Potential Rail Stoppage in Canada Threatens North American Agricultural Supply Chain
Source: DairyNews.today
A looming rail stoppage in Canada poses a severe threat to North America's agricultural supply chain, potentially disrupting the movement of essential commodities such as wheat, fertilizers, and meat. If labor agreements are not reached before the Thursday deadline, Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC)—which together control nearly all freight rail services in Canada—will halt operations, marking the first time such a shutdown would occur on a national scale.
Canada plays a crucial role in global agriculture, being the world’s top exporter of canola and potash fertilizer and the third-largest exporter of wheat. The impact of a rail stoppage would reverberate beyond Canadian borders, significantly affecting the U.S. economy due to the integrated nature of the countries' rail networks.
Agricultural groups across North America have expressed grave concerns over the potential disruption. In a joint letter to both U.S. and Canadian governments, nearly three dozen agriculture organizations urged immediate action to prevent the stoppage, emphasizing that the consequences would be particularly dire for bulk commodity exporters. Given the vast distances and large volumes involved, trucking is not a feasible alternative for many agricultural shippers.
The Teamsters union, representing rail workers, has issued a strike notice to CPKC, demanding better wages, benefits, and crew scheduling. Meanwhile, the rail operators have stated that lockouts will begin on Thursday if no agreement is reached.
The stoppage would have immediate and far-reaching effects on the agricultural sector. For instance, it would disrupt the shipment of U.S. spring wheat from states like Minnesota, North Dakota, and South Dakota to export terminals on the Pacific Northwest via Canada. According to Max Fisher, chief economist at the National Grain and Feed Association, this could severely impact the ongoing harvest season, with nearly two-thirds of the U.S. spring wheat crop still awaiting harvest.
In Canada, the prairie elevator network is expected to reach full storage capacity within 10 days of a rail stoppage, according to Mark Hemmes, head of Quorum Corp. This could halt the movement of crops such as soybeans, corn, and canola just before their harvest, adding to the logistical challenges.
The U.S. also heavily relies on Canadian railroads for transporting essential agricultural products. In 2023, Canada was the top destination for U.S. ethanol exports, with nearly 75% of those shipments traveling by rail. Similarly, about 85% of the 13 million metric tons of U.S. potash imports last year came from Canada, nearly all of which crossed by rail.
The disruption would not only affect grain and fertilizer shipments but also the meat industry. Canadian meat producers have warned that a stoppage could result in millions of dollars in losses and waste, with some processing plants expected to lose up to C$3 million per week. These facilities could be forced to shut down within seven to ten days of a rail stoppage, and it could take two to five weeks to return to normal capacity once operations resume.
Grain exporters are also concerned about the potential penalties and additional costs incurred from delayed shipments. Crosby Devitt, CEO of Grain Farmers of Ontario, highlighted the risk to Ontario soybeans destined for export markets like Japan, while Wade Sobkowich, executive director of the Western Grain Elevator Association, noted that delays could result in companies paying contract penalties and demurrage fees for ships waiting for grain to arrive.
Kayla FitzPatrick, spokesperson for Fertilizer Canada, emphasized the critical role of rail in the agricultural supply chain, noting that the railways move an average of 69,000 tons of fertilizer products per day. The disruptions could cost the fertilizer industry C$55 million to C$63 million per day in lost revenue, excluding logistical and operational expenses.
Krista Swanson, chief economist for the National Corn Growers Association, echoed the concerns, pointing out that there is "no good time" for such a disruption, given the constant trade flows and the importance of the trade relationship between the U.S. and Canada.
As the deadline approaches, the agricultural sector is on edge, recognizing the significant economic and logistical fallout that could result from a prolonged rail stoppage. The situation underscores the critical importance of rail infrastructure to North America’s agricultural supply chain and the broader economy.
Agricultural groups across North America have expressed grave concerns over the potential disruption. In a joint letter to both U.S. and Canadian governments, nearly three dozen agriculture organizations urged immediate action to prevent the stoppage, emphasizing that the consequences would be particularly dire for bulk commodity exporters. Given the vast distances and large volumes involved, trucking is not a feasible alternative for many agricultural shippers.
The Teamsters union, representing rail workers, has issued a strike notice to CPKC, demanding better wages, benefits, and crew scheduling. Meanwhile, the rail operators have stated that lockouts will begin on Thursday if no agreement is reached.
The stoppage would have immediate and far-reaching effects on the agricultural sector. For instance, it would disrupt the shipment of U.S. spring wheat from states like Minnesota, North Dakota, and South Dakota to export terminals on the Pacific Northwest via Canada. According to Max Fisher, chief economist at the National Grain and Feed Association, this could severely impact the ongoing harvest season, with nearly two-thirds of the U.S. spring wheat crop still awaiting harvest.
In Canada, the prairie elevator network is expected to reach full storage capacity within 10 days of a rail stoppage, according to Mark Hemmes, head of Quorum Corp. This could halt the movement of crops such as soybeans, corn, and canola just before their harvest, adding to the logistical challenges.
The U.S. also heavily relies on Canadian railroads for transporting essential agricultural products. In 2023, Canada was the top destination for U.S. ethanol exports, with nearly 75% of those shipments traveling by rail. Similarly, about 85% of the 13 million metric tons of U.S. potash imports last year came from Canada, nearly all of which crossed by rail.
The disruption would not only affect grain and fertilizer shipments but also the meat industry. Canadian meat producers have warned that a stoppage could result in millions of dollars in losses and waste, with some processing plants expected to lose up to C$3 million per week. These facilities could be forced to shut down within seven to ten days of a rail stoppage, and it could take two to five weeks to return to normal capacity once operations resume.
Grain exporters are also concerned about the potential penalties and additional costs incurred from delayed shipments. Crosby Devitt, CEO of Grain Farmers of Ontario, highlighted the risk to Ontario soybeans destined for export markets like Japan, while Wade Sobkowich, executive director of the Western Grain Elevator Association, noted that delays could result in companies paying contract penalties and demurrage fees for ships waiting for grain to arrive.
Kayla FitzPatrick, spokesperson for Fertilizer Canada, emphasized the critical role of rail in the agricultural supply chain, noting that the railways move an average of 69,000 tons of fertilizer products per day. The disruptions could cost the fertilizer industry C$55 million to C$63 million per day in lost revenue, excluding logistical and operational expenses.
Krista Swanson, chief economist for the National Corn Growers Association, echoed the concerns, pointing out that there is "no good time" for such a disruption, given the constant trade flows and the importance of the trade relationship between the U.S. and Canada.
As the deadline approaches, the agricultural sector is on edge, recognizing the significant economic and logistical fallout that could result from a prolonged rail stoppage. The situation underscores the critical importance of rail infrastructure to North America’s agricultural supply chain and the broader economy.
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