Canadian grain handlers seek stricter rail rules to avoid logjam
Grain handlers are lobbying the Canadian government for even stricter rules requiring railroads to allocate thousands of railcars to them each week in hopes of stopping an unprecedented crop logjam from getting worse.
Tougher rules could ensure that U.S. and other buyers have ample access to Canadian grains. They would also give grain handlers priority over other shippers, including oil companies, which have moved a rapidly growing, though still relatively small, volume of crude by rail.
A record-large harvest and frigid weather had snarled the transportation system last fall and winter, leaving millions of tonnes of grain stuck in farm bins.
Minimum shipments to the United States, part of the grain handlers' wish list, could keep cereal companies from suffering a repeat of last winter's oat shortages, as Cheerios maker General Mills Inc did.
Canadian Agriculture Minister Gerry Ritz said the government intended to have new regulations in place by mid-July, possibly with tougher volume requirements.
"If it's necessary, it will be done," Ritz told Reuters. " ... I'm not going to be prescriptive yet."
Under pressure from angry farmers, Canada's Conservative government in March ordered the nation's two railways, Canadian National Railway Co and Canadian Pacific Railway Ltd , to boost grain shipments to minimum weekly levels.
The minimums expire in August, when the next harvest begins, but a recently passed bill allows Ottawa to set new targets for the 2014/15 crop year. Adding more regulations creates tricky politics for the Conservatives, although they have also gotten tougher on banks and phone companies.
The Western Grain Elevator Association, a handlers group whose members include Cargill Ltd, Richardson International and Viterra, is arguing for between 11,000 grain cars, the current weekly minimum, and 14,000, a level Canadian National says may overwhelm grain handlers.
Grain handlers, who buy crops directly from farmers to re-sell or process, say railways last winter shunned trips to the United States, which can take longer from the western farm provinces than those to Canada's busy West Coast ports.
"If the railways ignore certain corridors and focus all movement into others, then it stands to reason that port terminals could face challenges unloading railcars," said WGEA Executive Director Wade Sobkowich.
The grain handlers' lobbying push extends from Ritz to federal assistant deputy ministers, whom the WGEA met with in late May, and to the government's Canadian Transportation Agency.
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