(Adds comment on crop price impact, CP comment, paragraphs 9,
By Rod Nickel
WINNIPEG, Manitoba Aug 1 The Canadian
government will require the country's two big railways to ship
more than the current minimum of 1 million tonnes of crops a
week through the autumn harvest as it tries to prevent a repeat
of last season's backlog.
The regulations announced on Friday in the world's
third-biggest wheat exporter require Canadian National Railway
Co and Canadian Pacific Railway Ltd to each
move 536,250 tonnes of crops each week starting Sunday and
lasting through Nov. 29.
Failing to do so can result in penalties of C$100,000
($92,000) per violation.
In March, Ottawa forced the railways to each move 500,000
tonnes weekly to unclog bottlenecks that followed record 2013
Canadian wheat and canola harvests and shipment delays caused by
a brutal winter. Those requirements were due to expire on
"Harvest looks like it might be late again. If that's the
case, then there is still a lot of grain to move through August
and September," Agriculture Minister Gerry Ritz said in an
Ottawa's decision keeps the pressure on the railway
companies, which angered farmers during the winter by delivering
insufficient numbers of cars to crop elevators.
The railways say they did the best they could given the
"It's truly unfortunate that the federal government has
decided to introduce extensive regulations in reaction to a
100-year grain crop that has been handled reasonably well in the
normal course of business," said CN Chief Executive Officer
CP spokeswoman Breanne Feigel said the railway is
disappointed, since the problem requires a solution involving
the entire supply chain's capacity.
CN and CP shares fell 1 percent in afternoon trading in
The backlog, which left billions of dollars worth of crops
on farms in winter, has eased as CN and CP picked up the pace
and summer weather allowed for more fluid movement. But leftover
grains and oilseeds from 2013 were still an estimated 20.9
million tonnes as of Thursday, more than double the previous
year's stockpile, according to the Canadian agriculture
The next wheat crop has potential for the second-largest
yields on record, a crop tour found this week.
"This gives us some comfort that we'll have the capacity to
move the supply we have," said Brant Randles, president of Louis
Dreyfus Commodities, the Canadian arm of the global
The volume thresholds are realistic, according to the
Western Grain Elevator Association, which represents grain
handlers such as Viterra, Richardson International and
Cargill Ltd, even though the handlers had wanted
minimums for shipments to the United States and along other
individual rail corridors.
Railway minimums may modestly support cash prices, as they
will make it easier for grain companies to deliver crops to
The government also said it would require CN and CP to
provide more data on grain movement and will continue to allow
interswitching in more parts of Alberta, Saskatchewan and
Manitoba that are normally served by a single railway.
Interswitching, which applies to all commodities on the
Prairies, involves the transfer of cars from one railway's line
to the line of another.
Ottawa's measures also clarify which terms in commercial
negotiations between shippers and railways can be arbitrated by
the regulatory Canadian Transportation Agency. The measures also
give farmers more clout in their contracts with grain companies.
Farmers complained last year that grain handlers did not accept
delivery of their crops as required by sales contracts.
(Editing by David Gregorio; and Peter Galloway)