As a result, some farmers have waited months to deliver crops and receive payment
By Kate Ayers
A rail car shortage is leaving grain and oil shipments grounded in the Prairies, resulting in delayed crop payments for farmers and dropping crude oil prices.
Harsh winter conditions and a surge in energy production have driven up rail demand and caused this shortage, according to a Bloomberg article yesterday.
The rail crunch means farmers are waiting for months to deliver their wheat and canola to elevators, which means payments for their crops are delayed.
Producers “are dealing with it the best that they can and are hauling (crops) when they can. It’s a difficult situation to deal with … because (farmers) have no control over it,” Warren Sekulic, director with the Alberta Wheat Commission, said to Farms.com yesterday.
As a result of the rail back-up, some Canadian producers have missed out on market opportunities while other nations have taken advantage of the recent rise in global commodity prices.
“We make these contracts because we have payment obligations at a certain time of the year. So, we need that cash at that time of year, not three (or) four months later,” Norm Hall, vice-president of Agricultural Producers of Saskatchewan, said in the article.
If farmers have payment deadlines, “they’re depending on this cash or maybe it’s a rent payment. They get hit hard,” he said.
The Canadian National Railway Co. (CN) has cancelled nearly 13,000 hopper car orders since August 2017 and the company has 1,072 unfilled orders for rail cars as of Feb. 8, according to the article.
In addition, 996 hopper car orders from Canadian Pacific Railway Ltd. (CP) are outstanding, according to data from the Ag Transport Coalition.
However, CN plans to recruit more crews and trains once the ground thaws, Kate Fenske, a company spokesperson, said to Bloomberg in an email statement. The company is also looking to boost capital spending to $3.2 billion this year to enhance rail capacity, she said.
Despite the rail car shortage, CP has moved 4 per cent more grain this crop year, the article said.
“While we are dealing with some extreme weather currently, we continue to deliver for our customers and supply chain,” Jeremy Berry, a CP spokesperson, said in the article.
Nonetheless, the bottleneck in grain delivery is the worst farmers have experienced since 2013, the Western Grain Elevator Association said to Bloomberg.
Canadian farmers are also competing with growing demand from other sectors for this rail car space, such as the oil industry’s shipping needs for frac sand. And railways are struggling to keep up with a surge in oil production, according to the article.
Updated Feb. 16, 2018
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