Agriculture Committee on March 19th, 2018

[Lloyd Longfield, Liberal, Guelph, ON]

Go ahead, please, Mr. Bjornson.

[Tyler Bjornson]

I'm really glad you brought up roads, because that's one of our concerns. Hopefully rail service will improve over the coming weeks, but the challenge is that there are going to be weight restrictions and road bans starting in April. Not only that, my colleagues here are going to be in the field seeding their next year's crop. If that becomes available in April and May.... That's partly why I said at the end of my testimony that we've lost too much of the opportunity for this year, so let's not do the same thing for next year.

Really what we're focused on is preparing for next year and making sure that we don't lose that opportunity for next year. It will take us months and months to negotiate service level agreements with reciprocal penalties, and we will probably have to arbitrate them. That's why we're focused on speedy passage. We know it's going to take us many months to negotiate those agreements.

[Lloyd Longfield, Liberal, Guelph, ON]

I understand that some of our provincial partners are giving extensions on what would have normally been a restriction. Facing the situation that possibly highway infrastructure could also, depending on the design.... I know they're doing some interesting things in the northern territories about this challenge.

[Tyler Bjornson]

They're really challenged.

[Lloyd Longfield, Liberal, Guelph, ON]

Yes.

As far as the long-term plan is concerned—and farmers have been asking for years for the government to have a long-term plan—we're hoping to get to that stage through an independent Senate. Really, we aren't whipping votes. We don't have the tools, as government, to use with the Senate that previous governments have had. Hopefully we can work together to get this through quickly.

I'm going to have to leave it at that. Thank you very much for your testimony.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Longfield.

That concludes this hour.

I want to thank all of you—Mr. White, Mr. Bonnett, Mr. Dyck, and Mr. Bjornson—for taking the time to come here and talk about the situation on the ground. Hopefully we'll get good weather and timely shipping.

We'll suspend quickly to change the panel again and be right back.

[The Chair, Liberal, Pat Finnigan]

Okay, everybody, back to your seats. We'll get this third hour going.

In this hour we welcome, as an individual, the Honourable Gerry Ritz; from the Grain Growers of Canada, Mr. Jeff Nielsen, President; and Mr. Ian Boxall, a Vice-President of the Agricultural Producers Association of Saskatchewan.

We'll start with seven minutes for opening comments.

Let's go right to you, Mr. Ritz.

[Gerry Ritz, As an Individual]

Thank you, Mr. Chair.

Thank you to the members of this committee for taking on this study. A lot of the farm groups have made a lot of pertinent points, so I won't underscore them again, but this is déjà vu all over again. As has been said, we went through these same things in 2013 and 2014.

I'm hearing a few different things this time around. There's an apology from the railways, which is great. I'm going to go to my banker tomorrow and tell them they can't foreclose, because I've got an apology. However, it's a good start.

I do have a bit of a concern in that what we talked about, which led to Bill C-30 and is now underscored in Bill C-49—there is some more work to be done on that, with a couple of amendments—still comes down to consultation among all of the supply chain to find out what exactly will be required, when, and so on. As Rick said, the prime months for shipment to get that premium dollar are in the fall. Somehow we're still missing that.

I was a little bit concerned when the railways talked about how they allow for 3% growth. From talking to industry, it seems they need 13%, but they're not making that connection. They were talking too about last year's big crop, but in reality it's less than 3% of the five-year average increase. If they're talking 3%, there shouldn't have been a problem.

Also, we're only talking about agriculture here, but there are a lot of other commodities on the rail as well, and I understand that there are concerns from all of them, as we found out in 2013-14. It wasn't just farmers. They began the push to see some changes, but everybody who hauled a bulk commodity, including intermodal and so on, was talking about delays, about boats sitting waiting, about not being able to off-load boats and so on because the capacity wasn't there to do that.

Since that time, there have been tremendous increases in infrastructure through the full supply chain. The railways are now talking about making some of those investments, but it still comes down to track capacity. To get to the bottom of that is again a collaborative effort. It takes data on a week-by-week, quarter-by-quarter basis, going through Quorum and Transport Canada, to figure out where the hot spots are, where there's a problem. Then the shippers, the grain buyers, can make a decision that, for instance, we're not going to run to Thunder Bay this week, because there'll be this type of capacity problem there. We'll run west coast, or we'll run not west coast Vancouver but Prince Rupert, because we see some bottlenecks and capacity problems on those lines.

Again, it needs a collaborative effect, quarter by quarter, week by week, to know exactly what's going to happen. I'm a little shocked that some of the line companies don't seem to understand, or the railways can't figure out, how much volume they're going to have to handle when StatsCan is out there saying what the crop is going to be before I've even brought my combine into a few of the fields. The numbers are always out there. They're reasonably close, within the margin of error. I think what our crop outputs are going to be has to be brought into the argument as well.

Most farmers do those StatsCan surveys. I know you guys get more than you want to do. They call before breakfast and they call after supper, when you're busy.

It's great that you're doing this. It's great that you're having this analysis. Again, the problem comes down to the fact that it's tied up in the Senate and there's no push to break it free there. I know that work was done in trying to split the bill, and that was a good move, but there are things that the Minister of Transport can do by order in council to continue what sunsetted in July and get the interswitching back at 160 kilometres, which works well. We didn't pick that number out of the sky. We sat down with the new design that's out there. I mean, at one point there were almost 2,000 elevators across western Canada. Now there are 300, with the same kind of capacity. They're all located a lot further than the 30-kilometre interswitching, which was the rule at that point. We sat down and drew concentric circles where it made sense, and 160 kilometres was the magic number.

I know they're talking about a long haul now of 1,200 kilometres or some such thing, but the average haul out of western Canada at the port in Alistair's country is 1,400 kilometres. We're still a little short there. I'm not sure how workable it is or whether the minister has the ability to tweak that or not. It all comes down to....

Japanese buyers are usually the ones who talk about three things. They love our quality, they're always concerned about the price, and they always bring up the ability to ship in a timely way. Those are the three things I heard year after year after year about Japan, even before we had our problems in 2013-14.

Moving beyond that, there's still a tremendous amount of work to be done to make sure that when we're bidding against the U.S., against Australia, against Brazil, and against the other major producers in the world, we're there in a timely way and can make this thing work.

I know one of the major shippers. He owns 40-some Panamax boats. He doesn't like to come into the west coast because he doesn't want to sit there. There's only money in moving and continuing to move. There were some changes made, and he is now doing some work out of there, but still it's not his first port of call. He needs other things happening.

A tremendous amount of infrastructure is going to be needed. I know there is talk about the corridors. The TPP has now been signed, and that means a lot more product going out, providing we ratify it in a timely way and we're one of the first six, so let's get 'er done. At the end of the day, of course, it's about making sure that we can load those boats and get them on the water and to our buyers overseas.

I'll stop with that, because I know you guys need some time for questions. You also have a vote coming up, I understand.

[The Chair, Liberal, Pat Finnigan]

We do.

Thank you, Mr. Ritz.

Now Mr. Nielsen is up for seven minutes.

[Jeff Nielsen, President, Grain Growers of Canada]

Thank you, Mr. Chair, senators, and MPs, for allowing me to come and provide some comments to you today.

Across the Prairies, farmers are once again suffering the impacts of poor rail service. Unfortunately, this is not a unique experience. We dealt with it four years ago, and that's why I am here today: to ask the committee to back the systemic solutions that can fix rail transportation for the long term.

Grain Growers of Canada represents 50,000 grain, pulse, corn, oilseed, and soybean farmers across Canada, from the Atlantic provinces to the Peace Country of British Columbia.

Personally, I run a family-owned incorporated grain farm in south central Alberta, near Olds, growing wheat, malt barley, and canola. Grains off my farm are shipped south to the U.S. and to Mexico, and shipped through the west coast to ports in Asia and around the world. Effectively, every tonne of grain I sell off my farm must travel by rail to get to the end customer, be it in Canada, the U.S., or overseas.

Over the last couple of months, because of poor rail service, elevators are filling up and our grain is not able to get to our customers. This situation has put many farmers across the Prairies in the position where, because their own grain hasn't moved, they haven't been able to get paid.

We appreciate that this committee has recognized the difficult position this has put grain farmers in and has agreed to hold this hearing today. We believe that transportation is not a partisan issue and that all members of the committee should be able to agree on the need to have a rail transportation system that works. That is why we're asking you to come together and support getting Bill C-49 amended as we've presented it and passed as quickly as possible.

As has been mentioned, the unfortunate reality is that road bans and seeding are fast approaching. I will quickly just give a bit more information on road bans. Every 10 loads of grain I can haul today without the road ban would mean 13 trips the next time, once the bans are in place. That costs me more money in manpower for that trucker, and naturally it costs more for fuel. Farmers will have to use their skills as business managers to work through the difficult position they have been put in due to these new issues.

However, there is an opportunity to fix this situation for the long term so that farmers are not forced into a rail crisis again. With the amended Bill C-49 in place, the industry will have effective tools to hold the railways to account or to be able to take their business to another railway if they cannot get acceptable performance.

I know you've heard of the problems farmers face today, and that is why there is a focus on Bill C-49. First and foremost, the bill provides the ability to hold the railways financially accountable for the service through reciprocal penalties. The current lack of accountability impacts all the players in the supply chain, and ultimately farmers. Giving shippers the ability to hold railways to account through the reciprocal penalties in Bill C-49 will help ensure that car orders are fulfilled and my grain can get delivered.

Other benefits of Bill C-49 include a clear definition for “adequate and suitable service”, increased requirements for reporting and railway contingency planning, improved data collection, and new powers so that the Canadian Transportation Agency can play a larger role in areas such as improved dispute resolution processes.

However, it is important to understand where Bill C-49 falls short.

First, the maximum revenue entitlement, or MRE, is a key tool for protecting grower interest, and it needs to be amended to cover the movement of soybeans. I understand that when schedule II was created in 2000, soybeans were not really grown yet on the Prairies; however, soybeans are now a major commodity. They are the third-largest crop in Manitoba and soon will become second. Their production is spreading across Saskatchewan and Alberta as growers get new varieties. The act also excludes chickpeas, which should be corrected. It is simply unfair that some producers are protected, but not all of us are.

The real benefit of Bill C-49 is the long-haul interswitching, which gives shippers the ability to take their business elsewhere if they can't get acceptable service. Grain farmers saw improved service when interswitching was in place previously; often the threat of taking their business elsewhere was enough to get the railways to improve service.

However, as the bill is written today, too many elevators and too many processors will be excluded from long-haul interswitching. This means farmers will likely be put in the same situation of grain being backed up in their bins the next time one railway starts to suffer.

That is why the second target amendment that Grain Growers of Canada supports is to amend the provisions for long-haul interswitching so that it can remain a very useful tool for our grain companies to obtain more competitive terms of service.

Bill C-49's long-haul interswitching provision allows some of the same benefits as the previous extended interswitching; adoption of the amendments proposed by the crop logistics working group will ensure that oat and other grain farmers will receive the service they require.

Grain farmers across Canada have worked hard to provide the world with top-quality grain, oilseeds, pulses, and corn. We strongly support the government's ambitious target to increase agrifood exports to $75 billion by 2025, but this can only be achieved with a dependable and accountable rail transportation system. We can't meet our target if we can't get our grain to market.

The bottom line is that this year's repeat of the 2013-14 rail crisis is another example showing that we need to see Bill C-49 amended and passed as soon as possible. While it may be too late to see significant improvement this year, Parliament has an opportunity to give shippers the tools they need to prevent this situation from happening again. CN and CP have demonstrated time and again that they will not act on their own, and that is why shippers need tools to hold them to account. Without these legislative tools, we know it will happen again. It shouldn't take a farm crisis to get the grain moving.

I thank you and look forward to your questions.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Nielsen.

We now have Mr. Boxall for six minutes.

[Ian Boxall, Vice-President, Agricultural Producers Association of Saskatchewan]

Thank you, Mr. Chair, and thank you for the opportunity to present to this committee.

I'm here today to explain how poor rail performance affects my industry, my community, and my family business, and why we need Parliament to take immediate action.

I and my wife Lisa and my brother and my sister-in-law together farm 8,300 acres of grains and oilseeds in northeast Saskatchewan. I am also vice-president of the Agricultural Producers Association of Saskatchewan.

We farm about as far from port as you can get, and in an average year our farm pays $360,000 in freight to get our products to our customers. The backlog of grain in the Prairies has had a huge effect on the ability of producers to cash-flow their operations and is making things extremely difficult for farmers going into their most expensive season. In the northeast, we are sitting with 3-month-old grain contracts undelivered due to the shortage of timely and sufficient railcar service to the elevators. At the end of February, personally, we were sitting with an outstanding wheat contract from December that we had been unable to deliver. This was leaving us in an extremely tough financial position. Luckily, our local elevator, which is one of only four in Canada that are serviced by both CN and CP, found some room to take our product and help us out. They didn't have room to take the entire contracted amount, but just enough to give us the money we needed at that time. We don't get paid on a contract until we deliver, and these delays place financial and personal stress on us as producers for something that shouldn't be a concern.

Two of the short lines that operate in northeast Saskatchewan have also felt the pinch of the lack of rail service this season. They have had a very poor and inconsistent supply of cars this shipping year, and this problem started in October, long before winter showed up again in Canada. They have also had several cases of cars that have been loaded and then not picked up for weeks. Producers do not get paid for the product loaded in these cars until it is received by the end user, so this is again placing unnecessary financial and mental stress on producers.

A lot of the highly sought-after oats grown in northeast Saskatchewan are loaded on these short lines in either dealer or producer cars. I grow 2,200 acres of these oats every year, and with poor rail service the market for these oats is in jeopardy. The processors need to find alternative sources for their oat supply, since our railroads have dropped the ball on shipping our product in a timely manner. My little boys want their oatmeal most mornings. I want that to be Canadian oats from Tisdale, not oats from Australia.

The rail issue isn't just affecting grain deliveries. Our local fertilizer dealer has been trying to put fertilizer in place for us, its customers, since last fall. Due to rail logistics, they have to pull fertilizer by truck out of Redwater, Alberta, instead of Clavet, Saskatchewan. That's an additional 1,000 kilometres per trip. So far this season, they have had to pull roughly 60 loads of fertilizer from Alberta, and that is only half of the product they require. If things continue like this, we are looking at an additional 120,000 kilometres of trucking freight. That's added manpower, truck power, wear and tear on the roads and equipment, costs, and carbon emissions that we as the end users are going to have to pay for. Spring road bans will be coming into effect very soon, and we could be short of fertilizer in western Canada to put in this year's crop. All of this is due to poor management and planning on the side of the railroads.

Farmers need to get the rail service that we pay good money for. Bill C-49 was drafted because of the disastrous shipping season of 2013-14, and it's completely outrageous that we are even here today and talking about this again.

In closing, we need all parliamentarians, from both the House and the Senate, to come together and pass Bill C-49 for the sake of the shippers, the processors, the retailers, our economy, our farmers, and all Canadians. Farmers already deal with so many unreliable factors—weather, crop prices, input costs—but reliable rail service is something we should be able to depend on every year.

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Boxall.

Now we'll start our question rounds with Mr. Dreeshen. You have six minutes.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much. I'm glad the witnesses are here so we have an opportunity to talk and everyone can listen to some of the concerns that exist.

Ian, you mentioned the concerns you have with short lines and poor service. I don't think people recognize the importance of that aspect. Everything is affected because of it.

The road bans at spring seeding that we talked about earlier are an issue that is going to affect farmers and those who are going in, since even if they start calling for grain right now, it's going to be difficult to move it, and you have all of these other issues. I think that's one of the parts that is so critical for us to look at.

I know, Jeff, you were talking about the long-haul interswitching concerns. I know that when you were engaged in this issue back in 2013-14, this was a critical component as well.

Minister Ritz, we've seen so many things that have happened. You spoke about the tremendous development of infrastructure that is taking place in our system. This started when real investment went to give farmers the freedom to market and we started to see the issues that were expanding.

I thank all of you for the efforts you have made.

I'm wondering, Mr. Ritz, if you could talk about some of the concerns and issues you see, how the order in council was able to move things forward, and why, if that was a solution back in 2013-14, it wasn't done back in December or January when this problem started to develop.

[Gerry Ritz]

We could have gone back further than that and extended it to when they sunsetted in July, just to keep things on an even keel.

The problem we had in 2013-14 was cash flow for farmers, but there were also 60-some boats sitting on the west coast charging huge dollars in demurrage, waiting to be loaded. That's what led to the minimum weekly numbers. It's a very blunt instrument. We were very fortunate in that crop year that the tonnage was all of similar grade. There wasn't a lot of blending required, so it was just a matter of getting the tonnage to Vancouver, onto the boats, and gone.

At the end of the day, that left secondary lines and short lines coming up short. Ian was just talking about that too. Short lines always face the brunt of not getting the cars they need to move that product, and they serve a tremendous area. I know in the CP case that the southern part of the Prairies is a tremendous catchment area. I think there are six or seven short lines that feed in, and they're not used to the extent that they could be. There are elevators out there on those lines. Some of them were farmer-owned terminals, and still are, and they need access to do that.

The minister does have some tools that could be put in play now while waiting for the Senate to make its move. He could reinforce the 160-kilometre interswitching. He could talk about volumes that have to be met, although maybe not to the same extent, because I understand that there are only 40 boats sitting there now, maybe not all for grain.

At the end of the day, there are tools that he can put into play while he waits for the Senate to finally get around to doing something, and it may actually put some pressure on the Senate to finally move as well.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

On the same question about interswitching, you mentioned how the 160 kilometres was determined. There seems to be some talk that maybe we could change it back to another number, or whatever. I wonder if you could expand on that, because you mentioned that we used to have 2,000 grain elevators. As a farmer from 40 or 50 years ago, I know that's what we were doing. We were hauling to all of these small grain elevators. Then, of course, they consolidated. It means they're driving more in their trucks on their roads, and everything else that we used to do. Why was the 160 kilometres a factor that you determined for 2013-14?

[Gerry Ritz]

As I said, the existing number was 30 kilometres. You could see one elevator from another one. Every little town had its name on it, and you never got lost because you knew exactly where you were, whether you were in an airplane or driving down the highway. Now we have 300 high-throughput terminals, G3 Canada with these loop tracks, and so on. That's the answer: you load on the go and you unload on the go. There's no stoppage at all. At the end of the day, they're farther apart.

When I started farming, we had a three-ton truck and we took it two miles away. Then it got to the point that as we got a bigger truck, the cargo wouldn't fit into the elevator anymore. We couldn't lift the box to unload it, so we were in there shovelling it out. Then they started building bigger elevators, and trucks got bigger to drive farther to service them.

Farmers have made the difference. There's more capacity on-farm than there ever has been before, which is not the answer, because you've got to move it to sell it and get paid for it. Everybody's made the decision to increase their infrastructure, whether it's at port or on the farm. All the grain companies have done that too. They can handle more and handle it faster, and they're open more hours and so on.

However, the weak link is still getting it from that delivery point on the Prairies to the coast, or south, or wherever it is that you're trying to ship it. That's where the infrastructure has to be picked up. Perhaps it needs extra track.

I know a lot of the work the grain companies have done. I drove by huge parking lots at every siding as I came in on Sunday to catch the airplane this morning, and they're all sitting there. There are no engines on them, but the cars are all there. They've been spotted. Whether that counts in their equations, I don't know; at the end of the day, it's delivery point numbers that matter.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

The grain companies are where the frustration is when we start talking transparency, because they're ready to call the farmer to say they know when this train's going to come and they'll get ready, and then they call him back later to say that it didn't work, so it's going to be another day. Then when they finally get a crew together to load the train, instead of it being when they thought it was going to be, it's on a Sunday that they're going to have to bring everybody in.

Can you just talk about some of the other issues you've seen on that side when it comes to the grain elevator system?

[Gerry Ritz]

You're absolutely right that there is a frustration out there. A lot of the grain that's grown now, I'd guess in the 50% range, is contract. Guys want to know up front what the price is going to be and commit to the volume. Maybe it's even higher than that now, but in 2013-14 it was 50%. The grain companies are buying on contract. They've made a deal with the end-user in Japan or China or wherever that at such-and-such a delivery date, they'll have the product there, because they've got to do something with it then.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Ritz. I'm sorry, but I have to cut you off.

We go to Mr. Drouin for six minutes.

Thank you, Mr. Dreeshen.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you, Mr. Chair.

Mr. Ritz, you tried to get out and we pulled you right back in.

You mentioned collaboration at the local level and understanding whether the shippers need to go to Thunder Bay or Prince Rupert, etc.

I'm wondering whether that data is available for Mr. Nielsen's members. Is that local data available in terms of how many grains would be available in that particular area?

[Jeff Nielsen]

Not to the degree that we would like it to be, no. The government does facilitate some collection of data through Quorum Corporation, and as part of the Ag Transport Coalition we get that data from them, but it's not as distinct as you're suggesting.

[Gerry Ritz]

It's reactive.

[Jeff Nielsen]

Yes, it's reactive.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Ritz, you've mentioned that one of the tools would be to use an order in council. That's one of the tools to get to the same objective. We already know that CN and CP for week number two—and that's again going to the Ag Transport Coalition—have increased their capacity.

When you put in that order in council, was the capacity suddenly increased to 100% the next day?