Agriculture Committee on March 19th, 2018

[Lloyd Longfield, Liberal, Guelph, ON]

I'm thinking that as well, from our conversations.

[Warren Sekulic]

As well, we need to have other companies pick up the slack if the one company isn't performing. We think the competitiveness in the interswitch amendment is a big deal. It could really help this legislation work the way it's intended.

[Lloyd Longfield, Liberal, Guelph, ON]

In 30 seconds, was there something on your pages that you didn't get out that you'd like to get out?

[Warren Sekulic]

It was covered in a lot of the other talks. It's the reciprocal penalties and the interswitching.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you for standing up for your communities and for coming all the way across the country to try to help us to solve the problem with you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Longfield.

Go ahead, Mr. MacGregor, for six minutes.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you, Chair.

Mr. Mazier, in your exchange with Mr. Longfield you were talking about both railways' performance indicators, the power of their locomotives, and their workforce. I had asked them when they were here earlier about the net trend from 2013-14 up to now—how many locomotives they had and their workforce—to see if there had been a dip and they were trying to catch up all of a sudden.

What has been your experience with that trend with those companies over the past few years?

[Dan Mazier]

In 2013-14, they cut back too much. At CP at that time, there was a fellow named Hunter Harrison. He started the whole process of making sure that their capital was utilized to the utmost. That changed the way railways use their capital and their investment, but it was at the cost of service. The shareholders were very happy about that response, but it did not serve Canada very well.

You can't look at Canada in the same way that you look at the United States. When you have two independent railways, they have obligations and a lot of rights in Canada, but what comes with that is a lot of responsibility. They have a responsibility to service Canadians, especially people who only have access to one shipper. They've somehow focused away from that.

Even in the data that they were presenting today, there was nothing about “here's what we're seeing for demand”. They know what we're demanding. We need 5,000 cars a week. They know the plan. They didn't mention how many cars. They just told you what they delivered. There was no agriculture language in that at all with regard to delivering cars.

I think we have a long way to go. Two years ago, CN did cut—from what I remember—2,000 employees and several locomotives. They did very well last year. They supplied transport for what we had to ship, but there wasn't much economic activity.

On the other hand, last year we missed on CP. As the president of a farm group, I was irate when I turned around in April and started talking to farmers and there were a lot.... Southwestern Manitoba and southeastern Saskatchewan were hit particularly hard. CP was around 40% to 50% all winter last year, and no one said anything. They got away with it last year.

I kind of feel bad for CN this year, but it has to stop. They don't understand.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Can I get a quick comment from you? You mentioned the 28,000-car backlog, and you're pretty pessimistic about part of this year's crop.

Are programs like the advance payments program and the suite of business risk management tools adequate to deal with crises? Is there something we can do to improve them? Do you have any suggestions for this crisis here?

[Dan Mazier]

It's interesting. If we don't get rid of the backlog, what's going to happen in either August or September is that we're going to have to build more bins and have more debt, but we're not going to be able to pay bills. They can defer the interest from those actual payments. I think they can do that. That was done the last time, in 2013-14. There's a deadline of September 31 for last year's crop. They could defer interest on that and say, “No, we're going to let it go until January or whenever, until you get rid of the crop.” Until we get those numbers down and see what kind of summer they have, they could apply for that. Increasing the limits would help, but as we all testified, it's borrowing money when you have money in the bin.

There's the other thing we haven't talked about. As our grain comes into summertime, into spring, the temperature of the grain is changing, so we have to recondition it. We have to turn the fans back on. We have to make sure.... There's snow that sifted in and condensation going on, so we have to re-handle that grain again, maybe pull some bins out and circulate them. Meanwhile, we have to put a crop in. We have to start sowing it, seeding it, spraying it, and all that kind of stuff. It adds that much more complexity.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Mr. Sekulic and Mr. Fransoo, you both experienced 2013-14, and look at what we're going through now. Do you have any general comments on the parallels between the two? Are we going to repeat this sad story in another four years, or are you optimistic that we have something before us that will actually tackle this problem?

[Warren Sekulic]

I think that if we can pass this bill with the amendments that we're pretty much recommending as a supply chain, we can go a long way toward fixing the problem. I sure don't want to be coming back here in four years.

I was here in 2013-14. I learned those lessons really well, and they were really hard. I manage that risk right from the get-go every year now myself with regard to my own business and marketing plans and that type of thing. I'm behind, but I did manage that risk, because I didn't ever want to get stuck in a situation of looking at February. FCC moved things back to March in 2013-14. It used to be that February 15 was the payback date; now it's March 15, but they're talking about pushing it back again. If I'm looking at coming to the middle or end of January and I haven't moved my contracts, I sure as heck don't have my cash in the bank to pay that FCC bill.

[Daryl Fransoo]

I echo a lot of that. We've just got to concentrate on getting this bill passed as quickly as we can. Everyone is asking for amendments. They're no-brainers, so let's get them in there and get this done.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Fransoo. I have to move on.

Thank you, Mr. MacGregor.

Mr. Drouin, you have six minutes.

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

Thank you, Mr. Chair.

Thanks so much for staying late with us.

Thanks, Warren. We're all on a first name basis. It's nice to see you.

You mentioned that you've had to create a buffer zone because of the unpredictability of the rail system. How do you have that conversation with your accountant, I guess, on how to create that buffer zone for you, and how much has that increased since the incident in 2013-14?

[Warren Sekulic]

It's not really a conversation with my accountant. I took 2013-14 and saw how long the contracts got pushed back. From past experiences, I know that our service in the Peace Country can be pretty terrible. We can be the last that are cleaned out. I just don't leave risk on the table that I won't have my grain delivered in time to pay my bills—or I try not to, anyway—so I sell a big proportion of my grain early. That's how I manage that risk.

I end up paying a bit of a penalty. You can sell in, say, September or October, for a wider basis, and that's when everyone wants to sell, but it's just a better risk to take, in my opinion, than not having the cash flow to pay my bills later on.

Does that answer your question?

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

I want to focus on the long term, but as a member of Parliament, I'm not yet convinced.... I know Bill C-49 will answer a lot of questions, but I've spoken to a lot of your members and a lot of farmers about capacity, and they're saying that they're getting a lot more efficient on the farm and can produce a lot more in the same acreage of land, so that obviously means production is going to increase.

Mr. Mazier, are you having that conversation with the rail companies about long-term capacity? What's the five-year or 10-year output? Are we ramping up capacity? Even if Bill C-49 is there, we will be back here in four years if we don't have that capacity. If we don't ramp up capacity, it will happen again.

[Dan Mazier]

We did have the solutions back in 2013-14, and we talked about giving the agency more power to be more proactive, which is the word we're all looking for, I think, instead of reactive. As long as the railway companies are focusing on stockholders' share, we're all going to lose. We're going to lose as Canadians.

They've got to get their head around that. They're supposed to be offering us the service. When the economy starts ramping up, their solution is to ration, to cancel orders, to stomp out that economy and restrict it. I don't know how a carrier, in good conscience, could do that, especially with the monopoly that they have in Canada. It doesn't make any sense at all. They need regulations.

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

Yes, I completely agree, but I'm concerned whether we have the infrastructure in place to answer the demand in five years. That infrastructure takes a while to build, right?

[Dan Mazier]

They are coming to everybody and saying that this is the infrastructure that we're putting in. They know they have some choke points. In Vancouver, I know that they talk about the bridge going over the water and the other one up to Prince Rupert. They know they have some pretty vulnerable spots. I think they're ready to invest and to work with us, but a lot of their problems could be solved by using their power and their staff a lot more efficiently. Don't be cutting down right to the bone. When the economy slides down a little bit, be ready for that little bump, so that instead of that 2% bump, say an 8% bump. Put that in your model and see what it looks like.

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

That's one of the questions that I've asked previous witnesses. I think there's an opportunity for you guys to talk about projections with the rail companies, but there's not an opportunity for feedback after the fact. Would that be something that you guys would welcome?

I would suspect that meeting over 80% would be great news in today's cases. However, if there was an opportunity for you guys to provide feedback, then you could say, yes, this year we've met our numbers, but here's how we can improve the service for next year.

[Dan Mazier]

They have to start talking to our shippers and our grain buyers. They have to understand what they go through. We've all locked in to next year's price. We've probably got 20% of our product locked in for next fall already. Railways don't get that.

We are different in agriculture. You can shut down a mine and you can shut down an oil line and you can shut down a car plant. You can stop these industries, but you can't shut down agriculture. We go on cycles. We have the sunshine and the rains, so we produce. That's what we're hardwired to do, and we're going to keep on doing that because the government is sending us very clear signals to produce more. As producers, farmers can scream all we want, but the carriers have to start understanding what our grain companies and our buyers are going through. Why would they take on all this risk if the railways are not even going to provide enough service to move the grain?

Do any of you guys want to comment?

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

Thank you very much.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Drouin.

Mr. Poissant, you have six minutes.

[Jean-Claude Poissant, Liberal, La Prairie, QC]

Thank you, Mr. Chair.

I would like to thank our witnesses for their testimony.

Earlier you said the delay was about 20,000 cars. Before that, the CN and CP officials said that instead of 4,000 cars per week, there were 3,000 to 3,200. Is that included in the calculation of 20,000 cars that you mentioned? That is what I am wondering.