2. Wheat is Moving More Efficiently in the United States
By Shawn Campbell, USW Assistant Director, West Coast Office
While logistical problems continue to hurt farmers and delay grain movement to export facilities in Canada, similar challenges in the United States appear less disruptive as U.S. railroads have more flexibility to respond to market demand. And that is helping build confidence that the United States remains the most reliable wheat supplier in the world.
Canadian farmers produced record wheat and canola crops in 2013/14. But after seeing their highest monthly grain exports in 10 years in October and November, they began seeing the backlog all but dry up the cash market for old crop grain. The situation has not improved in March at a time when many farmers need to sell grain to help finance new crop inputs.
According to the Western Grain Elevator Association, early this month 53 vessels were waiting to load at British Columbia’s Vancouver and Prince Rupert ports. Additionally, 60,000 railcars, representing a volume of 5.4 MMT of grain, are behind schedule to be loaded, adding to an already difficult situation with some of the harshest winter weather in recent memory. For example, trains have had to haul fewer cars and run slower because temperatures repeatedly plummeted below -25 degrees Celsius (-13 degrees Fahrenheit).
Under this stress, grain companies and farmers see fault with the Canadian National and Canadian Pacific railroads. For their part, the railroads claim they are hauling more grain than ever before and attribute problems to elevator inefficiencies, bad weather and the record Canadian grain crop.
On March 7, the Canadian government had its say by ordering the railroads to jointly increase grain movements within four weeks or face significant fines. The railways say they will most likely be unable to reach that goal until the Lake Superior port of Thunder Bay opens again for grain exports, possibly by early April. Until then, rail shipments to eastern export terminals have to make a much longer journey, limiting railcar movements and locomotive availability. For similar reasons, the railroads have already limited grain shipments to the United States. This has roiled the North American oat market but may have limited movement of wheat south across the border. While the Canadian government’s goal may be achievable, many analysts wonder if it would negatively affect service for other rail-dependent industries.
As Canada faces its challenges, the movement of grain across the northern United States to export terminals in the Pacific Northwest (PNW) is dealing with similar issues. Large crop volume, strong overseas demand, competition with other commodities and increased export capacity combined to create a shortage of railcars and locomotives. Yet the United States is generally moving grain more efficiently. For example, grain railcar deliveries to the PNW set decade highs from October through January and PNW grain export volume remains close to its November peak.
Much of this performance can be attributed to a less regulated U.S. rail system. U.S. railroads offer more flexible forward contracting for grain railcar orders compared to their Canadian counterparts. Grain companies in the United States may also buy and sell these forward contracts with each other in a secondary market that increases the overall system efficiency. Therefore, while U.S. grain companies may have to pay a premium, they can still guarantee on-time delivery when needed.
Some U.S. rail carriers also recently announced major new investments to deal with this year’s backlogs and help minimize similar problems in the future. For example, BNSF, the largest rail carrier in the northern U.S. states, announced in February a $5 billion capital investment for 2014, including 500 new locomotives.
The latest estimates by the BNSF predict that rail delays in the United States likely will clear up by June. In comparison, estimates by the Canadian National Railway project that that the rail backlog in Canada may not be fully fixed until 2015."
http://www.uswheat.org/newsEvents/doc/9893B6F98F2454C885257CA100703D9E?OpenDocument#
By Shawn Campbell, USW Assistant Director, West Coast Office
While logistical problems continue to hurt farmers and delay grain movement to export facilities in Canada, similar challenges in the United States appear less disruptive as U.S. railroads have more flexibility to respond to market demand. And that is helping build confidence that the United States remains the most reliable wheat supplier in the world.
Canadian farmers produced record wheat and canola crops in 2013/14. But after seeing their highest monthly grain exports in 10 years in October and November, they began seeing the backlog all but dry up the cash market for old crop grain. The situation has not improved in March at a time when many farmers need to sell grain to help finance new crop inputs.
According to the Western Grain Elevator Association, early this month 53 vessels were waiting to load at British Columbia’s Vancouver and Prince Rupert ports. Additionally, 60,000 railcars, representing a volume of 5.4 MMT of grain, are behind schedule to be loaded, adding to an already difficult situation with some of the harshest winter weather in recent memory. For example, trains have had to haul fewer cars and run slower because temperatures repeatedly plummeted below -25 degrees Celsius (-13 degrees Fahrenheit).
Under this stress, grain companies and farmers see fault with the Canadian National and Canadian Pacific railroads. For their part, the railroads claim they are hauling more grain than ever before and attribute problems to elevator inefficiencies, bad weather and the record Canadian grain crop.
On March 7, the Canadian government had its say by ordering the railroads to jointly increase grain movements within four weeks or face significant fines. The railways say they will most likely be unable to reach that goal until the Lake Superior port of Thunder Bay opens again for grain exports, possibly by early April. Until then, rail shipments to eastern export terminals have to make a much longer journey, limiting railcar movements and locomotive availability. For similar reasons, the railroads have already limited grain shipments to the United States. This has roiled the North American oat market but may have limited movement of wheat south across the border. While the Canadian government’s goal may be achievable, many analysts wonder if it would negatively affect service for other rail-dependent industries.
As Canada faces its challenges, the movement of grain across the northern United States to export terminals in the Pacific Northwest (PNW) is dealing with similar issues. Large crop volume, strong overseas demand, competition with other commodities and increased export capacity combined to create a shortage of railcars and locomotives. Yet the United States is generally moving grain more efficiently. For example, grain railcar deliveries to the PNW set decade highs from October through January and PNW grain export volume remains close to its November peak.
Much of this performance can be attributed to a less regulated U.S. rail system. U.S. railroads offer more flexible forward contracting for grain railcar orders compared to their Canadian counterparts. Grain companies in the United States may also buy and sell these forward contracts with each other in a secondary market that increases the overall system efficiency. Therefore, while U.S. grain companies may have to pay a premium, they can still guarantee on-time delivery when needed.
Some U.S. rail carriers also recently announced major new investments to deal with this year’s backlogs and help minimize similar problems in the future. For example, BNSF, the largest rail carrier in the northern U.S. states, announced in February a $5 billion capital investment for 2014, including 500 new locomotives.
The latest estimates by the BNSF predict that rail delays in the United States likely will clear up by June. In comparison, estimates by the Canadian National Railway project that that the rail backlog in Canada may not be fully fixed until 2015."
http://www.uswheat.org/newsEvents/doc/9893B6F98F2454C885257CA100703D9E?OpenDocument#