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The Role of Railways

The Role of Railways

Canada’s grain sector is up in arms about a looming strike at both major railways. Without bulk rail movement, grain elevators are crippled to ship out to commodity export markets.

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Brenda Tjaden
Aug 15, 2024
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The Role of Railways
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Without the railways, Canada wouldn’t have a grain economy. Back when the Prairies were settled, national railway companies were created and compensated handsomely for constructing rail lines from rural grain-farming communities, to east and west coast ports.

Back then, the eastern ports were most important so that Canada’s new wheat crops could feed Britain’s war effort. Partly for this reason, the Canadian Wheat Board (CWB) monopoly was created, giving the federal government the exclusive right to sell grain for farmers.

It was the CWB that negotiated grain movement with the railways during that period, ending in 2014 when the monopoly was removed. In an effort to maintain fair access to markets and cash flow for all farmers, the Board operated a complicated system of delivery calls and staggered payments to even out the flow of grain through the transportation and handling system over the course of a year.

Obviously, demand for grain movement off of farms is at its peak in the fall, when harvest supplies come in, and especially in a high-yielding year such as this when production can exceed the farm’s available storage capacity. Grain producers try hard not to have to sell grain at harvest time when prices are seasonally the lowest, but their need to do so is somewhat unpredictable.

Thus, it’s no accident that now is the time railway workers have chosen to demand improved terms. Grain is right up there with oil and fertilizer in terms of the most important commodities hauled by Canadian railway companies, putting heavy pressure on negotiators to settle the dispute and get trains running again quickly.

Otherwise, the dearth of demand for grain will create another bearish influence on markets already under pressure from heavy supplies and uncompetitive pricing in international markets. Australian, Russian and South American competition has been eroding Canada’s global market share for years, and just a tiny fraction of the grain produced is processed in the interior of the Prairies.

The truth is that the looming rail strike is not the biggest problem in the hands of Canada’s grain economy today. Culture is, and it’s creating financial risks and opportunities that stakeholders are ignoring to their peril.

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