Poor rail service is hurting value-added agriculture too.
Some of Canada’s canola-crushing plants have had to shut down from one to three days because the railways are failing to move oil and meal fast enough, with the biggest disruptions in the West and on CN Rail lines. The crushers say that is costing millions of dollars in lost production and undermining Canada’s reputation as a reliable supplier of canola oil and meal.
“Some (plants) have been down a couple of days,” Chris Vervaet, executive director of the Canadian Oilseed Processors Association (COPA), said in an interview here March 8 on the sidelines of the Canola Council of Canada’s annual convention. “I haven’t heard anything that went past a week. But it’s not unusual these days to hear from my membership that a plant has been down for a day, two days, in some cases three days and it adds up very quickly.”
COPA members — ADM, Bunge, Cargill, LDC, Richardson and Viterra — operate 14 canola-crushing plants across Canada, including 11 in the West where both CN and CP have also failed to meet the demand to transport grain, prompting calls for the federal government to intervene (see sidebar).
Shippers, including member companies of COPA and the Western Grain Elevator Association, and most farm groups, are also calling for the Senate to quickly approve C-49, the Transportation Modernization Act, hoping it will lead to better rail service.
When canola processors can’t ship out their oil and meal seed, they can’t buy seed, hurting farmers, Vervaet said. Crushers are losing money. How much varies with the cost of seed and the value of canola oil and meal. Right now the combined value of a tonne of oil and meal is around $605. Most plants crush 3,000 tonnes a day, so every day a plant is down it’s roughly a $1.8-million loss.
“That’s crush that we can’t recoup,” Vervaet said. “It’s gone and there’s certainly a dollar value attached to that lost crush in terms of the value of the oil and the meal. Not to mention what it means in terms of not being able to service your customer in time. And that’s probably even more important in the longer term. That reputation, that ability to get your product to market.”
Normally crushing plants operate 24-7 for 350 days a year, Vervaet said.
“We do see interruptions from time to time throughout any normal year,” he said. “But this is really where we’ve seen it become a real chronic issue where it’s not just one week where a member doesn’t get proper service. It’s across all members, all facilities and now for an extended period of time.”
It’s not easy to stop and start a crushing plant either, Vervaet said.
“It’s not a question of hitting the on-off button,” he added.
“It takes time to get everything going again. So it’s a major interruption.”
The problem isn’t a shortage of cars. Crushers own and lease their own. What’s lacking are locomotives and crews to haul the cars, Vervaet said.
“We’re seeing a significant service slowdown, if not a meltdown on CN… and we’re starting to see some reductions in production,” he said.
C-49 will allow rail shippers to negotiate service agreements with the railways, which then can be penalized when the railways fail to fulfil the contract.
There’s also a provision for long haul interswitching, which it’s hoped will encourage competition between the railways, but the devil is in the details, Vervaet said.
“But it’s worth noting that oilseed processors were probably the biggest users of the 160-km interswitch provision when it was still available,” he said. “So based on that we are hopeful that we can make the long haul interswitch work in a similar fashion.”
