Good evening, Mr. Chairman. Thank you for the invitation to appear before you to discuss the grain supply chain in bill C-30. This is obviously an important conversation, not only for farmers and Canadian Pacific but for all Canadians, which is why I'm personally here to talk about this matter tonight.
For more than the past two decades, I've obtained considerable experience as an operating officer in both Canada and the United States. For the last 12 years, I've served in a number of increasingly senior operating positions at both Canadian National and Canadian Pacific, which has provided me experience in this grain supply chain in western, central, and eastern Canada.
My comments today will focus on the supply chain capacity, how CP, despite exceptional weather challenges, has performed this crop year, and why interswitching is not a compelling solution to this matter.
Specific to the supply chain capacity, I am not here to debate the new normal in crop sizes, but I'd be remiss not to emphasize the absolute fact that this crop is 37% above the five-year average of 58 million tonnes and an all-time high. In a normal grain year, Canadian railroads export approximately 33 million to 34 million tonnes. This year's exceptional crop requires the supply chain to move an additional 20 million tonnes, which equates to an over 50% increase. The reality is that the supply chain cannot move these types of volume over a short period of time. To put it in perspective, the surplus alone exceeds the total volume of potash that Canada typically exports every year.
This is clearly a total supply chain capacity problem. We need to be searching for a total supply chain capacity solution.
From a capacity perspective, the challenge is to create a grain supply chain that can meet today's and the future's demands. It is important to understand that this is not a single-component supply chain. This total grain supply chain is made up of essentially five components: first, the grain originates in a truck; second, it gets elevated in country; third, it moves to port by rail; fourth, it is then offloaded by a port terminal elevator; and fifth, it is finally loaded on a ship by the port terminal elevator again. To suggest any component, let alone a single component, could ramp up capacity with little to no warning to handle this exceptionally large grain crop is simply unrealistic.
I'll shift my comments to share the facts about CP's performance this crop year. In August, with an approximately nine million tonne carry-over from the previous crop year, we practically had no grain to move. At CP, we started storing grain cars in May and June. In fact, we had 4,000 railcars stored due to a lack of demand to move grain at the beginning of August when a normal crop was expected at that time, according to Statistics Canada.
From September through November with the harvest in full force, CP responded by moving more grain than we've ever moved during this comparable time period. We moved 20% more grain in Canada than the five-year average, and 14% more than the previous year. This demonstrated the surge capacity CP has to move more grain in response to strong demand.
In December and January, our double-digit growth was impacted by the extraordinary cold weather. To quote Environment Canada, “If we take the two months and combine them, we find it is the coldest December-January since 1949-50”. The facts are that December, January and February were extremely cold, with 49 days below -25°C from Kamloops, B.C., across the Prairies, and through to the east versus 25 days on average in a typical Canadian winter. I can tell you that I have never experienced anything this extreme in over two decades as a railroader.
I say -25°C because it's a critical tipping point in railroad operations. Sustained temperatures like this across a network or a country cause significant capacity reductions and safety concerns to operations. Train sizes decrease. The technology of railcar airbrakes does not allow maintaining brakes on a normal length grain train, let alone any train, in these temperatures. A 50% reduction in train size is not uncommon. Safety concerns increase. Trains must be slowed to safely operate to avoid derailments. As a result of these two key factors, the velocity slows, congestion increases, and therefore our effective capacity goes down. No one in the supply chain is immune to this capacity-reducing weather, from the country elevators to the ships on the Great Lakes and the trucks on the highways.
Moving to February, even in the face of record cold, CP was up 15% for grain. So far in March, we're up 20% over last year in Canada.
Mr. Chairman, in face of these extreme weather conditions, I am proud to say that our railroaders as well as CN's—who worked tirelessly 24-7, 365 days a year, even with crews operating grain trains Christmas Day to move this record crop—did this despite the fact that our efforts are absolutely not being matched by other partners in the supply chain, despite what some of the naysayers are saying, despite what some of the elevators and the grain companies are saying. In times like we've faced and are facing trying to move a record crop, it's critical that all components of the grain supply chain step up with the same efforts. This simply has not happened.
While some report to the contrary, CP has shipped and continues to ship record volumes to the betterment of farm communities, grain companies, and the Canadian economy.
As I have stated a number of times in the past two months, weather permitting, we would get back to a performance level like last fall. This is not because we've been ordered to do it; it's because the extreme weather has lifted, and we have the capacity and operating conditions to perform to this level.
Given the last two weeks of performance by CN and CP, operating at levels consistent with the government order, we are in fact bumping up against supply chain capacity limits. This is slowing velocity and reducing capacity at Vancouver and Thunder Bay. The railway is not the bottleneck, nor can it solve this capacity problem alone.
That said, rather than finger pointing, we need to have a constructive dialogue about how we can create additional total supply chain capacity. In the near and long term, additional capacity can be brought online if railcars are unloaded, when available for unloading, seven days a week, 24 hours a day.
For instance—this is fact, not rhetoric—yesterday morning, consistent with what we have experienced over the last three weeks, we had over 1,500 cars to unload in Vancouver between both railroads versus a run rate of 600 unloaded per day by the shipper terminals over those same past three weeks. This is because some terminals operate three shifts per day, five days a week, while others operate two shifts per day, seven days a week.
There is only one terminal of five in Vancouver that operates consistently three shifts per day, seven days a week. Unloads, using the last three weeks as an example, are 34% higher on weekdays versus the weekend. We need the entire supply chain to be thinking velocity to create additional available capacity. Instead of cars sitting, waiting to be loaded or unloaded, these cars should be cycling back to the prairie elevators and to the ports.
I'll now turn my comments to extended interswitching. l'm not here today to talk about the commercial implications of extended interswitching. I will, however, talk to the capacity concerns and implications of it. It will not allow the supply chain to move more grain, and has the potential for unintended consequences to a system that is world class. This could include competitive impacts for the Canadian economy. More specifically on capacity concerns, extended interswitching will lead to multiple handlings of grain shipments that will slow down the grain supply chain, negatively impacting transit times. It can also create circuitous routings, further complicating the supply chain and reducing capacity. That is the exact wrong thing to do.
In summary, if the supply chain is to do better, we need to find a collaborative approach in the near term and create capacity in the total grain supply chain in the longer term. This is how we will ultimately benefit the farming community and the Canadian economy.
Thank you, Mr. Chairman.