Minister-led Roundtable: Transportation of Grain by Rail - Summary of Discussion


October 20, 2016, 10:00AM to 11:30AM | Saskatoon, SK

Summary of Discussion

The meeting was conducted under Chatham House Rule: “When a meeting, or part thereof, is held under the Chatham House Rule, participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participants, may be revealed”

Notes on Roundtable Discussion:

The purpose of the roundtable was to hear grain producers’ perspectives on the longer-term agenda for transportation of grain by rail in Canada that supports the Government’s objectives for economic growth, a cleaner economy, and a country that remains well-positioned to compete globally.

Highlights of participants’ comments follow, grouped according to four questions that were shared with participants ahead of the meeting.

  1. What will enable efficient and reliable transportation of Canadian commodities to global markets?
    • It is vital that Canada remains competitive with other grain producing countries.
    • We need the capacity to the move the right quantities and qualities of grain to markets in times of demand.
    • Contingency plans developed by the railways are needed to address times when movement is affected by extreme circumstances. Transport Canada (TC) could step in and enforce.
    • Railways are focused on utilizing capacity year-round, but this does not align with producers’ schedules, as their need for capacity fluctuates throughout the year. Surge capacity is required to ensure products are delivered to market when there is buyer interest.
    • The timeliness of movements is essential, including the timeliness of railways to meet vessels at port.
    • Service level agreements are needed to ensure obligations are met by all parties.
    • Accountability for all members of the supply chain, through the development of meaningful Service Level Agreements, would address current imbalances regarding consequences for unfulfilled contracts.
    • Financial penalties must be imposed on railways and be reflective not only of the cost of a late shipment, but must also take into account the ripple effect along the supply chain, including the harm done to Canada’s reputation as a reliable grain producer.
    • The current supply chain is not broken. It is important that the government not break the system in order to seek improvements.
    • Grain production will continue to increase, and therefore more capacity all along the supply chain is needed.
  2. Grain is an important commodity that relies heavily on the broad transportation system of Canada. What would maximize the long-term efficiency, competitiveness and reliability of Canada’s supply chain for grain?
    • The Maximum Revenue Entitlement (MRE) is of vital importance, as it protects producers from monopolistic practices, but also needs to be modernized by undertaking a costing review. A review would determine the current cost to ship grain. Elimination of the MRE would transfer money from the farmers to the railways.
    • A costing review should be undertaken prior to considering any changes to the MRE .
    • The current MRE does not reflect cost savings felt by railways as a result of increased efficiencies over the past two decades.
    • The elimination of the MRE does not necessarily equate to better service for the producer. During 2013, all shipments, including domestic shipments where the MRE was not applicable, saw similar levels of service as those where the MRE applied.
    • The US system had similar performance issues in 2014. Their higher freight rates would result in a large financial burden for western farmers
    • Inter-switching has had very positive impacts, as producers have seen financial savings using the extended inter-switching provisions. Permanent and further extended inter-switching would see even greater benefits. This provision is especially important for minor crops.
    • Providing the Canadian Transportation Agency with increased powers would allow more timely investigation of complaints regarding rail service. The Agency needs authority to act on their own to investigate complaints, which are too costly for small firms to pursue.
    • Current common carrier obligations need to be maintained in the Act and be more strictly enforced.
  3. What information and data are required to improve the efficiency and reliability of the transportation supply chain for grain?
    • Before data is collected, a decision needs to be made on what data is needed and who is best positioned to collect it. A forum is needed to bring together all shippers who utilize the rail system, not just those involved with grain, to participate in discussions regarding data collection.
    • Supply chain wide discussions need to take place in order to eliminate the silos of producers, shippers and buyers. These discussions will enable all parties to work towards performance improvements of the system as a whole.
    • Accurate price reporting in Vancouver would facilitate inter-company grain exchange to fill waiting ships in a more timely manner.
    • In forming a long-term vision of the grain transportation system, it is vital that discussions continue to take place between TC, Agriculture and Agri-food Canada (AAFC) and producer groups.
    • Government is encouraged to continue its support for AAFC /TC data and the grain monitoring program carried out by Quorum, though more timely release of data is required. Better publicly available production forecasts are also required.
  4. How can the Government of Canada best engage to support a commodity based transportation infrastructure that meets the needs of grain producers to get their products to global markets?
    • The current MRE formula needs to be modified in order to provide an incentive to railways to invest in infrastructure and increase capacity, including during the winter season.
    • The producer car structure is struggling due to factors such as the ability for railways to close loading sites, and the need for receivers, independent of the grain companies to distribute cars at ports.
    • Capacity and investments are needed at the Ports. The government should work with industry and the other levels of government to expedite proposed capacity expansion.