How Rail Stoppage May Impact Food Costs and Supply

A customer shops at a grocery store in Toronto, on May 30, 2024. The Canadian Press/Chris Young

A prolonged rail shutdown could have a major impact on food prices and even lead to empty shelves in grocery stores, food industry experts say.

“As soon as you go from rail to wheels, you’re likely doubling your transportation costs. And at some point, someone is going to have to pay for that, and that’s likely going to be the consumer,” Sylvain Charlebois, a professor at Dalhousie University, told The Epoch Times.

Trains across the country came to a halt in the early hours of Aug. 22 after the country’s two major rail companies, the Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC), and the workers’ union Teamsters Canada Rail Conference, failed to reach an agreement during contract negotiations.

The federal government, which had earlier refused to get involved in the dispute, said in the afternoon of Aug. 22 that it will force arbitration to get the trains moving again.

Labour Minister Steven MacKinnon during an Aug. 22 press conference didn’t specify when the shutdown would be over, but said it would be “within days.”

Canada is heavily reliant on rail transportation, with CN and CPKC hauling a combined $1 billion in goods per day.

According to Charlebois, a rail shutdown is “quite problematic” for Canada’s food supply chain, and “potentially can be catastrophic” if it lasts beyond a week. He said that every day Canadian rail lines are shut down will take a week for the entire supply chain to recover.

Charlebois said many grocery stores had planned ahead for the railway strike and purchased goods for five to seven days, so Canadians will likely not see immediate large changes to food prices. But if the shutdown goes beyond that, grocery store shelves could start having fewer items and higher prices.

Grain Growers of Canada, representing grain producers, had also warned that the railway stoppage is an “unprecedented crisis” for the grain industry, costing farmers an estimated $43 million per day in the first week alone.

Kyle Larkin, executive director of Grain Growers of Canada, said in a statement that with Canada’s 65,000 grain farmers unable to use the railway to get their products to market, they will see lost sales, degraded grain quality, and a “substantial loss of market confidence.” This will translate into higher prices for Canadian consumers and shortages of food products that rely on grain, he said.

Trevor Heaver, a professor emeritus at UBC’s Sauder School of Business, said while some food products are shipped exclusively by trucks to grocery stores, others rely on railway. Switching from rail to trucking to ship food will not be easy, especially given the current shortage of drivers.

“There’s not a lot of spare capacity available as an alternative and at a reasonable price,” Heaver told The Epoch Times.

Heaver also noted that the rail strike would impact more than just the rail workers, causing mines, lumber mills, and food refrigeration plants to close down.