Winnipeg Free Press - PRINT EDITION

Railways' pursuit of profit leaves customers behind

Grain-transportation crisis not due to bumper crop

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Chris Young / The Canadian Press files
CP CEO Hunter Harrison was praised for reducing the railway�s capacity by 450 locomotives and at least 10,000 railcars.

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Chris Young / The Canadian Press files CP CEO Hunter Harrison was praised for reducing the railway�s capacity by 450 locomotives and at least 10,000 railcars.

A few people rolled their eyes back in November 2011 when Agriculture Minister Gerry Ritz told a legislative committee hearing getting rid of the Canadian Wheat Board monopoly meant farmers would no longer have to start their trucks and augers at -40 C in January.

It turns out the minister was right -- but for all the wrong reasons.

Predictably, this winter's grain transportation crisis has those who supported the single desk saying this never would have happened if the board had been left intact, with some going so far as to suggest the solution is to bring it back.

That's not going to happen and debating whether it should takes the focus away from the real issue, which is the fact Western Canadian grain shippers can't get their crops over the mountains without the railways -- and the railways know it.

It is also important to avoid romanticizing how the CWB, in all its previous glory, would have affected the current situation. The available evidence suggests there would have been a problem getting grain through the export pipeline this winter, with or without the board.

Contrary to the assertions by Canadian Pacific Railway and Canadian National Railway CEOs, this is not about a bigger-than-usual crop or colder-than-usual winter.

The railways were in no way prepared to handle the demands of moving a normal harvest this winter, let alone a crop that was 33 per cent above average and shattered previous records in several commodities.

Earlier this month, railways were at least 61,000 cars behind what the grain companies requested and more than 25,000 cars behind what they told the grain companies they could deliver. There is not a snowball's chance in July of clearing that backlog before the crop year ends. Heaven forbid farmers pull off another bumper crop.

Well-placed industry sources indicate railway performance has been lagging for several years. They have been so focused on improving operating ratios for shareholders -- with CP's CEO Hunter Harrison applauded for shedding approximately 450 locomotives and at least 10,000 railcars from the company's fleet -- they forgot their customers.

They can do that. In fact, the railway's duopoly on grain shipments creates a rather unusual scenario in business -- they can make more money by providing less service. Governments figured that out a long time ago and until recently, regulated balance and a certain degree of logistical co-ordination into the system.

One of the differences during the board era was whatever capacity was available was managed through delivery quotas or contract calls to ensure all farmers wanting to deliver had equal access to whatever space was available. That's no longer the case.

Farmers who contracted to sell through the new CWB will likely wait the longest to deliver this year, because the board must negotiate shipments through the same companies it now competes with for export sales. As space becomes available, it makes sense those companies will want to clear their own sales backlog first.

The most notable difference between then and now is the board was in a position to hold the railways accountable for poor performance in a way grain companies, either individually or en masse, are not. The time involved, the legal expenses and the real or perceived threat of railway retribution is too great for grain company shippers.

Taking the railways to task means filing a complaint to the Canadian Transportation Authority, proving the claim, then seeking compensation through civil court. But any compensation the board won went back to farmers through the pool accounts.

Now the federal government has stepped in to give the railways a kick in the caboose, imposing performance targets backed up by financial penalties. But there is no mechanism for delivering any fines collected to those who suffered lost delivery opportunities and sales.

It's also a safe bet this heavy-handed intervention wouldn't have happened during the board era. It was too easy to simply blame the board.

On one hand, it was surprising to see the Conservative government treat the railways like it treats unions. On the other, it's consistent with this government's ideological stance on monopolies, which has more than few wondering what it plans to do with the legislation it has promised to table.

 

Laura Rance is editor of the Manitoba Co-operator. She can be reached at 204- 792-4382 or by email: laura@fbcpublishing.com

Republished from the Winnipeg Free Press print edition March 15, 2014 B10

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