CN cites derailments, frack sand demand as factors affecting grain movement

(photo source: CN Rail)

With winter weather settling in across Western Canada and new rail legislation meant to protect grain shippers stalled in Ottawa, there are serious concerns that railways could fall further behind in shipping a larger-than-expected 2017 crop to market.

According to data from the Ag Transport Coalition, which includes grain companies and some farm groups, CN Rail has been fulfilling less than 60 percent of hopper car orders in a given week over the last three weeks — a significant drop from 2016-17 when CN set new grain shipping records and consistently hit the 90 percent mark in spotting cars on a weekly basis.

(source: Ag Transport Coalition Week 19 Performance Update)

CP Rail’s numbers have been higher this year, with the Ag Transport Coalition reporting 80 to 90 percent of hopper car orders submitted to CP being delivered in recent weeks.

(source: Ag Transport Coalition Week 19 Performance Update)

Both railways have disputed the Ag Transport Coalition numbers, since grain shippers can order more cars than can be realistically delivered, or more than they actually need, but in its week 19 grain report, CN acknowledges its grain car spotting performance has not met its own plan in recent weeks.

So why has CN’s performance dropped off this year?

“I think it’s worth, first of all, taking a look at actual numbers, rather than talking about percentages,” says David Przednowek, CN’s director of marketing for grain, in the podcast below. “With some challenges, in terms of mainline derailments and that sort of stuff, we still ended up having the third best October and the third best November on record.”

In terms of actual numbers, Przednowek says CN averaged just over 5,000 cars per week last month, versus 5,800 cars per week in November 2016. Overall, CN says it has moved 8.9 million tonnes of grain this crop year, which is down eight percent from 2016-17’s record performance, and four percent versus the average from the last three years.

Three derailments caused some setbacks in late November and early December, notes Przednowek.

“The other thing that’s been different this year relative to last year is the growth in the demand for freight and network capacity for other commodities. There’s always the fall demand for grain movement, but you’ve also had strength in frack sand movement, intermodal and coal,” he says.

While there have been references in the media to crude oil taking up more rail capacity, the idea that oil is to blame for reduced grain movement is “one of the biggest misperceptions out there,” says Przednowek.

“It represents about one percent of CN’s overall book of business… In the case of crude, the opposite of what people think is happening is actually happening. We’re moving less crude year-over-year. Not more.”

Looking ahead, CN expects lower car demand over the holidays “should help to reset” the list of outstanding car orders. After billing only 4,300-4,400 cars per week in early December, the railway just finished its second best week of the crop year, moving almost 6,000 cars, says Przednowek.

“We can’t control the weather. We’ve seen some improvement here over the past couple weeks, certainly, so it feels like things are taking a turn,” he says.

Farmers and grain shippers were hoping the federal government would pass Bill C-49 — the Transportation Modernization Act — prior to the Christmas break. However, the legislation that would give shippers the right to impose reciprocal penalties against railways only made it to second reading in the Senate, with Parliament scheduled to resume at the end of January.

Przednowek joined us on RealAg Radio on Wednesday to discuss CN’s side of the story, shipping demand from other commodities, including frack sand, and what shippers can expect for rail performance through the winter:

Related: Rail bill won’t be passed until after winter break

 

Kelvin Heppner

Kelvin Heppner is a field editor and radio host for RealAgriculture and RealAg Radio. He's been reporting on agriculture on the prairies and across Canada since 2008(ish). He farms with his family near Altona, Manitoba, and is on Twitter at @realag_kelvin. @realag_kelvin

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