By Rod Nickel
WINNIPEG, Manitoba Feb 24 Canada's two big
railways are stepping up service to reduce a backlog of grain
shipments that have delayed exports and pushed oat prices to
record highs, but the Canadian government said it may still step
in with new regulations.
Record crops of wheat and canola, along with frigid weather,
overwhelmed Canadian National Railway Co and Canadian
Pacific Railway Ltd, resulting in overdue orders for
tens of thousands of grain cars.
The railways said they are preparing to add thousands more
cars per week to transport grain to ports. The expanded service
would last at least until December, CP spokesman Ed Greenberg
said, while a CN spokesman did not confirm how long it would
But Canadian Agriculture Minister Gerry Ritz, who met Monday
with the railways and grain companies, left the meeting
unimpressed and told reporters he is considering new regulations
to speed the flow of grain from western farm regions to ports.
In some areas, rail cars are sitting on track awaiting
locomotives and crews, he told reporters.
"That seems to be the problem in capacity, not necessarily
cars, but the ability to move them from where they should be
spotted to the port," he said.
Ritz said railway officials "fudged" their commitment to
dedicating more grain cars when he spoke with them, by saying it
depended on factors like where the grain was headed.
Canada is the world's biggest canola exporter, and usually
the No. 2 wheat exporter, but the bottlenecks have left crops
Ritz said grain companies told him they would ideally like
13,000 rail cars per week, nearly three times what railways
OATS RALLY ON DELAYS
The railways are also only delivering grain to the British
Columbia ports of Vancouver and Prince Rupert for the short
term, Ritz said, and not to the United States.
"Unfortunately, the railways have decided arbitrarily that
no cars will be going into the U.S. (for grain)," Ritz said.
"That's really not their role. There are some consequences to be
faced when they make arbitrary decisions like that."
A lack of rail cars to the United States would be disastrous
for U.S. oat millers, who depend on top exporter Canada, said
Randy Strychar, president of Ag Commodity Research.
U.S. millers have about a 20-day supply of oats, he said.
"If we can't get rail cars down to them, they're going to
run out of oats," Strychar said.
Chicago Board of Trade nearby oat futures hit a record
high on Monday.
CP's Greenberg said the railway will move grain cars to any
destination that is most efficient for its customers.
Canadian National spokesman Mark Hallman said the railway
hopes to provide 4,000-plus cars per week for grain once
extremely cold temperatures abate and up to 5,500 cars per week
by early April. Grain handlers estimate the railways currently
provide about 5,000 cars combined per week.
If port terminals worked around the clock, like railways,
cars could get back into service sooner, said Greenberg of CP.
But Wade Sobkowich, executive director of Western Grain Elevator
Association, said grain company staffing levels already exceed
railways' ability to deliver loaded cars.
Ritz said he is also considering ways to make sure grain
companies honor contracts with farmers.
Dean O'Harris, commodities manager at Winnipeg-based grain
handler Parrish & Heimbecker Inc, does not see a quick solution.
"We're doing our best to get this thing moved here, but we
just can't," O'Harris said in a presentation at the Wild Oats
Grainworld conference in Winnipeg. "... How long will logistical
problems continue? I don't see an end to it."
Earlier on Monday, Ritz said he is not in favor of scrapping
the grain revenue cap that Ottawa imposes on railways, but said
the cap system needs changes.
Canadian farmers, meanwhile, are expected to plant more
canola and less wheat this year.
Global grain giant Louis Dreyfus Corp, a Western
Canadian canola crusher and grain handler, estimated the
region's canola area at 21.51 million acres in 2014/15, up 7
percent from a year ago.