Saskatchewan's farmers produced a record crop in 2013 but as grain languishes in elevators and ships waiting to be loaded sit in Vancouver for weeks on end, the excitement of that bumper crop is beginning to fade into frustration.
A major backlog on the railways - estimates peg Canadian National and Canadian Pacific Railways at tens of thousands of cars behind schedule - has left many farmers wondering why they can't get their grain to market. At least 100 of those concerned farmers met in Humboldt on Feb. 19 at a meeting of the Agricultural Producers Association of Saskatchewan (APAS). There were several speakers who explained the problem as they see it, from a lack of incentive for railways to increase costs by upgrading service to delays at the Port of Vancouver, where much of Saskatchewan's grain is exported around the world.
"I believe it's a logistics problem," said Gerry Gault, president of Grain Workers' Union Local 333. "Getting grain onto boats faster has to be our top priority," he said to applause.
The questions from the crowd were many, although most centred around one issue: where are the rail cars?
The answer is complicated but according to Richard Gray, a professor of agricultural economics at the University of Saskatchewan and a farmer in Indian Head, the main issue is one of power imbalance: the railways aren't nearly as desperate to move the grain as the farmers are, especially during the winter months, when it's more expensive.
"We're hearing the railways say, 'We don't have to move the grain this year because if we don't we can move it next year,'" Gray said. "That's evidence of how much market power they have because they have captive shippers."
There's also the issue of the revenue cap, a limit imposed on the rail companies by the Canadian Transportation Agency that caps how much CP and CN can earn by shipping grain. According to Gray, the cap creates an incentive for the railroads to ease back on shipping grain during the most expensive times of year, as no matter how much grain they ship there is a limit on how much they can make. It's a system that manages costs for farmers but can make it more difficult to ship grain when there is a bumper crop.
"Railways plan for a particular size of crop and when it comes in bigger than that you'd expect they'd be short of crews, short of trains," Gray said. "Similarly the terminals might not have the workforce they need to fully move the grain."
The issue is primarily one of transportation, the rail link that connects the grain sitting in terminals in Saskatchewan with the waiting ships in Vancouver and elsewhere. For some railway executives, devoting cars and crews to grain isn't as attractive as other options.
"If you had one commodity where you made this much on, and another that you were capped and you made that much on, which one would you give attention to?" asked CP President and CEO Hunter Harrison to reporters in Calgary. He added that CP is still committed to clearing out the grain backlog.
"The best thing for us to do right now is to move grain, and that is what we are trying to do, and we are setting records."
Some farmers might be inclined to support a removal of the revenue cap to encourage CN and CP to ship as much grain as possible, but Gray said that would be a mistake that would only cost farmers more money.
"Producers in Montana, where they have an unregulated railway, are paying twice as much on freight rates as we are," he said.
Discussion at the APAS meeting also turned to the potential solution of political advocacy and lobbying. APAS members were traveling to Ottawa soon but weren't necessarily optimistic that they would be able to gain much traction with decision-makers.
As the days and weeks pass with no significant ease in the grain backlog, farmers who haven't been able to sell their grain yet will continue to feel the squeeze. What many thought would be a dream crop season has instead turned into a bit of a nightmare.
"It's really put farmers in a tough situation," Gray said.
