Good evening, everyone.
I thank the committee for giving CN the opportunity to contribute to its work and provide information about CN’s role in Canada’s food supply chain, as well as on potential next steps that would benefit all participants in freight transportation coming to and coming from Canada.
CN is a major contributor to the import and export of goods for Canada. In 2021, CN moved over 5.7 million shipments of freight across its network, with over 30% of that being import or export business. Primary commodities moved for export are grain, coal, potash, propane, pulp, ore concentrates and many more. Imports are more concentrated around containers filled with retail merchandise.
CN is also a major transportation partner for the food industry. CN moves significant amounts of grain for export to countries around the world. This is moved in railcars to port for furtherance by ship, at roughly 30 million tonnes per year. Grain is also moved in containers loaded near farms or at the ports for movement around the world, at roughly half a million tonnes per year. Additionally, CN moves both imported and domestic food products in our fleet of refrigerated and heated containers, as well as in our customers' fleets.
One of the main areas that have caused insecurity for food are the disruptions in the supply chain caused by climate events in the last few years. These are events such as record rainfalls that cause roads and train tracks to be washed away with no notice, forest fires that tragically wipe out towns and the transportation infrastructure in the area, and freezing cold temperatures for record lengths of time that prevent normal transportation movements. These events cause serious disruption in the supply chain and impact Canada's reputation as a reliable food supplier to the world.
Drastic changes in the container markets over the last two years are another key cause of food insecurity. The supply chain challenges created by COVID have disrupted the normal worldwide flow of goods and services. The container industry has adapted to these market forces with higher prices and reduced trade lanes. This has caused a shift in the availability of containers for grain exports from Canada. As supply chains normalize, we believe rates will come down to historic levels and trade lanes will slowly be re-established. As this happens, CN will work with our customers to adapt to the new supply chains.
I will highlight some areas for improvement for all supply chain participants.
New and additional infrastructure will be a key requirement to improve the supply chain and security for food. In order to handle more volume through existing supply chains, capacity expansions must be undertaken. This includes port infrastructure, rail capacity and intermodal terminal capacity. If Canada wants to have surge capacity available on short-term notification, it will need to fund it. The NTCF program is a good solution for this. It needs to be fully funded and used for this infrastructure.
Canada also has one of the longest timelines to approve infrastructure investment. This makes it impossible to quickly adapt to changing supply chains. In order for Canada to expand in trade, the government needs to streamline the process for infrastructure investment. By way of example only, it took CN over seven years to get its Milton intermodal terminal approved. These delays threaten the agility of the supply chain to respond to emerging issues or crises.
Regulation in Canada continues to slow down or stifle investment decisions as well. Canada's national transportation policy provides that “regulation and strategic public intervention are used to achieve economic, safety, security, environmental or social outcomes that cannot be achieved satisfactorily by competition and market forces”. I submit that regulation has departed from that guidance and needlessly interfered with market forces that would deliver better results for market participants and the global economy. If the need to regulate exists, it must be based on hard evidence and tailored to address real issues, rather than issues presented through the perspective of certain market participants. Uncertainties and lack of evidence-based regulation create uncertainties that deter investments in Canada, versus other countries with a consistent policy agenda.
The government needs to promote further automation of the supply chain while considering the ESG impacts of those changes. All supply chain participants will continue to automate while reducing the impact on the environment. The government can help in these areas by funding innovations that provide the largest impact for all Canadians. This would all need to be done with a solid implementation plan, with safety embedded in every area.
With that, I would like to thank the committee for the time. I would be happy to answer any questions.