Normally, fall is the time of year that grain companies are facing backlogs, are on the cusp of paying vessel demurrage and are having to reschedule farmer deliveries coming into the elevator system.
“This year that is not the case,” said Wade Sobkowich, executive director of the Western Grain Elevator Association.
“We have a little bit more breathing room.”
He called it a “backhanded silver lining.”
That is because farmers in the prairie provinces harvested an estimated 47.2 million tonnes of principal field crops in 2021, down 36 percent from the previous five-year average and the lowest production since 2002.
So there is simply much less grain than normal to get to port position.
Mark Hemmes, president of Quorum Corp., which is Canada’s grain monitor, said 34 percent of the crop had been shipped as of the end of October, which is well above the usual 27 percent.
“The fact that we moved so much volume in the first three months gives us a cushion,” he said.
But there will be lingering effects of the mudslides and track washouts caused by two days of torrential downpours in British Columbia’s Fraser Valley.
“This is a horror show of epic proportion,” said Hemmes.
He can’t recall a natural disaster of this magnitude in his 44 years in the railway business.
Hemmes flew into Vancouver on Nov. 17 in the wake of the flooding and got a bird’s eye-view of the affected region.
“It’s far worse than I could have imagined. The pictures don’t even do it justice and the pictures paint a horror show,” he said.
It is rare for both national railways to experience a mudslide or washout at the same time.
It is also highly unusual to have more than two sections of track shut down at one time, he said. CP Rail had more than 20 separate sections that required repair.
CP was anticipating service would be restored Nov. 23. Hemmes had heard CN was targeting the same date.
He said the quick action for getting trains back on the tracks is stunning.
“This is a year that we can’t criticize the railways for much of anything,” he said.
“The fact that they actually got track back this fast is just astonishing to me. It’s a testament to how good their engineering groups are.”
But he cautioned that it won’t be business-as-usual for a long time. They will be moving shorter and lighter trains at greatly reduced speeds through the Kamloops to Vancouver corridor as safety precautions.
“I don’t think business-as-usual is going to be here much before the spring,” said Hemmes.
He expects the grain supply chain will start to back up post-Christmas and vessels will be waiting longer to load at the Port of Vancouver.
Hemmes will be monitoring railway hauling in the coming weeks and months because that is going to tell the tale.
Sobkowich does not expect year-end export volumes to fall short of previous expectations but there will be delays getting product to market and grain companies might think twice about booking new sales for April/May.
“The crop will get moved but it’s just one more thing that affects our reputation,” he said.
CN Rail’s chief executive officer recently told investors that the company could hike rates to compensate for any lost revenue. Sobkowich said that won’t impact the grain business as much as other sectors of the economy due to Maximum Revenue Entitlement rules.
But logistical problems are looming as much of the 2021-22 export program is front-loaded because grain companies were anticipating a big crop when they made those sales six to nine months ago.
Richardson International, Viterra and Cargill can divert some traffic to the jointly owned Prince Rupert Grain Terminal.
But it will be hard for a company like Patterson Grain that relies on CP Rail to shift any volume to the CN Rail line that services the Port of Prince Rupert.
“It’s not like that line was empty and waiting for grain to be diverted through it,” said Sobkowich.
Hemmes said a lot of container traffic is being rerouted to Prince Rupert, which will take up most of the rail capacity at that port.
He said Thunder Bay is nearing the end of its shipping season so it is not an option and diverting traffic through the United States is also not viable.
Sobkowich said the situation underscores how vulnerable Canada is in that Kamloops to Vancouver corridor and stressed that the federal government needs to explore how it can help solve the bottleneck in that stretch of the supply chain.
Hemmes agreed that Ottawa and the two main railways need to start “working in earnest” on how to bolster rail infrastructure in that region of the country.
“I don’t think anybody should forget what just happened,” he said.
