Canadian government extends grain volume requirements for CN, CP into 2015

Canadian Transport Minister Lisa Raitt and Agriculture Minister Gerry Ritz on Saturday announced that the minimum grain volume requirements for CN and Canadian Pacific will be extended until March 28, 2015.

Introduced per a government order in March, the volume requirements are designed to help prompt the movement of the remainder of last year's crop along with this year's crop, and ensure the grain supply chain returns to normal operations.
 
Under a new government order that took effect Nov. 30, CN and CP must move:
• 345,000 metric tons of grain per week from Nov. 30 to Dec. 20;
• 200,000 metric tons of grain per week from Dec. 21 to Jan. 3, 2015;
• 325,000 metric tons of grain per week from Jan. 4, 2015, to Feb. 21, 2015;
• 345,000 metric tons of grain per week from Feb. 22, 2015, to March 21, 2015; and
• 465,000 metric tons of grain per week from March 22, 2015, to March 28, 2015.
 
Failure to meet the legal obligations could result in penalties of up to $100,000 per violation. The requirement for railroads to report on demand and volume remains in effect.

"Our government has again acted to ensure the supply chain operates effectively in delivering Canadian grain to market," said Raitt in a press release. "Railways, shippers and producers must work together and meet these new requirements."

The government also expects CN and CP to submit formal winter contingency plans, including service plans for producer car loaders and short lines for the remaining crop year. In addition, the railroads are expected to provide information on car order fulfillment by corridor, including the placement of rail cars at producer car loading sites and along short lines, to the federal grain monitor.

Instead of reimposing minimum weekly grain volume requirements on railroads, the Canadian government should have focused on encouraging greater supply chain collaboration, CN officials said in an emailed statement. CN has met, and continues to meet, the pledge it made to the government last March to move as much grain as efficiently as possible in western Canada, they said.

"CN’s grain performance shows a supply chain fully in sync. We posted a record performance in the 2013-14 crop-year ended July 31 — the movement of western Canadian grain was a full 25 percent greater than past average performance," CN officials said. "Since the start of the new 2014-15 crop year on Aug. 1, CN has fully kept pace with demand and has maintained a record-setting pace in supplying covered hopper cars for the movement of western grain. With the stocks now drawn down in line with normal levels, the mission of bringing the grain supply situation back to balance was achieved within a period of a little more than a year despite the 100-year crop harvested last fall."

Normal commercial relationships and a stable regulatory environment are essential for an effective, well-functioning rail transportation marketplace, including for grain by rail, CN officials believe. Additional regulation threatens to increase costs, stifle innovation and potentially discourage investments that are critical to building strong, safe and resilient supply chains, they said.