Photo by Susan Reidy.
Western Canada has seen a 20% increase in crop production in the last 10 years, said Joan Hardy, vice-president, transportation, Richardson International, during a panel discussion at the Canadian Global Crops Symposium in Calgary, Alberta, Canada.
“Exports can only happen with rail service,” Hardy said. “Fortunately, rail service has been available to handle these larger crops for a number of reasons. Part of it is because the demand from other commodity groups has been depressed. That’s created glut capacity for grain and we’ve taken full advantage of that.”
Cold weather is one of the worse enemies of the rail industry, and warmer winters the last few years have been helpful in moving grain, she said. Railroads also have figured out new technology so they don’t have to reduce train length as much in cold weather.
That’s important to farmers because delays can result in a basis rise of C$10 to C$20, said Kent Erickson, a farmer in Irma, Alberta, Canada, and former director of the Alberta Wheat Commission. That can translate into anywhere from a loss of C$50,000 to C$100,000 just because of delays in the transportation system.
Grain companies have invested in country facilities to increase unit train loading and have invested C$1.1 billion in the last two years on increasing storage, loading speed and trucking capabilities at country elevators. Hardy noted that this year 82% of grain shipped from Western Canada is moving in unit trains.
Much of the growth in exports is happening in the West Coast corridor. Of the 7.7 million tonnes of growth, 6.5 million tonnes has been through West Coast ports, she said. Vancouver port has seen significant capital expenditure the past few years in expectation of this growing market demand. Additional expansions will come online in the next 12 to 18 months that will increase throughput capacity by 11 million tonnes.
“This represents the capacity of the future,” Hardy said. “Much of the 6.5-million-tonne growth happened before this capacity was there, so we are well prepared for the future.”
Looking forward, the grain industry is anticipating continued increases in production. Conservative estimates call for a 2% to 2.5% increase annually in Western Canadian production. That means the region could see a 90 million tonne crop 15 years from now, she said. That’s 25 million tonnes more than what the industry has seen in the last four years.
The question is: How does the industry move that much grain? Hardy said from an origination standpoint, the industry is in good shape. The number of grain elevators has shrunk from upwards of 500 about 15 years ago to 345 elevators today in Western Canada. Of those, 142 elevators can load unit trains with 100 plus rail cars.
“There are others that are going to be adding high capacity loop track type of operations,” she said.
Erickson said having larger elevators is important because shippers need to have the inventory in place.
“I think that’s important for the producer when it comes to the rail system, knowing we can get inventory in place, so it’s ready when the rail car or ship shows up,” he said. “It makes it better for the end users.”
In the next five to 10 years Hardy said she anticipates the government grain car fleet will be replaced, hopefully with highly efficient cars that are shorter, lighter, and with bigger capacity. Given that most of the current cars are low cube hopper cars that are 40 to 50 years old, there is definitely an efficiency opportunity, Hardy said.
“With one-to-one replacement, we would increase capacity by 6%,” she said. “Adding more cars would give us the capacity that we need.”
She also anticipates trains are going to get longer. There are some announcements already about the railways looking at handling longer trains from the grain elevators. That will add capacity and reduce crew requirements as well.
Positive train control is a new technology being implemented in the United States that allows trains to be slowed and stopped remotely from dispatch centers. It’s expected to come to Canada in the next 10 to 15 years, and has the potential to reduce crew sizes, which means delays that happen now related to crew rest or shortages would be lessened, Hardy said.
“It also allows trains to be moved more closely together, effectively increasing the capacity of different line segments,” she said.
Another innovation that needs to be investigated is the ability of vessels to be loaded in the rain. Two-thirds of exports are going to the West Coast, where rainy weather is common. More vessels need the proper equipment to load in the rain, Hardy said.
“As we’ve seen this year with long periods of rain in October and again in March, it can definitely have impact on capacity,” she said. “This is one area where the rail industry needs to put some focus.”
Erickson said the grain industry needs credible and transparent data on rail metrics, rail supply side information as well as shipper demand side information. This is needed in order to find long-term solutions, and to understand where the downfalls are, and where there can be more efficiencies, he said.
“We need to build a healthy relationship along the transportation value chain,” Erickson said. “That can only be done through accountability, transparency and most importantly, honesty and trust.”