Measuring What Matters (PCN Spring 2015) MAR 25 2015 | Consumers and Producers | Pulse Crop News
This article appeared in the Spring 2015 issue of Pulse Crop News.
Greg Northey, Pulse Canada
There has been a lot of attention paid to rail freight service over the last year. The discussion around where the problems lie, and their potential solutions, has just changed.
On January 26, the Ag Transport Coalition publicly released its first Weekly Performance Measurement Report. The report measures railway performance according to key indicators such as rail car demand, railway car supply, timeliness of railway car supply and corridor performance. The data included in these reports provides a level of visibility into the grain transportation system that farmers, shippers and government had not previously had.
So what are these reports saying about grain movement? Essentially, they are quantifying what has been heard anecdotally for years, which is that shippers are not receiving the equipment they need, when they need it. This is particularly true for USA/Mexico, Vancouver transload and Canadian domestic corridors, where railways have been supplying less than 30 per cent of the cars ordered by shippers each week. Overall, the reports are showing that through the current crop year, railways are only supplying 44 per cent of customer orders in the week for which cars were ordered.
Every rail car ordered is destined for a processing facility, a mill, a transloader, a container or bulk vessel that needs product. For Canadian suppliers, lack of rail capacity and delays in car delivery result in increased costs associated with labour-load mismatches, contract penalties, container detention fees, vessel demurrage and ultimately lost sales. For farmers, each weekly failure to supply cars results in a lost opportunity to deliver grain, cash flow challenges, wider basis levels and ultimately lost earnings. For customers purchasing Canadian grain, every failure adds risk and uncertainty to their supply chain. Facilities don’t sit idle waiting for Canadian product. Buyers source from other suppliers when Canada can’t deliver its goods on time.
Hearing that the rail freight system is moving 18 per cent more grain compared to the five-year average obscures the fact that 56 per cent of weekly orders are not being met in the week for which cars were ordered. The reality is that customers measure Canada’s performance each and every week – long term averages don’t count for much when the processing line runs out of a key ingredient.
So now that we have this increased visibility into the grain transportation system, what do we do with it? The reports themselves don’t provide solutions, but they do provide common, objective information from which everyone (government, railways and the ag industry) can base discussions about legislative and commercial solutions. The information allows for a tight focus on the improvements that need to happen now so the numbers begin to move in the right direction.
What’s a reasonable expectation in terms of action? In the short term, the Order in Council (OIC) minimum volume requirements will come up for renewal in Spring 2015 and the government has the opportunity to take immediate action to ensure that the next phase of the OIC addresses the timeliness and corridor performance issues highlighted in the reports. In addition, the weekly reports have ignited further calls for even greater transparency on rail freight performance and a commitment from government and railways to provide enhanced railway information reporting for all shipping sectors.
Broadening the base of information stakeholders have access to will help ensure that federal policy measures, infrastructure investments and commercial improvements can have the desired impact. A recommendation focused on information transparency is a key element of the submission a coalition of agriculture organizations have made to the CTA Review process.
Having influence over the creation of new legislation and regulations requires that a wide range of stakeholders speak with one voice. Pulse Canada and its members joined forces with the Western Grain Elevator Association, the Inland Terminal Association, the Canadian Oilseed Processors Association, the Canadian Special Crops Association, the Canadian Federation of Agriculture, the Keystone Agriculture Producers, the Agriculture Producers Association of Saskatchewan, the Alberta Federation of Agriculture and the B.C. Agriculture Council to develop one comprehensive submission for the Review of the Canada Transportation Act.
The submission calls on government to introduce legislation that provides independent, detailed, comprehensive and timely monitoring and reporting on railway service performance for all commodities. In total, the coalition has developed 10 recommendations to address issues in three key areas: railway capacity, railway performance and the current shipper protection measures.
The weekly reports have become the catalyst for a renewed and focused discussion on rail transportation. There is now quantifiable evidence that there is room for substantial improvement on performance. The solutions need to result in that measurable improvement in the short, medium and long-term.