* Government would set future grain volume minimums
* Grain companies to pay farmers for breaching contracts
* Legislation too narrow in scope -opposition
(Adds details on timing, comments from opposition, farmer, CN
By Randall Palmer and Rod Nickel
OTTAWA/WINNIPEG, Manitoba, March 26 The Canadian
government introduced legislation on Wednesday that will allow
it to set minimum levels of grain that railways must ship each
year to avoid the huge crop backlogs that have hurt farmers'
cash flow this winter.
The Conservative government earlier this month ordered the
country's two dominant railroads, Canadian National Railway Co
and Canadian Pacific Railway Ltd, to double
their weekly grain volumes to 1 million tonnes combined over a
four-week period to clear the massive crop logjam.
The new legislation enforces that requirement - 500,000
tonnes of grain weekly for each railway - through the balance of
the 2013/14 crop year, which ends in August.
The bill also would allow the government to set similar
grain movement targets in subsequent years, depending on the
size of the harvest, with penalties of up to C$100,000 ($90,000)
per day for noncompliance.
"Our government means business when it comes to getting our
grain and other commodities moving throughout the marketplace,"
Agriculture Minister Gerry Ritz told reporters.
Record crops of wheat and canola, along with frigid weather,
have overwhelmed the railways this winter, resulting in overdue
orders for tens of thousands of grain cars. A government
official said the value of the grain currently sitting in bins
is an estimated C$14.5 billion to C$20 billion.
The bill would increase inter-switching distances in the
Prairie provinces, which will allow more grain elevators to have
access to service by more than a single railway.
The government also targeted grain companies that do not
accept farmers' crops on the dates agreed to in contracts. In
future, companies such as Richardson International Ltd, Cargill
Ltd and Viterra would have to pay
compensation to farmers for failing to accept grain on time. The
amount of compensation would be determined by the Canadian Grain
Commission or another arbitrator.
Shares of both CN Rail and CP Rail ended down about 1.3
percent on Wednesday on the Toronto Stock Exchange.
"CN is disturbed that the government has decided to punish
railways with re-regulation for an outsized crop and winter
conditions totally beyond their control," said CN Chief
Executive Claude Mongeau, in a statement. "The legislation does
not address the root cause of the current grain situation and
will do little to move more grain, now or in the future."
A Canadian Pacific spokesman said the company was reviewing
the legislation and could not immediately comment.
The opposition New Democratic and Liberal parties said they
have agreed to fast-track the bill to a committee for review,
which means it is not likely to pass for a couple of weeks.
"I don't think we'd be inclined to delay this, but we also
would make the point that it's very narrow in scope and should
be more ambitious," deputy Liberal leader Ralph Goodale said.
He said the C$100,000-a-day fine was too little to have much
"From the railways' perspective, that's walking money."
But Ritz said the railways have already stepped up, moving
closer to the government's requirements in recent weeks.
"That C$100,000-a-day penalty may not seem like a lot to a
company the size of the railway but certainly the notoriety they
bring upon themselves by not measuring up, I think it hurts them
NDP Member of Parliament Malcolm Allen blamed the new
free-market system, which replaced the marketing control of the
Canadian Wheat Board in 2012, for the fact that some farmers
have not been able to move any grain.
"Under this new free-market system, it's whoever gets there
first gets the big fish, and if you're there a little late you
But one Manitoba farmer said the bill "appears to answer a
lot of the calls from farmers. "For that I think we're going to
see a lot of appreciation from producers who haven't been able
to move their grain this winter," said Doug Chorney, president
of the Keystone Agricultural Producers.
Chorney said the increase in inter-switching distances will
be a powerful tool for shippers to negotiate better rail
service. Interswitching involves the transfer of cars from one
railway's line to the line of another railway.
Increasing those distances could open the door to "unfair
poaching" by U.S. railways of Canadian railways' business, CN's
The legislation would also give the government's Canadian
Transportation Agency a bigger role in regulating service
agreements between railways and shippers.
The Western Grain Elevator Association, which represents
grain handlers, said it was reviewing the bill and could not
($1 = $1.11 Canadian)
(Additonal reporting by Louise Egan in Ottawa and Solarina Ho
in Toronto; editing by Peter Galloway and Matthew Lewis)