Poor Rail Service Costing Agriculture Sector, Canadian Economy, Industry Insiders Say

A worker boards a Canadian Pacific Railway locomotive at a yard in Calgary on March 18, 2022. The Canadian Press/Jeff McIntosh

Problems with rail service in Canada are prompting calls for change from industry experts, including some in the agriculture sector, who say that poor rail service is costing them money.

From Jan. 2 to April 2, the car fulfillment delivery rate was just 53 percent for Canadian National Railway (CN) and 65 percent for Canadian Pacific Railway (CP).

In response, Wade Sobkowich, executive director of the Western Grain Elevator Association (WGEA), wrote a letter to the Canadian Transportation Agency to request an investigation. According to Sobkowich, the agency refused, saying fulfillment rates were above 70 percent for the crop year as a whole, which began Aug. 1, 2021.

Sobkowich told The Epoch Times he was disappointed the investigation did not take place.

“We explained how service had been poor in January and February, and we had incurred some significant costs as a grain industry and we feel the issue is systemic,” he said.

The WGEA says its member companies paid $16 million in vessel demurrage fees and contract extension penalties between Aug. 1, 2021, and Jan. 31, 2022. Delayed deliveries in the first two months of 2022 left ships moored near Vancouver and Prince Rupert for 25 to 30 days. Sobkowich says Canada’s reputation suffers when this happens, causing buyers in other countries to look elsewhere.

“It was a much smaller crop than what is normal, so we’re worried about next year,” he said.

“We wanted the agency to investigate into the reasons why rail service was so poor in the hope of getting in front of whatever problems there were so that we don’t have a repeat of the same problems next fall, when we’re expecting a better crop.”

CN and CP did not respond to emailed requests for comment. However, in comments published in the Western Producer, a CN spokesman said floods in B.C. caused a backlog, and work time lost due to COVID also caused problems. A CP spokeswoman said its railway had to handle increased imports of feed grains from the United States due to poor domestic supply. Both said their service had improved dramatically in recent weeks as they caught up to the challenges.

According to the Canadian Association of Railway Suppliers, Canada has 49,422 kilometres of railway. CP owns 49.1 percent, CN owns 25.6 percent, and other railways own the remaining 25.3 percent. The association estimates that railways have invested 20 percent of their revenues into infrastructure, for an average of about $1.8 billion annually over the past five years.

Sobkowich said the lack of competition results in railways not always responding to the needs of customers who have nowhere else to turn. This leaves Canada unable to deliver the full volume of commodity they would like during times when buyers are willing to pay the most money.

“They know you’re going to move that grain anyway eventually, so they would like to flatline demand so that we’re moving one-twelfth of the crop every month [and] they can enjoy 100 percent asset utilization,” he said.

Quorum Corporation, which monitors grain shipments, reports that from August 2021 through March 2022, the tonnage of grain delivered form Western Canadian ports to destinations within Western Canada was down nearly 44 percent from the same period in the previous crop year. Meanwhile, total Western Canadian rail shipments of grain to all destinations were down by just over 41 percent from the same period a year earlier.

Quorum president Mark Hemmes said the railways did well until the B.C. floods in November.

“It’s just taken them forever to recover from that. It was only in the last two or three weeks that we saw rail performance that was anything close to what you would expect to be normal,” Hemmes said.

“There’s going to be a lot of discussion over the next little while, and especially as we get closer and closer to next fall when this year’s crop starts come off and the railways have not fixed their problems. And it’s going to be a lot louder discussion, I can tell you that.”

Greg Gormick, a rail analyst and policy adviser with On Track Strategies, told The Epoch Times that Ottawa’s hands-off approach has allowed Canada’s rail service to go off the tracks.

“In Ottawa, nothing is being spent on the railways. In the States, at least, we’ve got legitimate P3 [public-private partnership] projects going,” he said.

“The functioning of the railways has ... a lot to do with the national economy of Canada. You can see how the economy changes by looking at the mix of traffic and the volume, so this is not minor stuff.”

Gormick, who got his first railway job in 1978, says politicians of past generations had a higher appreciation and greater familiarity with the railways. He says billions of federal tax dollars for the airlines and aviation during the pandemic would have been better leveraged on railway infrastructure.

“For every dollar government put in, whether it’s federal or provincial, you could likely get the railway to match it, so you get double the impact. In the case of CN, they'd love to relieve this capacity constraint. It’s a mess.”