UPDATE 1-Grain handler Louis Dreyfus files complaint against CN Rail

Mon May 5, 2014 4:35pm EDT

(Adds comment from CN)

By Rod Nickel

May 5 (Reuters) - The Canadian unit of global grain trader Louis Dreyfus Corp has filed a complaint with the Canadian government about service from the country's biggest railway, Canadian National Railway Co, following a record-breaking harvest that has led to transportation bottlenecks.

Louis Dreyfus Commodities, which operates a canola-crushing plant at Yorkton, Saskatchewan, and 10 country elevators in Western Canada, filed a complaint on April 16, the Canadian Transportation Agency said on Monday.

The agency said Dreyfus complained about CN's service based on a contract between the two companies. The grain handler has also requested that the agency issue an interim order requiring CN to abide by contractual terms during the proceedings.

The complaint, while not the first of its kind, highlights the unusually fierce animosity between grain handlers and railways during the winter with mounting pressure from farmers and politicians to unplug an unprecedented backlog that stranded up to C$20 billion ($18.2 billion) worth of crops.

Huge crops of wheat and canola, combined with a frigid winter caused CN and rival Canadian Pacific Railway Ltd to fall behind on filling requests for grain hopper cars to country elevators. This caused grains and oilseeds to pile up in commercial and farm storage, including the largest wheat stocks in 20 years as of March 31.

The complaint was filed under the Canada Transportation Act. Under provisions of the act, if the CTA determines a railway is not meeting its contractual obligations, it can order it to meet them within a set time period.

Canadian National spokesman Mark Hallman said the record harvest has created demand for rail service that exceeds the capacity of the supply chain. CN has attempted to allocate rail cars among shippers fairly and consistently, he said.

"To the extent any shipper is afforded preference, by law or otherwise, this will necessarily be at the expense of the rest of the industry," Hallman said. "CN will keep customers informed of any adverse impact this complaint could have on their allocation."

Brant Randles, president of Louis Dreyfus Commodities, said the company does not comment on pending legal proceedings.

($1=$1.10 Canadian) (Reporting by Rod Nickel in Winnipeg, Manitoba and Gus Trompiz in Paris, editing by G Crosse)

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