-transportation system. The decline signals railways are responding to federal legislation that requires them to clear the backlog of grain stuck on the prairies, he said.

Agriculture Minister Gerry Ritz and Transport Minister Lisa Raitt introduced legislation last month that will let the government set minimum volume requirements for grain shipments. The backlog left as much as C$20 billion ($18 billion) of crops stuck on prairie farms. A government order effective March 7 stipulates that Canadian National Railway Co. and Canadian Pacific Railway Ltd. are each be required to ship 500,000 metric tons of grain each week or face penalties of as much as C$100,000 per day.

“It’s very obvious the railways are reacting to it, and are moving this product,” Hemmes said in a telephone interview.

Canadian National “is disturbed that the government has decided to punish railways with re-regulation for an outsized crop and winter conditions totally beyond their control,” Chief Executive Officer Claude Mongeau said in a March 26 statement. The current rail capacity “cannot move these extraordinary volumes over this short period of time,” Canadian Pacific’s Chief Operating Officer Keith Creel told a federal agriculture committee in Ottawa April 1.

Record Harvest

Farmers collected more wheat and canola than ever before in 2013, and supplies from multiple crops in the same season placed unprecedented pressure on rail lines that handle 95 percent of Canada’s output.

The outstanding rail-car orders mean 6.1 million metric tons of grain are still waiting to move by rail, Hemmes said. There is probably an additional 30 million tons sitting on farms, and demand for rail cars may grow in the coming weeks if companies start to make new sales, he said.

“We’re seeing some increased movements,” said Wade Sobkowich, the executive director of the Winnipeg-based Western Grain Elevator Association, which represent handlers including Glencore Xstrata Plc’s Viterra unit and Richardson International. “We still have a huge backlog that we’re trying to clear out.”

To contact the reporter on this story: Jen Skerritt in Winnipeg at jskerritt1@bloomberg.net

To contact the editors responsible for this story: Millie Munshi at mmunshi@bloomberg.net Patrick McKiernan

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