Canada faces grain backlog with freight halted through B.C. after flooding

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The British Columbia floods that have destroyed road and rail links to the Vancouver port have left producers and shippers of wheat, barley and other crops with no viable way to reach export markets.

Brian Otto, who grows malt barley and wheat on 5,000 acres south of Lethbridge, Alta., fears the impact the severed transport links will have on demand for his crops, and on supplies of fertilizers and farm machinery. The malting companies in B.C. and Alberta that buy his barley and wheat use trucks and trains to reach overseas markets. “If they can’t ship their malt, it’s going to slow down demand for the barley,” Mr. Otto said, adding, “I think effects of this won’t be felt right away.”

Flooding in the southern part of B.C. over the past week washed out railways, roads and bridges, leaving many homeless and at least one person dead. Canada’s two big railways, Canadian National Railway Co. and Canadian Pacific Railway Ltd., are working to restore the lines to Canada’s busiest port.

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“We did not receive any grain by rail yesterday and don’t expect to receive any more until rail service resumes,” said Matti Polychronis, a spokesperson for the Vancouver Port Authority.

Salem Woodrow, a CP spokesperson, said service could be restored by the middle of next week.

Wade Sobkowich, executive director of the Western Grain Elevator Association – which represents Viterra, Cargill and other big grain exporters – said the financial losses to growers and exporters will mount as the outages drag on.

Grain elevators that cannot get train service will become full and stop taking deliveries of crops from farmers, he said. This means farmers will not be paid for their grain. And grain companies will face financial penalties from overseas buyers for failing to deliver, in addition to charges from vessel owners forced to idle at anchor near the port of Vancouver, Mr. Sobkowich said.

Steve Pratte, manager of policy development with the Canadian Canola Growers Association, said farmers are used to dealing with risk because they are always at the mercy of the elements. But the floods in B.C., he added, have been “an unreal event.”

With grain elevators filling up, some farmers will be in a tough spot: Many will have to store grain on their farms instead. That introduces the risk of crops degrading or spoiling over time.

Farmers on the Prairies are in the middle of delivery season for canola for the export market, which lasts from October through December. The lack of cash flow could put some of them under significant financial strain, Mr. Pratte said.

The hits to individual farmers will vary. After a drought during the summer that affected certain pockets of Western Canada, some farmers were already sitting on extremely low crop yields. Others, who managed to avoid the drought, were expecting to capture high prices for grain but now will have to wait. The price of canola futures for January delivery is trading higher than $1,000 a tonne, according to the Alberta Canola Producers Commission. This represents an increase of about 30 per cent since May.

Three-quarters of Canada’s grain exports pass through Vancouver, where they are loaded onto ships destined for international food producers. Most of those are in Asia, but the port also ships to Latin America and other regions.

Although ports in Thunder Bay, Ont., Prince Rupert, B.C., the United States Pacific Northwest and overland routes into the U.S. offer possible alternatives, train shipments are not easily or affordably diverted. And terminals lack the capacity to quickly handle large new volumes of commodities.

“There are no practical alternatives,” Mr. Sobkowich said. “We have grain shipments that are completely halted between the Prairies and Vancouver.”

Some Western Canadian grain is taken by train to Thunder Bay, where it is shipped through the Great Lakes to markets in Europe, the Middle East and elsewhere.

Tim Heney, chief executive officer of the Thunder Bay Port Authority, said the port could see some additional trains of grain, particularly in the spring. The port, which will soon become iced in and close for the winter, has the room to store grain, he said. In any case, he added, it is too late in the season to line up enough ships to move much additional grain this year.

“It’s getting near the end of the season, so it’s not like you can turn on the ship supply at this point,” Mr. Heney said.

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