Hello. My name is Lynn Jacobson and I'm president of the Alberta Federation of Agriculture. I farm in Enchant, which is in southern Alberta. I raise wheat, pulses, and canola. We do canola seed production and also some alfalfa seed production.
I'm speaking today on behalf of the Alberta Federation of Agriculture, our province's only general farm organization. Our members are involved in all aspects of agriculture production. We also work closely with other western general farm organizations on problems that affect all of western Canada's agricultural producers.
I'd like to thank the committee for this opportunity to provide comments on the very serious problem western Canadian farmers are facing shipping their grain and oilseed production this winter. From our perspective, the single largest problem we are facing is inadequate rail service. Western Canada produced a record crop in 2013, totalling some 90 million tonnes of grain, oilseeds, and pulses, close to 30% more than was harvested in 2012. While we enjoyed good growing conditions last year, this bumper crop was also due to new technologies, better crop protection, and higher yielding varieties. In other words, we view an increased level of crop production as a new normal in the prairie provinces now and into the future.
Grain producers, governments of all levels, and industry players have all invested in research priorities that will provide producers and the industry with access to varieties and processes that will increase production across Canada in the future. Without reliable access to overseas markets, these investments will be largely underutilized.
As a result of these investments and growing world demand, the current problems grain producers face will only get bigger if there isn't an immediate and permanent solution to fix the shortfall in Canada's grain transportation system. This is the situation we currently face. Last year's crop of 90 million tonnes compares to an average of 50.8 million tonnes. If things do not improve this year, we will have a 22-million tonne carry-over in 2014. As a comparison, the normal carry-over for a given year is eight million tonnes.
With this huge amount of grain stockpile and if the transportation system isn't fixed immediately, even producing an average crop in 2014 would still have a negative effect on the market as Canada absorbs only about 20 million tonnes of grain a year and the rest must be exported. The inability to move this volume of grain is having a detrimental effect on pricing, and the potential losses for prairie farmers are huge. Based on StatsCan's most recent production figures, the zero forward pricing revenue for canola is anticipated to be $1.6 billion less than it should be, while CWRS wheat is looking at a $1.2 billion hit. If you assume 50% was prepriced, canola's hit would be $823 million lower and wheat would also be $606 million less than it should be.
At this time when we have record crops to deliver, rail companies are actually operating 2% to 3% more slowly than they were at this time last year. The railroad's plan was to spot 11,000 cars per week and this just isn't happening. In fact, CP has reduced engines and railcars by 43% and 35% respectively, taking 400 locomotives and 2,700 railcars out of service at a time when we need to move the biggest grain crop in history to port. Further, CP has reduced staff by 4,500 employees.
Our reputation as a reliable supplier to the export market is being damaged by this as well. As an example, last week Japan announced it would start purchasing more American wheat over Canadian wheat because the rail backlogs have led to late Canadian orders two months in a row, leaving Japanese mills short on grain. Even our neighbours to the south are unhappy over Canadian delays. An American General Mills plant has already started importing oats from Scandinavia because Canadian suppliers aren't reliable. As Randy Hoback was quoted as saying, “That's unbelievable.... How can the logistics be easier to ship oats out of Scandinavia to the U.S. versus 400 miles north in Manitoba and Saskatchewan?”
We have more than 50 ships stacked up in Vancouver and Prince Rupert harbours waiting to be filled. Western Canadian grain farmers are paying in the neighbourhood of $500,000 of demurrage per day. Even farmers in B.C. are seeing shortages of feed grain in that province since most of it comes east from the prairie provinces. The situation is going from the sublime to the ridiculous when prairie farmers are sitting on record stockpiles, yet their fellow farmers in B.C. are scrambling for feed grain supplies.
In summary, something must be done and done immediately. The short-term solution to move more grain to the market in the coming months is that the railroads must reallocate locomotives and staffing from other products to grains and oilseeds. The railroads and grain handling companies must work together to utilize this increased access. To enable this, the Government of Canada must enforce the Fair Rail Freight Service Act to ensure an immediate increase in shipping capacity.
The railways have extensive market power over farmers and all shippers. Until this is addressed, the situation will remain unsolved. We firmly believe that rail companies need to fully understand and appreciate how vital an efficient grain transportation system is to western Canada's economy and Canada's reputation as a reliable supplier of world-class grain products to the world, as opposed to their current approach of tailoring their logistics system to maximize their profits.
The government recognizes this and enacted the Fair Rail Freight Service Act last year. Unfortunately, the provisions of the act are fairly weak and do not compel rail companies to enter into a service contract with shippers. Even if they did, there are no penalties imposed on the railways for non-compliance. At this time we are unaware of any shipper who has signed a service contract under the current act.
As well, if a grain company takes a railroad to court and wins, the fine that is outlined in the act automatically goes to the government, so the grain company is out for this legal cost—
