SASKATOON — Frustration is mounting within Canada’s grain industry as persistent rail delays continue to disrupt shipments and inflate costs, particularly at ports on Canada’s west coast.
Industry stakeholders are calling for increased scrutiny and potential regulatory intervention, citing a recurring pattern of inefficiencies that impact farmers and grain companies alike.
Quorum Corp. president Mark Hemmes told the Canadian Crops Convention in Edmonton March 5 that the heart of the issue is in the railways’ inability to consistently meet demand. While railways prioritize cost control and asset utilization, their primary obligation to shareholders often clashes with the needs of shippers and the broader supply chain.
“They’re always focused on controlling the costs. They’re always focused on asset utilization. They never want to have a person or piece of equipment sitting too long alone,” Hemmes said.
“But keep in mind, they answer to the shareholders, not to the shippers, not to the government.”
However, the call for government regulation is hampered by a lack of quantifiable data. While anecdotal complaints from across the industry are plentiful, concrete evidence proving systemic problems is scarce.
Hemmes says government regulation isn’t realistic without hard data showing that there is a real and ongoing issue.
Quorum Corp. president Mark Hemmes.
A key point of contention is the railways’ struggle with a lack of reliable forecasts and the need to accommodate seasonal demand.
Grain companies argue that accurate predictions are impossible in an agricultural sector heavily reliant on weather and global market fluctuations. They also criticize the railways’ preference for a consistent, year-round volume, which clashes with the seasonal nature of grain harvests.
“If anybody was working for a grain company and had the ability to look forward one year and tell you what the crop will be like, they wouldn’t be working for a grain company. They’d be making a lot of money working for themselves,” Hemmes said to a chuckle from the crowd.
“Grain companies are also criticized for having to flatten peak volume periods because the railways want to move the same amount of grain every month for 12 months of the year. Well, that’s just not how the global marketplace works. We’re a seasonal business. Harvest only comes once per year, and peak periods are there for a reason.”
The financial burden of shipping delays ultimately falls on farmers, who are “price takers” in the global market, Hemmes said. Increased shipping costs translate directly into lower returns for grain producers.
“We don’t set the price. The price gets assessed globally. I know I’m talking to the converted, but farmers are the ones who actually take on the costs. So when the railways or shipping company increase the rate, it always flows back to the farm,” he said.
The data Hemmes presented reveals a clear correlation between rail car shortages at port terminals and vessel lineups. When terminals run out of cars, vessel delays escalate, leading to significant demurrage costs. Last year alone, the industry paid more than $30 million in vessel demurrage.
“This morning, there were 37 vessels sitting around the Vancouver Harbour area.… When the rail cars aren’t there on time, order fulfilment goes down and you start to see the vessels line up down the harbour,” Hemmes said, highlighting the ongoing crisis.
“We’re going through the same thing again and again. It happens repeatedly.… One of the biggest problems that a lot of terminals have is that they don’t get the trains in the same sequence that they were released in the country. And basically that just turns the whole harbour upside down because they are expecting a train that doesn’t come, and then they have to bring in a different ship. So they’re playing chess with vessels in the harbour.”
Furthermore, the average time to move a loaded hopper car from the Prairies to a port has increased over the past decade, with variability also rising sharply. This unpredictability makes planning extremely difficult.
Railway performance also consistently falls short of their own projected grain plans, Hemmes said. Data shows a persistent failure to meet order fulfilment targets.
“They’re not meeting the demand, they’re not meeting their plan,” Hemmes said.
“There’s an issue.”
The industry also points to a direct correlation between railway velocity and vessel time in port. When trains slow down, vessels wait longer and costs increase.
“Put it simply, when the railway sneezes, everybody else gets the flu,” Hemmes said.
With grain production and carry-forward stocks projected to continue growing, the problem is expected to worsen. Industry stakeholders are urging a collaborative effort to address the root causes of the delays and ensure a more efficient and reliable grain transportation system.
Hemmes suggested three solutions.
First, he said, would be for railways to increase operational flexibility.
“We have to coerce railways into making redundancies available and helping the system out,” Hemmes said.
Although railways have made a point to reduce redundancies to help the bottom line, it makes reaction time to issues much slower and affects the broad scope of the operation.
Secondly, he said forming some kind of artificial competition will be necessary.
“Let’s face it, we’re not going to nationalize the railways, so that’s not on the table. And we’re not going to build a third railway, that’s also not on the table. So there’s got to be some form of competition that has to fill in behind it,” Hemmes said.
“And if you have to do that artificially, which I think you do, that might be something that causes the coercion that will create that redundancy to be put in place.”
His third solution is a greater amount of visibility when approaching government about the systemic problems with the railways.
“While the grain industry has taken a bit of a lead in this in so far as measuring the supply chain, the grain industry only represents 20 per cent of the total body of work that the railways do. In that other 80 per cent, yes, some people are actually making some headway, but they are not where we are today,” Hemmes said.
“There is strength in numbers, and I think if we worked more with other market sectors and you cram all of that data and complaints together, it would look really good and there would be no arguments about this. But it all has to be about confirmed data and really, really hard statistics — stuff that nobody can argue.”
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