Four reasons the averted U.S. rail strike is good news for Canadian agriculture

by

Opinion

The U.S. agriculture industry — and economy as a whole — breathed a sigh of relief early Thursday morning when Labour Secretary Marty Walsh tweeted that a tentative agreement had been reached between rail companies and the unions representing railway workers that were threatening to go on strike on Saturday.

The Canadian agriculture sector, for which the cloud of a possible rail strike looms much more frequently than in the U.S., should also be celebrating.

In the short term, sure, Canada competes with the U.S. in overseas markets. Canadian crops would have been more attractive to foreign buyers if the U.S. railways were shut down, but there are many reasons why the first rail strike in 30 years in the U.S. would have been detrimental for Canadian ag.

First, U.S. crop prices, which drive farmgate values for most crops in Canada, would come under immense pressure, with U.S. commodities unable to reach export positions, flooding domestic markets. While domestic processors would benefit from this for a few days, it wouldn’t take long for backlogs of processed commodities that are normally moved out by train.

Canadian exports to our largest market would obviously be reduced, with the exception of commodities — both crops and livestock — that move by truck.

Speaking of trucks, there would be increased demand and rates for alternative methods for moving U.S. commodities to port, sending North American trucking rates higher. U.S. grain doesn’t normally move on Canadian railways, but U.S. shippers desperate to move their goods to export positions may have looked to Canadian National and Canadian Pacific to move U.S. commodities (the Canadian government’s maximum revenue entitlement on Canadian grain could factor into this math as well). It was just last year that a large amount of U.S. corn was moved into Canada by CP, showing large-scale movement north across the border is possible.

Meanwhile, on the supply side of things, a large portion of fertilizer moved into Canada from the U.S. is imported by rail, and fertilizer plants in the U.S. would be forced to stop production due to not being able to access necessary inputs or move product out.

“For every day this uncertainty continues, we essentially lose five shipping days because of the ramp down and ramp up,” said Fertilizer Institute president and CEO Corey Rosenbusch on Wednesday. “If this situation is not resolved by tomorrow, it could quickly impact supplies for fall application and lead to a reduction in U.S. production at a time when 70 per cent of European production has been curtailed or ceased due to Russia’s shutoff of natural gas supplies.”

There likely would’ve been many other broken supply chains for Canadian agriculture, including parts and machinery.

Overall, this had the potential to go off the rails on both sides of the border.

While the possibility of the first rail strike in the U.S. in three decades received major attention, right to the White House, you don’t have to look too far into the future for the possibility of another rail labour stoppage in Canada. After a 2.5 day labour stoppage at CP Rail in March, more than 3000 conductors and other railway employees who work for CN are currently working with a contract that expired in July. The expired contract, it just so happens, was signed after an eight day strike in 2019.

The CP shutdown in March, meanwhile, marked the fourth consecutive case where labour talks between CP and the Teamsters Canada Rail Conference have resulted in a work stoppage — 2012, 2015, 2018, and 2022.

There have been suggestions to make rail in Canada an essential service, preventing railway workers from walking off the job. If that’s not possible, longer contracts that provide shippers with longer periods of certainty would also be valuable.

Perhaps in addition to celebrating, there are lessons to be learned here in Canada from the U.S. rail dispute on avoiding a strike or lockout.

Related: Given the cost and frequency of labour disputes, it’s high time rail service be deemed essential

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