Feb. 28 (Bloomberg) -- Saskatchewan Premier Brad Wall is calling on the federal government to pass an emergency law to clear the backlog of grain in Canada’s railway system.
Record crops are overwhelming the rail network, creating a shortage of grain cars and slowing shipments to foreign buyers. About 5 million tons of grain is stuck on the Canadian Prairies as 55,000 grain-car orders wait to be filled by railways, according to Wade Sobkowich, executive director of the Western Grain Elevator Association. Grain companies have halted purchases of some crops and are pulling back on sales because they’re not confident they will be able to move crop to export, according to the association.
A federal law would force railways such as Canadian National Railway Co. and Canadian Pacific Railway Ltd. to guarantee certain levels of service to grain-handlers, Wall said today in Ottawa. Wall told Agriculture Minister Gerry Ritz he would support “even more aggressive action” and also spoke with Prime Minister Stephen Harper about shipping constraints, which have been exacerbated by soaring shipments of crude by rail from Canada’s oil sands.
“I’m comfortable they’re more than looking at options in this regard,” Wall said. “We have a duopoly here. There’s two options and the product’s not moving.”
The government is looking at all options to deal with the current logistics challenges in the short, medium and long-term, Ritz said in an emailed statement. Farmers and the economy need a reliable, efficient logistics system and it’s clear that “the current level of rail service is not keeping pace with the needs of the agriculture industry,” he said in the statement.
CN already has supply chain agreements with a number of grain companies that set out performance standards, spokesman Mark Hallman said in an emailed statement. There are remedies available under the Canada Transportation Act if shippers have concerns about rail service, he said.
CN is doing its best to move this 100-year grain crop to export in the face of “extremely challenging weather conditions,” he said. Operations will be suspended on some branch lines in Manitoba, Alberta and Saskatchewan over the weekend due to cold weather, Hallman said.
Oat growers are unable to sell their crop because shipping constraints limit bids from grain companies and millers, Randy Strychar, president of Ag Commodity Research, said Feb. 24 at an industry conference in Winnipeg. Canola processing has declined even after last year’s record harvest as railway backlogs have slowed shipments to crush plants.
Wheat, Canada’s biggest crop, fell 17 percent in the past 12 months through yesterday to $5.8925 a bushel on the Chicago Board of Trade and canola in Winnipeg tumbled 30 percent.
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