WINNIPEG, MANITOBA--(Marketwired - April 1, 2014) - The Western Grain Elevator Association (WGEA) today responded to CN's March 31, 2014 plea for grain companies to "stop complaining to government and step up their performance to help move giant crop to market."
CN states that they are making significant progress toward their goal of transporting close to 5,500 grain cars per week to meet the Canadian governments Order in Council of March 7, 2014. The WGEA appreciates that CN is moving more grain now than in the past. "Legislative intervention has had an impact" said Wade Sobkowich, Executive Director. "The federal government passed an Order in Council to require the railways to move more grain, and they are beginning to comply." The WGEA highlighted that CN has not improved its performance to the important US and St. Lawrence markets, which has the effect of holding out producers' grain contracted for those markets.
CN states that grain companies need to be held accountable to their performance and calls for regulation of grain elevator companies in this regard. The WGEA points out that CN has already been given the statutory ability to apply penalties to grain shippers for performance CN deems to be poor, through unilaterally imposed tariffs. "Grain companies do not object to the railways having the ability to issue penalties for poor shipper performance, however, we continue to seek the ability to negotiate, and if need be arbitrate, penalties to the railway companies for their poor performance in the same way," said Sobkowich. "In other words, what is missing, is the ability to hold the railways accountable, and is what Bill C-30 sets the framework up to potentially address."
The WGEA agrees with CN that the most effective way to allow farmers to deliver grain to prairie elevators and to ensure farmers receive the cash they are owed by grain elevator companies as soon as possible is to create space at country elevators as quickly as possible. "This is what the WGEA has been saying all along," continued Sobkowich. "We need to create space at our country elevator facilities in order to bring in grain from the farmers and offer reasonable prices." The WGEA notes that grain companies do not control the rail service provided to their elevator locations - these are established by the railway companies themselves. "This links back to taking measures to maximize the rail capacity available for grain shippers," said Sobkowich. "CN and the WGEA are on the same page on this point. We require as much shipping as possible to free up country elevator space and offer the best prices to farmers."
According to CN one of the biggest root causes of the challenge we face is the lack of coordination across the supply chain and growing pains from the new grain marketing strategies following the change in the role of the Canadian Wheat Board. The WGEA is somewhat taken back by this statement for a couple of reasons. Grain companies have daily calls with both railways to set priorities on the movement of grain which includes volumes, corridors, priority train movements, capacity requirements, performance issues and opportunities to increase efficiencies, as well as operational issues. In addition we share statistical data on a regular basis on a number of measurements. As for new marketing strategies the only real noticeable change from the grain companies has been the fact, as reported by Quorum, that capacity at the Export Terminal position has been far more fluid than any time in the past. Terminals have continued to run with more available storage capacity to unload railcars as they arrive at port reducing cycle times in this part of the supply chain.
The CN press release also stated that the WGEA is concerned about too many movements to the West Coast and Thunder Bay. For clarification, the member companies of the WGEA are not concerned with this at all. "WGEA members are concerned that the appropriate number of cars be placed in all corridors to meet market demand," said Sobkowich. "These corridors include not only the West Coast and Thunder Bay but also domestic movements, eastern Canada and the US." The WGEA adds that in order to properly coordinate sales and deliveries in all corridors, shippers need to have a clear understanding of railway plans moving forward.
Grain elevator companies look forward to working with CN to ensure they reach 5,500 loads per week, every week, apportioned appropriately among all corridors according to market demand, in order to maximize the return to producers. The WGEA agrees that it will take all stakeholders working together to move this record crop to our customers.
The WGEA is an association of grain businesses operating in Canada, which collectively handle in excess of 90% of western Canada's bulk grain exports. Its members account for approximately 20% of railway revenues and pay annual total rail freight of over one billion dollars.
CN Tariff 9000
Below are two examples of the differing consequences to shippers and railways that result from poor performance;
Supply and Acceptance of Railcars
Consequence to shipper for not being able to take delivery of ordered railcars:
- CN Tariff 9000; Item 1200; Page 3 - Not Used Railcars; "Railcars that cannot be accepted by the loader on the required loading date at the required loading time are subject to asset use fees. Railcars placed, or constructively placed, for the required loading date/required loading time which are not used and are subsequently released as Not Used. $100 per railcar plus. If the railcars were placed at your facility and were subsequently pulled as an empty. $150 switch fee per railcar. Note: All railcars ordered from CN and not accepted by a loader located on another rail carrier are subject to a $250 per railcar fee.
Consequence to CN for failing to supply ordered railcars:
Timeliness of Service
Consequence to shipper for not loading/unloading railcars within the prescribed time:
- CN Tariff 9000; Item 9000; Page 7 - Asset Use at Loading; "When you must exceed the time we (CN) provide for loading and unloading. $87 per railcar per day.
Consequence to CN for failing to deliver railcars (at country elevator or destination) at a time set by CN: