:
I call the meeting to order.
Welcome, everyone, to our Standing Committee on Agriculture and Agri-Food meeting. Pursuant to Standing Order 108(2) and the motion adopted by the committee on Wednesday, March 7, 2018, the committee commences its study of the grain transportation backlog.
I would like to welcome, from the Canadian National Railway Company, Michael Cory, Chief Operating Officer and Executive Vice-President, and also Mr. Sean Finn, Executive Vice-President, Corporate Services and Chief Legal Officer. From the Canadian Pacific Railway, we have Jeffrey Ellis, Chief Legal Officer and Corporate Secretary, and Mr. James Clements, Vice-President, Strategic Planning and Transportation Services.
I welcome all the members of the committee. We shall start with an opening statement.
We're going to start with you, Mr. Finn, if you wish, for up to seven minutes for your organization.
:
Good afternoon, everyone.
I'm only going to spend a brief part of my time discussing the circumstances that put us in this position. I believe it's more useful to focus on what we have done and are doing to recover and ensure that our service is back at the levels that you and our customers have come to expect as quickly as possible.
At the outset, let me point out that the situation has not been taken lightly by CN. On March 5, the CN board of directors took unprecedented, decisive action. You're probably aware that we have a new CEO, J-J Ruest, and within two days of taking up the position, J-J acknowledged our service issues, apologized to our customers, and pledged to do better on behalf of all of us at CN.
The challenges we have been facing are not specific to grain. All areas of our business have been impacted. CN has been facing a capacity and resiliency challenge over the winter.
After six consecutive quarters of flat to negative growth, we underestimated the level of growth that was about to come at us. We're not alone in this; the Bank of Canada and many of our customers also greatly underestimated the strength of the Canadian economy. This has left us seriously stretched, with little resiliency in some corridors.
Frac sand and intermodal traffic are both up very significantly. Forest products, coal, potash, and virtually everything we move saw an increase in volume. Grain volumes were not a surprise and the grain car fleet is sufficient to handle the volume; however, locomotive power and crews have presented a serious challenge, along with winter resiliency that wasn't there this year. We simply did not have enough locomotive power or crews to deal with the rapid increase in business. Hiring and training operating personnel takes a minimum of six to nine months, and there is also a long lead time for acquiring new locomotives and for building capacity.
The increased business also led to bottlenecks at a number of locations on the network. Through the fall and early winter, we were getting by and providing fair service, but we did suffer setbacks in the late fall owing to mainline incidents, including a severe windstorm that blew a train off a bridge in Alberta, shutting down the main line until the bridge could be repaired.
However, as our CEO recently said, we had a horrible February. When the extreme cold hit us in February, forcing us to shorten our trains and requiring even more locomotives, crews, and network capacity, our service deteriorated badly to levels that were clearly unacceptable to our customers and to every one of the hard-working, dedicated CN employees who take great pride in their work.
While our grain service prior to February did not match last year's record numbers, in every month from September to January we moved the third-highest volume of grain in CN's history. This clearly was not sufficient, but not so weak that we cannot recover over the balance of the crop year.
I am pleased to say that we are already making good progress in turning things around in moving the backlog that accumulated in February. In week 31 we spotted 5,349 grain cars, including 772 customer cars, at Prairie elevators; in week 32, we spotted 5,953 cars, including 905 customer cars, and in the week that just ended, we spotted 5,742 cars, including 647 customer cars.
As a reference, we view 4,000 CN cars per week as the normal sustainable capacity of the system in a normal winter operating condition, and 5,500 CN cars as being the sustainable capacity outside of winter and when the port of Thunder Bay is open.
We are confident that we can maintain this pace through the spring. We are committed to catching up, as we are with all of our customer traffic. Our car placement numbers to the week for grain are not yet in line with where they need to be, but there has been significant improvement.
To begin turning things around, the first thing we needed to do was relieve network congestion, particularly in the very busy Edmonton-Winnipeg corridor. We undertook a number of measures to temporarily restrict traffic in this corridor to gain fluidity and velocity in our network. Only by reducing congestion could we create more capacity and resiliency.
We had to make some tough decisions to restrict and regulate the flow of cars into this congested part of our network. For example, we implemented a system controlling the flow of both incremental frac sand and crude cars.
We have also established a 24-7 situation room of cross-functional representatives at our network operations centre in Edmonton to review critical customer issues and to prioritize their movements.
Turning to other actions we have taken to add capacity to our system, in the short and medium term we added 250 qualified conductors in the fourth quarter of 2017, and an additional 400 will have completed their training and be in place by March 31. We will be adding a further 375 conductors in the second quarter. That said, we are still hiring, and there remains a challenge to find new labour at some remote locations. Our national training centre in Winnipeg will remain at full capacity.
With regard to locomotives, CN added 34 new high-horsepower locomotives in Q4 of 2017, and that was all we could get from the manufacturer. We also leased 130 locomotives, some of which required upgrading, but almost all of which are now online. For the longer term, we have placed an order for over 200 new locomotives and will begin to receive the first 60 in the second half of this year.
CN has a strong record of investing in our network. Even in the years with weaker growth, we maintained a very robust capital spending program. Earlier this year, our board of directors approved an increase in our capital expenditures from $2.7 billion to a record $3.2 billion. Over $250 million of this increase will be spent this spring and summer on projects in our western region to increase both track and yard capacity and to create fluidity that will build a base of capacity and resiliency before next winter.
If there is one thing that has become clear from this year's challenges, it's the need for better sharing of data among the supply chain stakeholders. Bill will require railways to provide even more data than at present, and we accept that. We are, however, only one link in the supply chain, and we are concerned with the lack of data provided by some of the other supply chain participants. For all of us, transparency with all partners in the supply chain is in our interests, and it ultimately benefits the Canadian economy.
Recent actions by our board of directors and all of us at CN have shown how seriously we take these service issues that have adversely affected our customers. Our capacity challenges will not go away overnight, but we have acted aggressively to address them, and I am confident that our service will continue to improve for the grain sector and all parts of our business going forward.
Thank you.
:
Thank you, Mr. Chair. I'll begin and then pass it over to my colleague James.
I'm Jeff Ellis, Chief Legal Officer at Canadian Pacific. I'm joined by James Clements, our Vice-President of Strategic Planning and Transportation Services.
Thank you for the opportunity to discuss CP's grain service and the recent challenges the grain supply chain has been experiencing. We acknowledge that as a supply chain we need to do better.
First, however, let us begin with some context.
Although the grain supply chain has had to manage significant operating challenges in recent weeks, including a recovery from extreme weather conditions this winter, CP's crop year-to-date grain shipments through week 32, which is March 4 through March 10, have increased by 3%, or approximately 450,000 metric tons, the equivalent to roughly 22,000 truckloads of grain. In other words, we've moved more grain this crop year, even while the entire grain supply chain copes with difficult operating conditions.
Extreme weather has been a challenge for CP this year, especially in February. Although we plan extensively for winter each year, this winter was unusually harsh. Compared to last year, conditions across our network were on average significantly colder, and for longer periods of time. We've also experienced unusually large snowfalls along much of our network, causing some significant outages. When temperatures reach below -25°C, trains must be shortened and moved at slower speeds to ensure safety, which is critical to our operations. These difficult conditions caused a reduction in our network velocity and overall system capacity.
CP is also experiencing significant and largely unexpected demand, especially in western Canada, part of which is coming from dual rail-served territories in the northern catchment areas of our network.
CP strategically plans each year for the upcoming grain crop. This year the crop was originally forecast at approximately 65 million metric tons, but came in at closer to 71 million metric tons. This variation represents a difference of 6 million metric tons, with much of the additional production occurring in the northern catchment area of the Canadian prairies because of dry conditions in the south. Notwithstanding the challenging operating environment, our shipments have increased by 30% in this crop year to date.
It's also important to note that we are facing significant demand across numerous lines of business.
All of that said, we can and will do better. My colleague, James Clements, is going to speak to that more specifically.
Honourable members, we are pleased to report that our rail network performance is improving. The grain supply chain is on the road to recovery
Our operations team has been focused on moving grain and working extremely hard to rebound from the weather challenges in February. The data and evidence provide encouraging signs that a recovery has taken hold.
Week 32—March 4 through March10—saw grain shipments increase by 22% compared to the previous week, totalling 484,000 metric tons of grain. This is the highest weekly volume we have moved since mid-December.
Our daily network throughput has increased by 8% compared to last week, and is up by more than 16% overall since mid-February. We placed 10% more empty railcars in the country in week 32 compared to the week prior, a further sign of incremental gains being achieved. I am happy to report that we are up another 5% in week 33. Our network velocity is also improving, with train speeds up approximately 13% this past week versus mid-February.
As weather conditions moderate, we expect the positive trend to continue through March, with a further lift as the port of Thunder Bay reopens. Until Thunder Bay is available, we expect heavy demand for railcars out of Manitoba to ship all the way into the Vancouver corridor.
CP continues to add both crews and locomotives to support a strong recovery. We are adding more than 700 new employees, who are currently in various stages of training, and we are adding 100 locomotives, which will start being integrated into the fleet through the summer.
We have also deployed a “SWAT team” of retirees and CP managers to provide additional crew capacity, which is helping ensure the system recovers as quickly as possible.
As we move into spring, we are taking strong precautionary measures to avoid operational constraints caused by adverse environmental conditions, such as the heavy snowfall melting and the resulting runoff, as well as avalanches.
CP's avalanche monitoring and control program continues to work closely with all stakeholders through B.C.'s mountainous transportation corridor, including Parks Canada and the B.C. highways ministry, to constantly monitor present and forecasted weather conditions that could adversely affect the corridor.
We have also commenced our spring thaw surveillance program, which has strong protocols in place to monitor conditions and respond effectively in the event of high water conditions across our network. Early indications across most of CP's network east of the Rockies are pointing to an average to below average threat for spring flooding. Although we remain optimistic the snow will melt slowly, all precautions are being taken with respect to potential avalanche and spring flooding disruptions.
We continue working closely with our customers to deliver on the commitments of CP's grain products and services to meet their needs. Beyond these measures, we have earmarked between $1.35 and $1.5 billion for capital improvements this year to help strengthen the capacity and fluidity of the supply chain.
Capacity-enhancing infrastructure investments are critical to realizing long-term gains to the overall performance of the grain supply chain. This is particularly true in regard to the market's preference for Vancouver as the primary and growing outlet for grain. CP is hopeful the Government of Canada will prioritize investments under the national trade corridors fund for projects that will enhance supply chain capacity in this corridor.
In closing, as we have said previously, CP strongly encourages the swift passage of Bill by the Senate. Although imperfect, this legislation will provide additional certainty for the grain supply chain, particularly with respect to the potential new hopper car investments.
Again, thank you for the opportunity to be here today. We would reiterate that in spite of the difficult operating conditions this winter, CP is committed to improvement and is still moving more grain than we did last year, and we are well positioned to have a strong year overall.
Thank you.
:
Thank you very much, Mr. Chair.
Many thanks to the officials from the two railway companies who are with us today.
[English]
We called for an urgent emergency meeting two weeks ago to catalyze action for our producers, who don't get paid when grain doesn't move. Unfortunately, the Liberals didn't think it was urgent. The didn't even think it was serious at one time. They didn't want to listen to farmers earlier. We asked to have this meeting last week, but we were refused. Signs were there in the fall that we were facing another impending grain backlog crisis.
Farmers are in a cash crunch, and our international reputation is eroding. The railways have a responsibility to Canadians, in my opinion, to honour their contracts and to move commodities. That is their mandate.
[Translation]
There are just two main railways that serve all of Canada, and we rely on them for our exports and our economy to run smoothly.
As to the matter before us, grain transportation, we had a big problem and we failed. You said that grain shipments were up by 16%, but if you compare that to a slow week, you cannot say that those are good results. When you say that the rate has improved by 16% since mid-February, when the results were poor, I do not consider those good results.
There is still a lot of work to be done. As soon as the crisis became evident, we should have asked the ministers to intervene and force the rail companies to play the role that all Canadians expect of them.
My first question is for the CP officials.
Further to our request for an emergency meeting, the sent a letter that clearly called on you to publish your plan on your website by March 15. I was not able to find that plan, however. Can you tell me where it is?
:
In February, we provided grain producers an average of 3,400 cars during the worst part of the winter. We were able to increase that to 4,500 cars three weeks ago, and to 5,000 cars two weeks ago.
We clearly indicated that the capacity of the network and of the supply chain was about 4,000 cars per week in the worst winter conditions. We can see that the harsh winter is finally letting up, maybe not here in Ottawa or in eastern Canada, but in some regions. Now that the weather is not as bad, we think we will be able to systematically provide over 5,000 cars per week.
You have to consider the process. We have to provide the rail cars, then pull them and get them moving. It is not enough to put them on an elevator and hope they will be filled. Clearly, it will take a lot of work for Michael Cory's team and all our railroaders to meet the objective of delivering 5,000 cars per week in the coming weeks. If there is an incident or bad weather, that figure could be a bit lower, but we think we can do it.
During the worst part of the winter, we usually aim for 4,000 cars. In February, our average was 3,400 cars, so we did not reach our own objective in February and we will work harder to get there. We have a commitment to the market. We hope to be able to deliver 5,000 cars per week so the producers can unload their grain.
:
Thank you very much. I appreciate your being here.
As was mentioned earlier, trade is such a critical component. We've known since 2013 that things were going to get turned around, and things are going in the right direction, but it doesn't seem as though some of the logistics in CN and CP have kept up with that.
You spoke to transparency between the company, Transport Canada, and the customers. As a farmer, I have both CN and CP going right beside me, and there are issues. Elevator agents are concerned. Producers are concerned. We even have municipalities that are concerned when you start taking lines out and all that shipment then ends up being on trucks rather than on railcars.
The other issue is that they're again starting to look at moving trains intermodally. As soon as that happens, we find out that CP has raised the cost of intermodal transport by 10%—at least, that's what we were told, so the question might be whether or not that is true.
Just to comment on the demurrage issues that we have, that cost is going to the farmer. We've talked to elevator agents who are given four or five different times that the train is going to come. They're the ones who are going to call the farmers and say, “Well, here's when you're going to have to be able to deliver your loads and have this opportunity.” That's where the frustration comes from. We can talk about how it has to do with weather and it has to do with other issues, but it doesn't seem as though that plan is getting down to where it has to go.
Therefore, my basic question is this. We know that it's so important, and we have lumber, fertilizer, and oil products, and just a moment ago the concerns about not having pipelines were mentioned. You can't run lumber down a pipeline, and you can't put barley down a pipeline. How are you going to bring all of these aspects together so that the person who is ultimately really depending on this—not the shipper, but the farmer—is going to be looked after?
:
We're not waiting for Bill to pass. We're going to invest $250 million in the network, following our announcement two weeks ago of $3.2 billion for the year. We're not waiting for Bill C-49 to pass.
Bill comes out of a consultation by the minister and David Emerson over an almost two-year period about how the environment is working today. Clearly, we came out publicly saying we don't like to have regulation and we don't think regulation moves more product, but we're saying that there are provisions in Bill C-49 that, for example, will increase the amount of information to be exchanged with the business supply chain, allowing Transport Canada, us, and our customers to have contingency plans to face issues that come up.
Bill is a balanced bill. We don't like all of it, and that's normal, but there are provisions. My good friend Claude Mongeau has said to you that regulation is not bad, but ultimately you want commercial relations between the railways and the grain companies and between the railways and the farmers to dictate in an open market how we make sure that we serve our customers. Ultimately, we'll serve the customers because it's in our best interest to do so, and as I said to you before, Canada's reputation depends on it.
However, I think there are provisions in Bill C-49 that allow our customers to take measures to make us more accountable, which is not a bad thing. We're not looking for regulations for the whole industry, but there are areas where we think we can improve the exchange of information between the railways and our customers.
:
Welcome to our second hour.
Just before we move on, as most of you know, we have an upcoming vote. I think we have to leave at 6:15. We will suspend, and then we'll be back after the vote. That's just to give you a heads-up on that.
Also, we will move the Agricultural Producers Association of Saskatchewan from the last hour to the third hour, which will balance our panels better.
If everybody's okay, we'll get going.
In our second hour we have Mr. Rick White, Chief Executive Officer of the Canadian Canola Growers Association. Welcome, Mr. White.
From the Canadian Federation of Agriculture, we have Mr. Ron Bonnett, who needs no introduction. Thank you for being here, Ron.
We also have Mr. Mark Dyck, Senior Director of Logistics at G3 Canada Limited, and from the Western Grain Elevator Association, we have Mr. Tyler Bjornson, a consultant. Welcome to you both.
We shall start with Mr. White.
If you wish, you have up to seven minutes each for introductions.
:
Thank you and good afternoon, Mr. Chair and members of this committee. My name is Rick White. I'm the CEO of the Canadian Canola Growers Association. Thank you for inviting me here today to contribute to your committee's investigation into the current grain transportation backlog.
The Canadian Canola Growers Association is a national association governed by a board of farmer–directors that represents the voice of Canada's 43,000 canola farmers from Ontario west to British Columbia. In crop year 2017-18, Canadian farmers harvested an estimated 21.3 million tonnes of canola, and that is an all-time record.
Canada is the world's largest exporter of this highly valued oil seed, and we grow a truly global crop. In any given year, over 90% of Canadian canola, in the form of the raw seed or the processed products of canola oil or canola meal, is ultimately destined for export markets in more than 50 countries around the world.
Canola farmers critically rely on rail transportation to move our products to customers and keep those products price competitive within the global oilseed market. We have no alternative. The competitiveness and reliability of the canola industry, which currently contributes over $26 billion annually to the Canadian economy, is highly dependent on the supply chain providing timely, efficient, and reliable service.
Last year, Canada's railways transported over 50.7 million tonnes of grain originating in western Canada. It is a complex system, but we need to make it work to the benefit of all parties and the broader national economy as a whole. Farmers occupy a unique position in the grain supply chain, and this is what fundamentally differentiates this supply chain from that of other commodities. Farmers are not the legal shippers, but we bear the cost of transport, as it is reflected in the price we are offered for our products from the buyers of our grains and oilseeds, who are the shippers.
Simply put, farmers do not book the train or boat, but they ultimately pay for it. Transportation and logistics costs, whatever they may be at a point in time, are passed back and paid for by the farmer. Transportation of grain is one of several commercial elements that directly affect the price offered to farmers across western Canada. When issues arise in the supply chain, the price farmers receive for their grain can drop, even at times when commodity prices may be high in the global marketplace.
Another transportation-related issue for farmers is that until their grain is delivered to the buyer, they are not paid. Cash flow depends on grain delivery, regardless of the terms or dates that may be specified on a contract.
When transportation issues disrupt the typical commercial flow out of a bulk elevator or process facility, it affects the ability of the buyer to accept the contracted grain in the agreed-upon window, as there may be no physical space available. When this becomes highly unpredictable or there is a sustained lack of rail service, weeks or months in length, the reverberations extend back directly to the farm gate. It also extends forward to final purchasers in export markets, as grains do not arrive when planned, damaging the reputation of Canada as a solid and dependable source.
This is a primary reason that western Canadian farmers have such an interest in transportation: it directly affects personal farmer income.
Beyond that, farmers critically rely on the service of Canada's railways to move grain to export position. The last several years of reasonably good overall total movement and relative fluidity of the supply chain should not lessen our focus on seeking to improve and do better, as a sector and a nation, as fundamental issues continue to exist.
The current transportation predicament can essentially be grouped into three related but separate issues. The first is that the current rail service issues have created a backlog of grain. The second is the need for immediate government action, and third is the linkage to Bill .
Starting with rail service, one of Canada's class I railways has incurred what we can politely characterize as a system-wide sustained operational failure on its network. As it has conceded, this was largely a problem of its own internal business forecasting and planning, which then was exacerbated by the effects of annual winter operations and various other disruptions.
The other has had better performance overall this year, but at times still at unacceptable levels. The dismal service level sends signals to elevators to not accept grain and in turn to producers to not ship grain. Producers who need to pay bills and purchase inputs for seeding cannot do so, at no fault of their own, and there are no options. Poor rail service causes disruptions in the market for producers, for shippers, and for our export customers. The level of service seen over the past period has been simply unacceptable.
In terms of the second issue, the role for government starts with a recognition that Canada is served by two major railways that operate in essentially monopoly positions. There are no alternatives to move our large volumes of grain. Governments need to play a role in balancing the power of these railways. We were pleased that Minister and Minister have directly communicated with the railways and demanded an action plan, but this should not be needed. Rail should move regularly and predictably on a permanent basis. Bill can help in that regard.
For farmers impacted by the poor rail service, cash flow can be a problem. A proactive policy measure available to government could be to increase the maximum limit available under the well-established federal advance payments program. The increase would expand farmers' access to competitive financing while the backlog clears the system, maintain flexibility in grain marketing and farm management, and be at no cost and low risk to the government.
The program maximum is currently set at $400,000. Aside from the transportation challenges being discussed today, a compelling business case for an increase already exists. Since the limit was last set in 2006, farm size and demographics have evolved, farm expenses have grown, inflation has increased, and the grain marketing environment has become more volatile. A limit increase would work to ensure that the program remains relevant and continues to help farmers finance their operating requirements, especially in times like these. Increasing the limit would provide an additional tool for farmers to manage cash flow and finalize 2018 production plans, with spring seeding close on the horizon.
The railways have committed to take steps to improve service, with action plans already set in motion to obtain resourcing. With winter almost over, we expect to begin seeing service improvements in the coming weeks, but an increase to the limit under the APP could offer a tool to help farmers who have been directly affected by the current backlog.
:
Thank you, Mr. Chair and the committee, for inviting me to talk about rail transportation and how Bill can help to prevent the same chaotic situation from happening again.
Right now demurrage costs for vessels waiting at port are escalating, farmers are experiencing significant disruption in their cash flow, and international markets are yet again facing volatile delivery dates. You'll hear more about this in later presentations.
We are here today because a mere four years after an unprecedented breakdown in rail transportation amounting to billions of dollars of losses to the Canadian agricultural economy, we are on the verge of exactly the same disaster. The Canadian Transportation Agency, the CTA, held a review, and three years ago the agricultural industry submitted 10 recommendations to this review that if implemented in their entirety would most certainly have helped prevent this near repeat of the 2013-14 disaster.
Incidentally, recommendation 1, which was to give the CTA own-motion authority, which I will address in more detail shortly, would have prevented the current disastrous scenario, because everyone, including the CTA, was aware of a pending crisis as early as last October. The railways were either unaware or didn't care, knowing that the grain would wait. For the short term, and to solve the current crisis, we ask the minister to look at all options available. If that means mandating volume, we simply ask that it be done strategically to ensure that all geographic areas and commodities are equally well serviced.
Second, FCC and several banks have already announced various mitigation programs. The CFA would support Rick's comments about the advance payments program to address any cash flow issues farmers may be experiencing, and would support the expansion and higher levels as recommended.
For the long term, the needs have changed. At first it was thought that just an immediate implementation of Bill would serve us well and perhaps even prevent a repeat of 2013-14, and there was an urgent push to pass legislation quickly, even at the expense of several important amendments. Not everyone believes that this is the key thing right now. We have to ensure that Bill C-49 has the tools to prevent the current crisis from happening again. As it is currently written, it does not, as confirmed by many industry players, including CN, which at the CFA annual meeting said that the passage of Bill C-49 would not have avoided the current crisis. They went on to say that only end-to-end data collection, analysis, and fact-based decision-making could solve the problem. This sounds like a ringing endorsement to give CTA own-motion authority, since for the data to have any value, someone must have the authority to investigate and mandate solutions before a problem has started.
Honourable members, the Canadian Federation of Agriculture recommends the following with some urgency.
First, Bill should be amended to give the CTA investigative authority and the authority to act on its findings by mandating solutions. This would be, for example, investigative authority to be able to request information and data relevant and robust enough to provide a clear picture of transportation logistics, and own-motion authority to proactively mandate solutions. The second is to expedite passage of the bill after the inclusion of industry-submitted amendments.
Allow me to quote the Canada Transportation Act review. It recommended “amending the Canada Transportation Act to confer upon the Agency investigative powers, and the authority to act on the Agency’s own motion and on an ex parte basis, as well as to address issues on a systemic basis and to issue general orders.” The agency itself has requested own-motion powers in its most recent annual report, highlighting it as a major weakness in its ability to discharge regulatory responsibility. Shippers from across all sectors broadly support that request. This amendment will ensure that the regulator has the authority to proactively monitor the system, identify and investigate problems before they become a crisis, and take necessary action.
Own-motion authorities are not exceptional powers in Canadian economic regulation. Other expert quasi-judicial tribunals and regulators often have broader own-motion authorities. The agency's predecessor, the National Transportation Agency, had broad powers to address problems without a formal complaint. The National Energy Board and the Canadian Radio-television and Telecommunications Commission also have the power to act without complaint to address issues within their jurisdiction.
To reiterate, an extension of the agency's own-motion authority would allow for proactive solutions and inquiries when there are reasonable grounds for believing a problem might exist. Such grounds could include statistical evidence, a pattern of complaints, or consistent and credible media reports regarding a transportation service provider's financial difficulties or service failings.
We further support amendments suggested by various industry players, including the long-haul interswitch provision, and the inclusion of pulse crops in the MRE, which would help make our own grain transportation network more competitive and more capable of serving our growing international markets.
The CFA dismisses the argument that amendments will delay the passage of the bill. Members know that this does not have to be the case. Amendments suggested to date have been made by knowledgeable industry players striving to build an effective competitive transportation network and to provide the confidence we need as we continue to grow our international markets.
In conclusion, the excuses of winter weather and unexpected yields don't pass the smell test. The real reason, cutting costs to increase shareholder value rather than focusing on customer service, is much clearer. Information that included higher-than-expected yields, inventory, and grain movement requirements compared to previous years was well known by industry players as early as last October. The fact is that we can no longer depend on railways to get it right without significant regulatory and legislative guidance and authority.
:
Thank you very much for the invitation to be here today to speak about the grain backlog. My name is Mark Dyck. I am the senior director of logistics for G3 Canada Limited.
G3 Canada Limited was formed through the combination of the former CWB and Bunge Canada's grain assets, funded by two strategic shareholders, Bunge and SALIC, with the long-term vision of establishing a state-of-the-art grain handling company in Canada and a new competitor for Canadian grain farmers.
The G3 transportation model was developed well in advance of the formation of G3 in 2015. G3's strategy was formed on the heels of the bumper crop in 2013-14, when the Canadian grain handling system's fundamental weaknesses were highlighted through shipping and rail backlogs. The government of the time intervened with Bill to further regulate the Canadian grain handling system with minimum volume requirements to address the short-term issue.
There were some unintended consequences. Service levels did increase; however, they may have at any rate, as that coincided with warmer weather and the reopening of the port of Thunder Bay. We believe the regulation never solved the fundamental problems in the industry.
Western Canada is blessed with an abundance of natural resources. The markets for those resources rely largely on Pacific export corridors, and grain must compete with other commodities for a scarce resource: rail capacity. G3 is making investments to address some of these issues to ensure grain handling remains competitive with other industries in Canada.
We believe the fundamental issues are as follows.
Insufficient improvements have been made in the grain industry to invest in efficiency improvements. The last major port terminal construction was in the early 1980s. Much of the port terminal infrastructure dates to the mid-1950s or earlier, when the industry was still moving grain in boxcars. They have been upgraded since, but not to the same standard as for other resources, such as coal and potash.
Inland primary elevators are of a newer vintage, with most dating from the mid-1990s to the early 2000s, but many small shippers still exist. The logistical technology that is incorporated at these elevators has failed to keep pace with other industries and is relying on ladder tracks and breaking trains apart. This slows the loading process for grain, which is exacerbated in the cold Canadian winters when it is difficult to air up the train when it is being reassembled.
The supply of grain does not enter the grain handling system in a steady state. Market conditions are such that demand for rail capacity is generally higher in the fall and winter months. The surge capacity required to effectively conduct these exports, particularly off the west coast, does not exist today. Terminals are generally operating at or near capacity, and this problem will continue to grow as the production level in Canada continues to increase.
Early this crop year we saw that farmers were tight holders of grain during what has historically been a very busy season immediately following harvest. The volumes started to shake loose at the same time that western Canada entered winter. The railroads did not have the capacity to service such a spike, following a slower than expected delivery in the early fall period.
If these are the fundamental issues, what are the solutions?
First, it's important to recognize that the situation is not as dire as it was in 2013-14. Production in western Canada in 2017 was 70.9 million metric tons, down about 1% from last year but about 3% above the five-year average. According to Quorum Corporation, the federally appointed grain monitor, total metric tons unloaded at the Vancouver, Prince Rupert, and Thunder Bay ports, which is where the vast majority of western Canadian grain is shipped, is 6% behind last year but on par with the five-year average.
In comparison to 2013-14, Quorum shows that the railways moved 25% more grain hopper cars—that's about 40,000 cars—to Vancouver, Prince Rupert, and Thunder Bay in 2017-18 versus 2013-14. That is from August through January. The February date is not yet available. While rail performance has not met industry's expectations this year, the situation is not as bad as it was in 2013-14. That said, the long-term issues need to be addressed with long-term solutions.
G3's long-term strategy was born out of discussions with industry experts, the railroads, and farmers alike. G3 is investing significant money in a new type of grain handling system featuring loop tracks, a feature not uncommon in the coal and potash industries. We load grain faster and more efficiently than ever before. In addition, we are constructing a new state-of-the-art grain terminal in Vancouver, with loop tracks that will be able to accommodate three fully loaded grain trains intact on the property. G3 is making investments that industry has not experienced in decades, investments that will create surge export capacity, rail efficiency, and velocity.
In periods when demand spikes and conditions become challenging, companies such as G3 will still be able to function at levels not seen anywhere else in the industry. We are able to load a full, 134-car unit train even in extreme cold weather by keeping the trains intact, with the railway locomotives on the train. When locomotive power is not left on the train, the railroads are forced to shorten train lengths to ensure they can properly air out the train for their braking systems. Our model creates a win for us as the grain handler, as well as for the railroads and for farmers.
G3's position is that its investments in efficiency will allow Canadian farmers to effectively reach world markets, allow railroads to function, and allow those grain handlers willing to make the investments to thrive in the long term. Competing exporters around the world—in the U.S., Latin America, the Black Sea, and Australia—have been investing in efficiency for decades. It is time that Canada does the same. We are leading by example in this regard.
The railroads have the responsibility to provide sufficient rail service to the grain handling system. Overall, we are supportive of Bill , which introduces reciprocal penalties, as each party in the supply chain needs to be held accountable. We believe this will provide the motivation required for the railways to be adequately resourced to handle surges in rail demand and winter operating conditions. Further, Bill C-49 introduces the incentive for railways to invest in newer hopper cars, allowing for more grain to move on the same unit train. New, shorter cars will bring additional efficiency to the supply chain and allow companies such as G3 to load 150 cars on our loop tracks, where today we can only load 134. In addition, each car will be able to load about 2.5% more product. This represents a total increase of 16% for each train that arrives at one of our elevators. We would like to see Bill C-49 pass as soon as possible.
We are also supportive of the national trade corridor fund and hope to see some of this fund applied to projects that will further increase railway efficiency, specifically around the port of Vancouver.
In conclusion, I would like to thank you for the opportunity to share G3's unique perspective on the issues and potential solutions pertaining to grain handling in Canada.
Thank you.
:
Thank you, Mr. Chair and members of the committee.
I'm presenting to you today on behalf of my client, the Western Grain Elevator Association. We're pleased to have the opportunity to contribute to your study of the grain transportation backlog.
The WGEA represents Canada's six major grain handling companies, with inland and port facilities from Quebec to British Columbia. Collectively, these companies handle in excess of 90% of western Canada's bulk grain movements. Working alongside grain producers and other rail-reliant industry sectors, the WGEA has been committed to finding long-term solutions to chronic capacity and performance deficiencies in our rail freight system.
The growing backlog of rail shipments in western Canada continues to have a significant negative impact on shippers and the farmers they serve. As you will hear from numerous witnesses over the course of this study, declining rail service over the winter months has created the worst backlog we have experienced since 2013-14.
According to the Ag Transport Coalition, the total railcar shortfall is currently at almost 28,000 railcars. This represents over two and a half million tonnes of grain that companies have submitted orders for that have not been filled in the week they were ordered.
Overall performance over the course of this shipping season has been steadily deteriorating, with car order fulfillment below 50% on average in most weeks. One railway in particular has brought the average down, hitting an all-time low in the week of February 12, when just 17% of cars ordered were filled for that order week.
For grain shippers, that translates into serious costs in the form of not just lost sales but penalties due to vessels waiting at port. It also means a hit to Canada's reputation as a reliable supplier, a reputation that has not yet recovered from the 2013-14 grain crisis. As members of the committee will know, in a highly competitive market like ours, once business is lost to a competing supplier, it is very difficult to win that business back. These are the immeasurable costs that hurt us not only in the immediate term but also for years to come.
In this context of challenging service, we would like to thank Minister MacAulay and Minister Garneau for their interaction with the railways and for working to find ways to see an immediate improvement in rail service, not only for grain but also for the many sectors that are experiencing problems.
As most of you will know, the WGEA has been singularly focused on fixing rail issues in a permanent way. While this current backlog is shining much-needed light on the systemic problems that plague Canada's rail logistics system, the issues are of a much more chronic nature.
The WGEA is of the view that the measures contained within Bill represent a big step in the right direction toward arriving at permanent legislative solutions. The ability to negotiate reciprocal penalties into our service level agreements, for example, is in our view one of the most important provisions contained within the bill.
Consider what has likely precipitated the current rail backlog. Would the railways have planned differently this fall had there been the legitimate threat of penalties for not moving grain and other bulk commodities? We believe the railways would have taken different decisions if credible reciprocal penalties had been in place. Unfortunately, with the provisions of Bill expired and the passage of Bill uncertain, grain companies and farmers are effectively left in this no man's land with no tools or remedies for poor service.
It is to that end that the WGEA has joined with farmers and the entire grain sector in asking that Bill be passed without delay. The bill, as you know, is currently before the Senate committee on transport and communications. We are grateful to the senators of that committee, who are taking the time to ensure the bill achieves its intended goal of better performance by rail.
It will be well known to members that the WGEA is of the view that the bill needs to be improved in a key area with respect to the long-haul interswitching mechanism, the LHI mechanism. The LHI provision is not only more bureaucratic and difficult to use than the extended interswitching mechanism we saw in Bill ; we are also concerned that the grain sector will not be able to leverage its use properly if two small targeted amendments are not made.
As the bill is current written, if an elevator is dual-served—meaning it already has access to two competing rail lines on site—or if it's located within 30 kilometres of an existing interchange, the facility will be excluded from applying for an LHI order. Now, if those two rail lines are both headed in the relatively wrong direction—for example, east-west when the traffic's final destination is the southwestern U.S.—that elevator for all intents and purposes is still captive. The LHI is useless to them.
We have done an analysis on this point and have determined that 75% of all Canada's value-added grain processing facilities would be prohibited from using LHI because of this restriction. In terms of creating competition, we believe this was not the intent the government had when it drafted this provision.
The grain sector submitted an amendment to the House of Commons transport committee study to address this situation, but unfortunately it was ultimately rejected by the House.
It is our hope that now, during these final hours of consideration and in the context of the current grain handling situation, the Senate committee will take this opportunity to include these important targeted amendments in their report.
I want to take these final seconds to address you, the members of this agriculture committee, to ask for your help to ensure that once the bill is brought back to the House, you will work with your colleagues to do whatever is necessary to get the bill passed.
The WGEA, grain farmers, and our sector as a whole have waited too long to see this bill made law. We implore you to work across party lines in the interest of this sector to get the job done.
Members of the committee, the reality is that we've already lost too much in this shipping season. Let's not lose the next one as well.
Thank you for your time. I look forward to your questions.
:
Thanks again, Luc. You're exactly right.
Tyler, you touched on it. I remember speaking in the House about this last September and October; we did want to work across the floor. We adamantly supported splitting the rail transportation off of Bill . We would move it through. I think if that had been the case, we would have caught some of these proposed amendments that you're bringing forward, like the long-haul interswitching and those types of things. If it had been a separate bill, we could have addressed some of these points then, but because it's such a huge bill, it's now stuck in the Senate on something that has nothing to do with what we are talking about right now. That's the frustrating part of this entire discussion.
I like to think that when we went through this in 2013-2014 as the government, we knew what we were facing. Bill would have addressed some of these issues in good faith. We said, “We're warning you that this is going to happen, so let's try to address it.” It is frustrating for us, but it's more frustrating for you as producers and stakeholders that you're having to go through this again when there was opportunity to try to fix this situation.
Rick, you brought up an interesting point that I think we missed out on, and it's a fact that Tyler brought up too: we're missing markets that we may have had. We're not getting a premium for our product, because on the international trade market when we're talking about our producers and we want agriculture to have a $75-billion trade business, which is fantastic, we're taking away every possible tool for our producers to be able to reach those types of goals.
Can you touch on the fact that we are not getting a premium for our product because we are no longer a reliable trading partner because we cannot meet our sales deadlines because we can not get our product to market?
Thank you to the members of this committee for taking on this study. A lot of the farm groups have made a lot of pertinent points, so I won't underscore them again, but this is déjà vu all over again. As has been said, we went through these same things in 2013 and 2014.
I'm hearing a few different things this time around. There's an apology from the railways, which is great. I'm going to go to my banker tomorrow and tell them they can't foreclose, because I've got an apology. However, it's a good start.
I do have a bit of a concern in that what we talked about, which led to Bill C-30 and is now underscored in Bill C-49—there is some more work to be done on that, with a couple of amendments—still comes down to consultation among all of the supply chain to find out what exactly will be required, when, and so on. As Rick said, the prime months for shipment to get that premium dollar are in the fall. Somehow we're still missing that.
I was a little bit concerned when the railways talked about how they allow for 3% growth. From talking to industry, it seems they need 13%, but they're not making that connection. They were talking too about last year's big crop, but in reality it's less than 3% of the five-year average increase. If they're talking 3%, there shouldn't have been a problem.
Also, we're only talking about agriculture here, but there are a lot of other commodities on the rail as well, and I understand that there are concerns from all of them, as we found out in 2013-14. It wasn't just farmers. They began the push to see some changes, but everybody who hauled a bulk commodity, including intermodal and so on, was talking about delays, about boats sitting waiting, about not being able to off-load boats and so on because the capacity wasn't there to do that.
Since that time, there have been tremendous increases in infrastructure through the full supply chain. The railways are now talking about making some of those investments, but it still comes down to track capacity. To get to the bottom of that is again a collaborative effort. It takes data on a week-by-week, quarter-by-quarter basis, going through Quorum and Transport Canada, to figure out where the hot spots are, where there's a problem. Then the shippers, the grain buyers, can make a decision that, for instance, we're not going to run to Thunder Bay this week, because there'll be this type of capacity problem there. We'll run west coast, or we'll run not west coast Vancouver but Prince Rupert, because we see some bottlenecks and capacity problems on those lines.
Again, it needs a collaborative effect, quarter by quarter, week by week, to know exactly what's going to happen. I'm a little shocked that some of the line companies don't seem to understand, or the railways can't figure out, how much volume they're going to have to handle when StatsCan is out there saying what the crop is going to be before I've even brought my combine into a few of the fields. The numbers are always out there. They're reasonably close, within the margin of error. I think what our crop outputs are going to be has to be brought into the argument as well.
Most farmers do those StatsCan surveys. I know you guys get more than you want to do. They call before breakfast and they call after supper, when you're busy.
It's great that you're doing this. It's great that you're having this analysis. Again, the problem comes down to the fact that it's tied up in the Senate and there's no push to break it free there. I know that work was done in trying to split the bill, and that was a good move, but there are things that the can do by order in council to continue what sunsetted in July and get the interswitching back at 160 kilometres, which works well. We didn't pick that number out of the sky. We sat down with the new design that's out there. I mean, at one point there were almost 2,000 elevators across western Canada. Now there are 300, with the same kind of capacity. They're all located a lot further than the 30-kilometre interswitching, which was the rule at that point. We sat down and drew concentric circles where it made sense, and 160 kilometres was the magic number.
I know they're talking about a long haul now of 1,200 kilometres or some such thing, but the average haul out of western Canada at the port in Alistair's country is 1,400 kilometres. We're still a little short there. I'm not sure how workable it is or whether the minister has the ability to tweak that or not. It all comes down to....
Japanese buyers are usually the ones who talk about three things. They love our quality, they're always concerned about the price, and they always bring up the ability to ship in a timely way. Those are the three things I heard year after year after year about Japan, even before we had our problems in 2013-14.
Moving beyond that, there's still a tremendous amount of work to be done to make sure that when we're bidding against the U.S., against Australia, against Brazil, and against the other major producers in the world, we're there in a timely way and can make this thing work.
I know one of the major shippers. He owns 40-some Panamax boats. He doesn't like to come into the west coast because he doesn't want to sit there. There's only money in moving and continuing to move. There were some changes made, and he is now doing some work out of there, but still it's not his first port of call. He needs other things happening.
A tremendous amount of infrastructure is going to be needed. I know there is talk about the corridors. The TPP has now been signed, and that means a lot more product going out, providing we ratify it in a timely way and we're one of the first six, so let's get 'er done. At the end of the day, of course, it's about making sure that we can load those boats and get them on the water and to our buyers overseas.
I'll stop with that, because I know you guys need some time for questions. You also have a vote coming up, I understand.
:
Thank you, Mr. Chair, senators, and MPs, for allowing me to come and provide some comments to you today.
Across the Prairies, farmers are once again suffering the impacts of poor rail service. Unfortunately, this is not a unique experience. We dealt with it four years ago, and that's why I am here today: to ask the committee to back the systemic solutions that can fix rail transportation for the long term.
Grain Growers of Canada represents 50,000 grain, pulse, corn, oilseed, and soybean farmers across Canada, from the Atlantic provinces to the Peace Country of British Columbia.
Personally, I run a family-owned incorporated grain farm in south central Alberta, near Olds, growing wheat, malt barley, and canola. Grains off my farm are shipped south to the U.S. and to Mexico, and shipped through the west coast to ports in Asia and around the world. Effectively, every tonne of grain I sell off my farm must travel by rail to get to the end customer, be it in Canada, the U.S., or overseas.
Over the last couple of months, because of poor rail service, elevators are filling up and our grain is not able to get to our customers. This situation has put many farmers across the Prairies in the position where, because their own grain hasn't moved, they haven't been able to get paid.
We appreciate that this committee has recognized the difficult position this has put grain farmers in and has agreed to hold this hearing today. We believe that transportation is not a partisan issue and that all members of the committee should be able to agree on the need to have a rail transportation system that works. That is why we're asking you to come together and support getting Bill amended as we've presented it and passed as quickly as possible.
As has been mentioned, the unfortunate reality is that road bans and seeding are fast approaching. I will quickly just give a bit more information on road bans. Every 10 loads of grain I can haul today without the road ban would mean 13 trips the next time, once the bans are in place. That costs me more money in manpower for that trucker, and naturally it costs more for fuel. Farmers will have to use their skills as business managers to work through the difficult position they have been put in due to these new issues.
However, there is an opportunity to fix this situation for the long term so that farmers are not forced into a rail crisis again. With the amended Bill in place, the industry will have effective tools to hold the railways to account or to be able to take their business to another railway if they cannot get acceptable performance.
I know you've heard of the problems farmers face today, and that is why there is a focus on Bill . First and foremost, the bill provides the ability to hold the railways financially accountable for the service through reciprocal penalties. The current lack of accountability impacts all the players in the supply chain, and ultimately farmers. Giving shippers the ability to hold railways to account through the reciprocal penalties in Bill will help ensure that car orders are fulfilled and my grain can get delivered.
Other benefits of Bill include a clear definition for “adequate and suitable service”, increased requirements for reporting and railway contingency planning, improved data collection, and new powers so that the Canadian Transportation Agency can play a larger role in areas such as improved dispute resolution processes.
However, it is important to understand where Bill falls short.
First, the maximum revenue entitlement, or MRE, is a key tool for protecting grower interest, and it needs to be amended to cover the movement of soybeans. I understand that when schedule II was created in 2000, soybeans were not really grown yet on the Prairies; however, soybeans are now a major commodity. They are the third-largest crop in Manitoba and soon will become second. Their production is spreading across Saskatchewan and Alberta as growers get new varieties. The act also excludes chickpeas, which should be corrected. It is simply unfair that some producers are protected, but not all of us are.
The real benefit of Bill is the long-haul interswitching, which gives shippers the ability to take their business elsewhere if they can't get acceptable service. Grain farmers saw improved service when interswitching was in place previously; often the threat of taking their business elsewhere was enough to get the railways to improve service.
However, as the bill is written today, too many elevators and too many processors will be excluded from long-haul interswitching. This means farmers will likely be put in the same situation of grain being backed up in their bins the next time one railway starts to suffer.
That is why the second target amendment that Grain Growers of Canada supports is to amend the provisions for long-haul interswitching so that it can remain a very useful tool for our grain companies to obtain more competitive terms of service.
Bill 's long-haul interswitching provision allows some of the same benefits as the previous extended interswitching; adoption of the amendments proposed by the crop logistics working group will ensure that oat and other grain farmers will receive the service they require.
Grain farmers across Canada have worked hard to provide the world with top-quality grain, oilseeds, pulses, and corn. We strongly support the government's ambitious target to increase agrifood exports to $75 billion by 2025, but this can only be achieved with a dependable and accountable rail transportation system. We can't meet our target if we can't get our grain to market.
The bottom line is that this year's repeat of the 2013-14 rail crisis is another example showing that we need to see Bill amended and passed as soon as possible. While it may be too late to see significant improvement this year, Parliament has an opportunity to give shippers the tools they need to prevent this situation from happening again. CN and CP have demonstrated time and again that they will not act on their own, and that is why shippers need tools to hold them to account. Without these legislative tools, we know it will happen again. It shouldn't take a farm crisis to get the grain moving.
I thank you and look forward to your questions.
:
Thank you, Mr. Chair, and thank you for the opportunity to present to this committee.
I'm here today to explain how poor rail performance affects my industry, my community, and my family business, and why we need Parliament to take immediate action.
I and my wife Lisa and my brother and my sister-in-law together farm 8,300 acres of grains and oilseeds in northeast Saskatchewan. I am also vice-president of the Agricultural Producers Association of Saskatchewan.
We farm about as far from port as you can get, and in an average year our farm pays $360,000 in freight to get our products to our customers. The backlog of grain in the Prairies has had a huge effect on the ability of producers to cash-flow their operations and is making things extremely difficult for farmers going into their most expensive season. In the northeast, we are sitting with 3-month-old grain contracts undelivered due to the shortage of timely and sufficient railcar service to the elevators. At the end of February, personally, we were sitting with an outstanding wheat contract from December that we had been unable to deliver. This was leaving us in an extremely tough financial position. Luckily, our local elevator, which is one of only four in Canada that are serviced by both CN and CP, found some room to take our product and help us out. They didn't have room to take the entire contracted amount, but just enough to give us the money we needed at that time. We don't get paid on a contract until we deliver, and these delays place financial and personal stress on us as producers for something that shouldn't be a concern.
Two of the short lines that operate in northeast Saskatchewan have also felt the pinch of the lack of rail service this season. They have had a very poor and inconsistent supply of cars this shipping year, and this problem started in October, long before winter showed up again in Canada. They have also had several cases of cars that have been loaded and then not picked up for weeks. Producers do not get paid for the product loaded in these cars until it is received by the end user, so this is again placing unnecessary financial and mental stress on producers.
A lot of the highly sought-after oats grown in northeast Saskatchewan are loaded on these short lines in either dealer or producer cars. I grow 2,200 acres of these oats every year, and with poor rail service the market for these oats is in jeopardy. The processors need to find alternative sources for their oat supply, since our railroads have dropped the ball on shipping our product in a timely manner. My little boys want their oatmeal most mornings. I want that to be Canadian oats from Tisdale, not oats from Australia.
The rail issue isn't just affecting grain deliveries. Our local fertilizer dealer has been trying to put fertilizer in place for us, its customers, since last fall. Due to rail logistics, they have to pull fertilizer by truck out of Redwater, Alberta, instead of Clavet, Saskatchewan. That's an additional 1,000 kilometres per trip. So far this season, they have had to pull roughly 60 loads of fertilizer from Alberta, and that is only half of the product they require. If things continue like this, we are looking at an additional 120,000 kilometres of trucking freight. That's added manpower, truck power, wear and tear on the roads and equipment, costs, and carbon emissions that we as the end users are going to have to pay for. Spring road bans will be coming into effect very soon, and we could be short of fertilizer in western Canada to put in this year's crop. All of this is due to poor management and planning on the side of the railroads.
Farmers need to get the rail service that we pay good money for. Bill was drafted because of the disastrous shipping season of 2013-14, and it's completely outrageous that we are even here today and talking about this again.
In closing, we need all parliamentarians, from both the House and the Senate, to come together and pass Bill for the sake of the shippers, the processors, the retailers, our economy, our farmers, and all Canadians. Farmers already deal with so many unreliable factors—weather, crop prices, input costs—but reliable rail service is something we should be able to depend on every year.
Thank you.
:
Thank you very much. I'm glad the witnesses are here so we have an opportunity to talk and everyone can listen to some of the concerns that exist.
Ian, you mentioned the concerns you have with short lines and poor service. I don't think people recognize the importance of that aspect. Everything is affected because of it.
The road bans at spring seeding that we talked about earlier are an issue that is going to affect farmers and those who are going in, since even if they start calling for grain right now, it's going to be difficult to move it, and you have all of these other issues. I think that's one of the parts that is so critical for us to look at.
I know, Jeff, you were talking about the long-haul interswitching concerns. I know that when you were engaged in this issue back in 2013-14, this was a critical component as well.
Minister Ritz, we've seen so many things that have happened. You spoke about the tremendous development of infrastructure that is taking place in our system. This started when real investment went to give farmers the freedom to market and we started to see the issues that were expanding.
I thank all of you for the efforts you have made.
I'm wondering, Mr. Ritz, if you could talk about some of the concerns and issues you see, how the order in council was able to move things forward, and why, if that was a solution back in 2013-14, it wasn't done back in December or January when this problem started to develop.
:
We could have gone back further than that and extended it to when they sunsetted in July, just to keep things on an even keel.
The problem we had in 2013-14 was cash flow for farmers, but there were also 60-some boats sitting on the west coast charging huge dollars in demurrage, waiting to be loaded. That's what led to the minimum weekly numbers. It's a very blunt instrument. We were very fortunate in that crop year that the tonnage was all of similar grade. There wasn't a lot of blending required, so it was just a matter of getting the tonnage to Vancouver, onto the boats, and gone.
At the end of the day, that left secondary lines and short lines coming up short. Ian was just talking about that too. Short lines always face the brunt of not getting the cars they need to move that product, and they serve a tremendous area. I know in the CP case that the southern part of the Prairies is a tremendous catchment area. I think there are six or seven short lines that feed in, and they're not used to the extent that they could be. There are elevators out there on those lines. Some of them were farmer-owned terminals, and still are, and they need access to do that.
The does have some tools that could be put in play now while waiting for the Senate to make its move. He could reinforce the 160-kilometre interswitching. He could talk about volumes that have to be met, although maybe not to the same extent, because I understand that there are only 40 boats sitting there now, maybe not all for grain.
At the end of the day, there are tools that he can put into play while he waits for the Senate to finally get around to doing something, and it may actually put some pressure on the Senate to finally move as well.
:
As I said, the existing number was 30 kilometres. You could see one elevator from another one. Every little town had its name on it, and you never got lost because you knew exactly where you were, whether you were in an airplane or driving down the highway. Now we have 300 high-throughput terminals, G3 Canada with these loop tracks, and so on. That's the answer: you load on the go and you unload on the go. There's no stoppage at all. At the end of the day, they're farther apart.
When I started farming, we had a three-ton truck and we took it two miles away. Then it got to the point that as we got a bigger truck, the cargo wouldn't fit into the elevator anymore. We couldn't lift the box to unload it, so we were in there shovelling it out. Then they started building bigger elevators, and trucks got bigger to drive farther to service them.
Farmers have made the difference. There's more capacity on-farm than there ever has been before, which is not the answer, because you've got to move it to sell it and get paid for it. Everybody's made the decision to increase their infrastructure, whether it's at port or on the farm. All the grain companies have done that too. They can handle more and handle it faster, and they're open more hours and so on.
However, the weak link is still getting it from that delivery point on the Prairies to the coast, or south, or wherever it is that you're trying to ship it. That's where the infrastructure has to be picked up. Perhaps it needs extra track.
I know a lot of the work the grain companies have done. I drove by huge parking lots at every siding as I came in on Sunday to catch the airplane this morning, and they're all sitting there. There are no engines on them, but the cars are all there. They've been spotted. Whether that counts in their equations, I don't know; at the end of the day, it's delivery point numbers that matter.
:
The big thing is that they were a monopoly buyer, not a monopoly seller. They put out a three-bushel quota. It made it easier for the railways to keep up, because they'd put out a three-bushel quota up in Ian's area, but I wouldn't get it. Railways could concentrate on Ian's area in that couple-of-weeks stint and get the grain out of there. They did the same thing with Jeff. There was no western Canada-wide movement of commodities. They'd pick and choose and try to keep it fair for everybody so that we all starved to death. I never cleaned out my bins, not once, not ever. We always have a carry-over, even now, but not to the extent that we did then.
The first couple of years that I farmed, they never sold a bushel. I wasn't allowed to sell it to anybody else. I wasn't allowed to trade it. I had grain on the ground, and it rotted. I lost a ton of value there. They'd buy, and then they would make a deal with the grain company here to move product over there. Even when it got to their terminals in Vancouver and a boat came in, they'd say to take some from Ian's terminal, some from Jeff's terminal, and they'd move that boat here and there, to the point that some of the shippers wouldn't even come in and pick it up because it's hard on the carcass of a boat to move it out half-loaded and shove it back in again.
It was easy for the railways to keep up because they were getting little bits and dribs and drabs here and there and so on. The blending was done on the Prairies. If I hauled in a grade 2 and I wanted it brought to grade 1, they would mix in some of Randy's and bring both of us up to grade 1. They would still pay me for a grade 2, and he'd get his grade 1.
Now the blending is done mostly at port and is not done as much on the Prairies, so you have to coordinate those trains coming into the ports to blend that product. That's why 2014 was easy to do with that blunt instrument of minimums, because it was all the same. Every other year we've had low protein here and higher grades over there that we needed to move, but it's all done at port now in a different way.
With the Wheat Board gone, it made it tougher for the railways to keep up. The shippers like it, and for the most part the farmers have liked it.
:
Mr. Chair and members of the committee, thank you for the invitation to appear today.
My name is Warren Sekulic. I'm a director with the Alberta Wheat Commission. I'm a fourth-generation farmer in northern Alberta, and we will actually celebrate 90 years next year.
I am here today because the current grain transport backlog continues to impact my operation and the operations of farmers across western Canada. In addition to sharing my specific experiences, I also offer the strong support of our 14,000 farmer members for the amendment and passage of Bill , the transportation modernization act, as a means of addressing the systemic issues in our freight rail system.
My farm is located 70 kilometres north of Grande Prairie, Alberta, which is over 1,200 kilometres from the nearest port, and we are totally dependent on the one railway that services this line of four inland terminals. With our limited access to processing facilities, market alternatives, or other methods of transportation, almost 100% of the grain and the crops I grow are destined for the export markets and dependent on a single railway.
As with all businesses, planning is an essential part of my operation. Each year, much work goes into planning—planning what crops I'll plant; the amount of inputs, such as the fertilizer and seed I'll need; when those inputs will be delivered; and the timing of the contracts that I will negotiate to sell my grain. Those contracts are usually aligned with when I pay my bills.
As an example, on my farm in 2013-14, as a sound farm management practice, I had all of my forward contracts in place to sell my grain to the local terminal. I had a prudent plan to deliver my grain in a timely manner so that I could pay my land rent and input costs, such as fertilizer and seed. The rent is typically due in the fall. I even had allowed a buffer for rail delays, given that they are commonplace, especially up north.
When the railway failed to deliver in 2013-14, it put my farm business and my livelihood in jeopardy. I'm contractually obligated to pay my rent, regardless of whether or not I deliver my grain. Like most young farmers, I'm cash strapped as I build equity in my business, and because of long delays that year, I needed to secure a bridge line of financing in order to ensure that I could retain my land, pay my debts, and see my operation succeed into the next year.
I am here today, at what is one of the busiest times of the year for my operation, because as I head into the 2018 planting season, we are once again experiencing a backlog in the freight rail system which is impacting my operation and farming operations across western Canada that are reliant on the freight rail system.
When it comes to rail transportation in Canada, the agricultural sector has always operated in a monopolistic environment. Each year, our farmer members grow millions of tonnes of wheat, other grains, and oilseeds. We rely almost entirely on rail transportation to ship our products from the Prairies to port terminal facilities on the west coast and to Thunder Bay and south of the border into the U.S.
Costs associated with railway failures, such as demurrage fees and lost sales, are ultimately passed down the supply chain to me, the producer. As the price-taker, I'm dependent on the price the market dictates. I cannot adjust my price, the price of the products, so ultimately these increased costs reduce my profitability.
AWC appreciates the government's commitment to legislation that will ensure a more responsive, competitive, and accountable rail system in Canada. We believe that Bill is in fact a historic piece of legislation that paves the way for permanent, long-term solutions to the rail transportation challenges that Canadian farmers have faced for decades.
Passage of this bill is imperative, especially in light of poor rail service that shippers have been experiencing in western Canada this year, with the poorest period of car order fulfillment dropping as low as a combined 32% between CN and CP, reaching the levels experienced during during the 2013-14 crisis. In any other business, this lack of performance would be unacceptable, but in the grain sector, these service levels are all too common.
Because of this poor service level, currently I am left with a significant amount of grain on my farm, grain that was all contracted for delivery in October, November, and December. This type of backlog causes a cascading effect, not only on my operation but across the entire system. For instance, I had peas contracted for delivery in November, and when railcars didn't arrive to take my peas as scheduled, I had to bear the cost and resources of bagging my peas and leaving them on the ground in temporary storage, pending the availability of railcars to make up this shipment.
As the snow starts to melt now and the railway has still not fulfilled my delivery, I have to now use further resources to move the peas from bags to bins so that my product doesn't get damaged.
I, like most farmers, have contracts scheduled with terminals on a fairly ongoing basis, so when cars eventually do arrive for my peas contracted in November, the contracts that I have in place for March delivery of my canola get pushed into April. April contracts get pushed into May, May into June, and on and on. This is further complicated by spring conditions in which road bans are instituted, making it almost impossible to deliver my grain if delayed trains do arrive. This is not a fictitious backlog; this is reality.
As I and other farmers ramp up our operations to prepare to get our seed in the ground for this growing season, we are feeling the impacts of the current backlogs in the system. Farmers who haven't had the opportunity to deliver their grain in as long as six months are strapped for cash flow to buy inputs for this year's crop, and systemic rail failures often cause delays in receiving inputs, such as my fertilizer, which has actually been delayed since December.
In January I was in Ottawa to deliver this same message to the Standing Senate Committee on Transport and Communications. Now it's March, and while I have moved some of my grain, I am still significantly behind. From all indications, between the backlog and the spring conditions, as well as my focus on getting the crop in for next year, I will likely not deliver my grain until we're into April or May. For some of my contracts, that's almost eight months later than what the contract stipulated, which is eight months of not getting paid.
For these reasons, I am advocating for the amendment and passage of Bill , the , as a long-term solution to addressing the ongoing freight rail failures.
With respect to the role that reciprocal penalties play in this legislation, railways have long had a variety of measures that govern shipper efficiencies, including asset use tariffs. These tariffs are used to penalize shipper failures through monetary fines in order to gain shipper efficiencies. For example, when the railway spots my cars at a local elevator and the grain company fails to load them within 24 hours, the grain company faces an automatic monetary penalty. On the other hand, if the railway shows up two weeks late, there are limited or no penalties. Therefore, the railways are the only link in the grain logistics supply chain that are not held to account.
We were recently made aware that CN Rail has included a form of reciprocal penalties in their service level agreements. On the surface, this seems like good news, but these penalties are still extremely one-sided. As an example, they give CN the ability to spot cars at any time in a period of more than a week, while grain companies are still required to load these cars within 24 hours or face penalties. Bill provides the ability to establish service level agreements with truly reciprocal penalties.
Under Bill , which expired on August 1, 2017, interswitching provisions, which allowed shippers to access any interchange within 160 kilometres, proved to be a powerful and effective competitive tool to improve competitiveness for grain shippers.
:
Thanks for that story, Warren. I've heard from farmer after farmer after farmer that we can't get our grain to the ports and we can't get paid. That's kind of the big thing.
Mr. Chair and members of the committee, on behalf of the Western Canadian Wheat Growers, thank you for holding this meeting. I'm glad this issue is getting the attention it needs, although I am saddened that we have to be holding this meeting at all.
As a grain farmer, I can state without hesitation that when our rail lines are only hauling 50% at most, a lot of people and a lot of farmers are hurting.
Unfortunately, one of the reasons these statistics have risen in the last couple of weeks is that carriers are running more trains on main lines, and many farmers and terminals on the side branch lines are still woefully short of rail stock. In addition, we are now facing spring breakup in many parts of the country, so road restrictions are coming into place. Then we have planting season. We can ill afford to have these kinds of rail backlogs in the future.
As I stated, I personally know of many grain farmers who are having the same problems as Warren. One in particular has a barley contract worth three-quarters of a million dollars that is three or four months behind. He's a good-sized farmer, but that's a lot of money to be waiting on.
When grain is sitting in a farmer's bin, of course we aren't getting paid. We can't pay our bills, and the domino effect rolls out across all the towns and across the Prairies. On top of the immediate financial problems, farmers are attempting to make decisions for the looming crop year. When cash flow has all but stopped for many farmers, the future looks bleak.
I'd like to remind the committee—and Ian did it earlier—that in 2014 this not only affected grain but also the fertilizer coming up from the Mississippi. It ultimately made it here, but it gave input companies a reason to jack the prices, and farmers had to pay for that in the end. Truthfully, it shouldn't be this way and it doesn't need to be this way.
I'm glad that CN acknowledged they had made mistakes. This is a good start, but good intentions do not resolve the problem that grain farmers are facing.
I recognize that we can't discount weather, because it is an obvious safety issue. With that said, rail has run in Canada for over a hundred years. Cold temperatures and snow in July shouldn't be a surprise, and we need better planning for that. CN and CP need to be better prepared. They need to not get rid of power and have more front-line manpower. Obviously their forecasting was poor, so I suggest maybe they spend some money on that.
Although Bill isn't a perfect bill, it does give shippers some clout and does put some of the onus back on the rail companies. We need to pass this bill, with some of the proposed amendments, sooner rather than later so that farmers have that much-needed protection.
The government has stressed this year that agriculture will play a major role in strengthening our GDP and the middle class. We grain farmers are up to the task. We are among some of the most productive grain growers on the planet. Unfortunately, with the current grain transportation problems, we won't be able to easily meet these objectives. There are tens of thousands of farmers and hundreds of thousands of middle-class people who are negatively affected by backlogs like this.
We need an efficient transportation system. We need to be able to move all commodities to market: grain, minerals, raw resources, and finished goods. We need to be able to meet our customers' expectations. We need good rail lines that meet timelines, and we need pipelines for oil. The Western Canadian Wheat Growers believe this is a non-partisan issue. Ships are waiting in Vancouver. Farmers have the grain that needs to be exported on these ships. Farmers and grain shippers want to work with you, the governments, and we want to work with the rail companies. Let's collectively solve this problem.
In closing, Mr. Chair, Bill needs to be passed as soon as possible. We need long-term solutions to the problems we are facing today, but first and foremost we have to get this bill through. Get it done before the summer comes along so that we can work with some of these clauses in there and make sure they work.
Mr. Chair, I thank the committee for meeting today. Let's make certain that we, collectively, are not just talking. We need to be doing, and starting today, we need to fix this problem for the long term.
I look forward to answering your questions.
:
Thank you, Mr. Chair and members of the committee, for having me here today to speak about this important issue in the grain transportation system.
My name is Dan Mazier. I'm the President of Keystone Agriculture Producers, which is Manitoba's general farm policy organization representing over 7,000 farm families. I'm also a grains and oilseeds farmer northeast of Brandon, Manitoba.
In 2013-14, Canada suffered from a grain transportation crisis that is estimated to have cost western Canadian farmers approximately $6.5 billion. When shippers—my grain buyers—are unable to readily move their commodities to port, they will begin offering farmers lower cash bids or no cash bids for their products, so although farmers are not the actual shippers ordering the railcars, they are the ones who end up bearing the costs of the poor rail service.
The Government of Canada responded to the 2013-14 crisis in several ways, including an order in council that penalized the railways for missing grain movement targets and an accelerated schedule for the statutory review of the Canada Transportation Act. Out of that review came several recommendations that were incorporated into Bill , which passed in the House of Commons and presently sits before the Senate, as you know.
In 2013-14, the magnitude of the crisis caught many in government and industry off guard. This time around, we became aware much earlier of the challenges that railways have been having in moving our grain this year, largely because we now collect information on grain car orders and deliveries. This is done by a group called the Ag Transport Coalition, which reports weekly data on the number of grain cars ordered by shippers compared to the number of cars actually delivered by each railway.
According to Ag Transport Coalition data for Manitoba, six weeks ago, at the beginning of February, CP supplied 74% of cars ordered. So far, so good.
CN delivered 14%.
Things only got worse from there. In CP's worst week in February, they only managed to deliver 17% of ordered cars. In CN's worst week, they delivered 0% of their orders. On average, combined, the railways delivered only 29% of the cars that were supplied on the want week for the month of February, which created a backlog of 28,000 cars, or approximately 35,000 trucks, leaving more than 30 ships waiting for grain off the coast at the port of Vancouver.
How do we move forward and fix this problem before permanent damage to our country's reputation as a reliable shipper of grain is done again?
A good first step is to come up with a plan to get the grain moving. As the committee knows, a co-signed letter went out to the railways from Ministers and requesting such a plan and a report back by March 15. I also understand that CN has taken a proactive approach in communicating with shippers with how they want to move forward. It all boils down to more people, more locomotives, and more products. I would encourage this committee to monitor and support the ministers, using all the tools possible, so that we can all keep pressure on the railways to keep the backlog cleared.
The elephant in the room is that we need to have Bill strengthened and passed as quickly as possible. As you know, it is presently before the Senate. Along with other farm stakeholders, I have given presentations with amendments that we argue will create a policy environment whereby the railways are held more accountable for their service failures and the impact they have on shippers.
I would like to point out that the current design on the long-haul interswitching option in Bill is being viewed as overly restrictive in terms of which shippers are eligible to apply for it. We are recommending clarifying the existing language for interswitching to ensure that it is as effective as possible for shippers to access this program.
The most impactful amendment we are recommending is to empower the Canadian Transportation Agency to initiate investigations into service issues when it becomes aware of them and to mandate solutions when necessary. Presently, the agency's ability to act under most provisions of the Canada Transportation Act is triggered by an application or a complaint.
For instance, although the agency is allowed to act on its own motion with respect to air carrier tariffs for international services, it can only examine and potentially correct issues with domestic tariff provisions in cases where an application has been received. Similarly, under section 116 of the Canada Transportation Act, the agency's power to order measures to address rail level-of-service issues is conditional upon receipt of complaint. An extension of the agency's own-motion authority would allow for a proactive initiative of inquiries when there is evidence that a problem might exist.
This may include statistical evidence, a pattern of complaints, or consistent credible media reports regarding the transportation service providers' financial difficulties or service failings. The authority would be particularly relevant to matters affecting more than one transportation service provider or user, for which the existing complaint-based process is not particularly well suited.
This measure was one of the recommendations made by David Emerson in 2016 in the report to the Government of Canada that Ron Bonnett alluded to earlier this afternoon. We agree that these measures are necessary to help resolve service-related challenges that appear to be inherent in a monopoly marketplace such as Canada's grain transportation system.
In addition to these service-related measures, we are requesting that soybeans and related products be added to the schedule 2 list of grains that are eligible to be covered under the maximum revenue entitlement. In Manitoba, with more than two million acres planted in 2017, soybeans represent our third-largest crop by area. Currently the transportation costs for soybeans are as much as 40% higher per car than the MRE-covered grains, with no promise of getting these cars. They are charging more, but we're still not getting those cars in the first place. There is no reason that the farmers, who have innovated and adapted to changing conditions, should be denied the same protection from price exploitation by an monopoly industry that other crops receive.
To conclude my remarks, I would like to make one point very clear.
It is critical that Bill pass with these amendments before the House rises in June. This way shippers and carriers will know what their obligations are under the law. They will make the needed investments to ensure that the 2018 crop is delivered to customers on time and that we do not suffer the same economic hardships as a country that we have now suffered twice in less than half a decade. The railways must face repercussions if they fail to meet acceptable service standards. They must not be allowed to gouge captive shippers of soybeans. Their performance must continue to be carefully monitored and action must be taken when they fail.
In Canada our growing season is very short. Our seeding and harvest windows are narrow and it is difficult to predict how long they will last. To deal with this challenge, we invest more in equipment than nearly any other farmer in the world, and when the conditions are right, we work all day and all night to get the crop off the field and into the bin. I fully expect the railways to make investments necessary to get the job done, and if it requires senators and members of Parliament to work all day and night to get Bill C-49 strengthened and passed into law, then I expect that of you as well.
Canada's economic well-being is critically tied to rail transportation. Do not shy away from your responsibility to ensure that the Canada Transportation Act addresses the challenges we face and ensures that Canada's economy can grow to its full potential.
Thank you very much for your time and attention. I look forward to your questions.
[English]
I'm angry, really angry about that, because we told them to act. We told them a lot of times, over and over. This season is failing because of the lack of action by the Liberals. I don't want ask you to be political; I can't. I'll do it.
We told them in June of last year to split the bill, to pass just some amendments that you require. The Liberals defeated all the amendments we proposed. Now you are asking them again to make these amendments to Bill . I hope that this time they will accept, if we want to fix the problem for the long term. I think you should work a lot with the Liberals and try to convince them to accept those amendments, because otherwise you will have another bad season next year.
[Translation]
What is happening is offensive. We asked for an emergency meeting three weeks ago. You are saying we might have been able to change the course of things three weeks ago. Mr. Sekulic, you might have been spared one of the many delays you mentioned. Unfortunately, someone said it was not a rush and that we would have the meeting on March 19.
We have to send a very clear message right away. We have to stop playing games with western grain producers. We have to work to make sure the grain gets to market. It is the government's responsibility. It is our responsibility as a committee to demand that the government ensure that the farmers' grain gets moving so they can be paid. We are playing games with Canada's reputation and with the farmers' reputation.
Mr. Sekulic, how does it feel as a young farmer to see your debts mounting while you are unable to sell your crops? How do you deal with that, in your family? How do you feel?
:
In 2013-14, they cut back too much. At CP at that time, there was a fellow named Hunter Harrison. He started the whole process of making sure that their capital was utilized to the utmost. That changed the way railways use their capital and their investment, but it was at the cost of service. The shareholders were very happy about that response, but it did not serve Canada very well.
You can't look at Canada in the same way that you look at the United States. When you have two independent railways, they have obligations and a lot of rights in Canada, but what comes with that is a lot of responsibility. They have a responsibility to service Canadians, especially people who only have access to one shipper. They've somehow focused away from that.
Even in the data that they were presenting today, there was nothing about “here's what we're seeing for demand”. They know what we're demanding. We need 5,000 cars a week. They know the plan. They didn't mention how many cars. They just told you what they delivered. There was no agriculture language in that at all with regard to delivering cars.
I think we have a long way to go. Two years ago, CN did cut—from what I remember—2,000 employees and several locomotives. They did very well last year. They supplied transport for what we had to ship, but there wasn't much economic activity.
On the other hand, last year we missed on CP. As the president of a farm group, I was irate when I turned around in April and started talking to farmers and there were a lot.... Southwestern Manitoba and southeastern Saskatchewan were hit particularly hard. CP was around 40% to 50% all winter last year, and no one said anything. They got away with it last year.
I kind of feel bad for CN this year, but it has to stop. They don't understand.
:
Thank you very much, Mr. Chair. I'll split some of my time with Mr. Dreeshen.
It's frustrating that we're dealing with this, and it's sad to see or hear from our producers today that they have pretty much resigned themselves to the fact that this is a lost season. It's especially frustrating when, as Mr. Fransoo said, action could have been taken weeks or months ago to address the season, regardless of what happens with Bill .
This is no fault of my colleagues across the way, because we do work fairly well together. Many of the amendments that are being discussed right now that you have all talked about today were brought up at the transport committee by the Conservatives, and the Liberals voted them down at the transport committee.
We're already talking about dealing with things next year, the consequences of this year. This should never have happened if we had acted quickly on the advice from stakeholders and members who went through this before in 2013-14. I'm just shaking my head that while we're having to deal with this situation, we're already talking about how to deal with the consequences.
Mr. Mazier, you talked about CN getting through this before somehow despite massive cuts. It was because nothing was being transported in the energy sector that they managed to get through that, but it's a little different this time around. You're right that they made massive cuts to their staff and their equipment, and now they're trying to scramble to get it back.
Ian Boxall brought it up before, when he talked about how he pays $360,000 a year in freight alone. The cost to the industry of that last crisis in 2013-14 was $8 billion. Do you have any idea what this is costing you this time around, and have you recovered financially from 2013-14?
Again, as we've heard so many times, getting Bill passed with the amendments is the critical aspect of it; otherwise, we'll be coming back to deal with this again later on.
One of the things we talked about earlier was the APP and whether it should be raised from $400,000 to $800,000 and so on. All of those things don't help unless you know exactly when you want to use that tool, because if all you're doing is punting it down the road because you've lost all of the contract opportunities and your marketing....
That can work, and you can use it, but you better know that the year before, rather than trying to deal with it on an ad hoc basis.
Of course, the other aspect of it is trade, which is what we really are missing throughout. I was just in Southeast Asia a couple of weeks ago, talking on trade issues. We tried to say that we'll be able to market these products and that they should look at the great things they'll get if they have our Canadian grain or our beef and so on, but they look at it and say that right now they know they can get it from Australia, and there are no issues there. I know we're losing all of these opportunities because of the way people look at it.
That's one of the aspects that we have to recognize. The railways forecast a 2% or 3% increase and say they'll just do it as the economy looks, but as farmers we are increasing the volumes immensely because we have the skills and the tools and we are going from there. The key concern I have is how we keep this pressure on throughout the summer so that they are ready on August 1, when week one shows up, to handle the issues we always face.