MONTREAL – The ability of Canada’s transportation network to move Western Canadian grain will likely be tested again in future as higher-yielding crops continue to add volume to the system, according to the head of the Canadian Wheat Board.
“I think we could see the grain production in Western Canada be on a good, steady growth path and that means that we’re going to have to find the logistical means to get that crop from the Prairies to customers,” Ian White said before participating in Thursday’s opening of the St. Lawrence Seaway.
Western farmers have grown large grain crops in the past few years, especially in the record 2013 season when a bumper crop later prompted complaints about the shipping performance of Canada’s two major railways and resulted in intervention last year by Ottawa.
Transport Minister Lisa Raitt and Agriculture Minister Gerry Ritz announced Saturday that the government wouldn’t extend the unprecedented step taken a year ago to impose minimum grain volumes, adding that grain now is moving adequately through the system and the new grain crop is of average size.
Although the grain shipping system now is back to normal, White said the move “focused everybody’s attention” on the need to ensure the supply chain functions well as pressures grow to deliver more grain for export.
Canadian National Railway (TSX:CNR) and Canadian Pacific Railway (TSX:CP) have been critical of the federal government’s decision to impose minimum shipment volumes. They moved more than 50 million tonnes of grain in 2014, exceeding the minimum volume requirement by 5.5 million tonnes.
The wheat board, which is in the process of developing a privatization plan to be implemented in the next two years, is investing up to $200 million to buy new Great Lake ships and grain-handling terminals.
The Chinese-built CWB Marquis is making its maiden voyage and will become the first vessel to pass through the seaway in 2015. A second Equinox-class vessel, costing about $30 million, will arrive later this year, joining other new ships being added by several companies as part of an overhaul of the Great Lakes fleet.
Terrence Bowles, chief executive of St. Lawrence Seaway Management, said he expects the waterway to benefit from an improving U.S. economy and recovering Canadian manufacturing sector.
Increased automobile manufacturing and construction activity should accelerate demand for steel, concrete and aggregate. And a cold winter should also mean another good year for restocking road salt inventories, but shipments of iron ore continue to suffer from rock-bottom prices, he said.
The seaway expects to handle 40 million tonnes of total cargo in 2015, the same as in 2014, but could easily handle 50 per cent more volume, he said, adding that efforts to accelerate grain shipments could help.
“Demand is only going up in the world so we think that’s a very positive development and good for the seaway for sure.”
Heavy ice in the Great Lakes is causing the latest seaway opening since 1997. However, Bowles doesn’t expect the same problems that caused weeks of shipping delays early last year.
The late start to the season shouldn’t affect overall tonnage for the year, added Seaway marketing director Bruce Hodgson.
“We’re going to lose a bit of time at the opening but it’s more than likely that we’ll make it up as the season goes on,” he said.
However, Stephen Brooks, president of the Chamber of Marine Commerce, said ship owners and industrial customers are concerned by delays in parts of the Great Lakes due to ice conditions.
“The harsh winters of the last two years have highlighted serious systemic flaws,” Brooks said.
“Instead of a system driven by industry demand, timely transportation of North America’s valuable commodities is held back by a limited supply of icebreakers that are stretched too thin across too large an area.”