Grain farmers and pork producers bearing the brunt of rail stoppage

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Grain farmers, pork producers and fertilizer companies are among many in the food and farming sector that have been caught in the unprecedented shut down of two major railways.

Late Thursday, the federal government took measures to order the disputes to binding arbitration and quickly get the railways back to work. The lockouts happened in the early hours of Thursday morning.

However, some damage has already been done: Railways had slowed deliveries in anticipation of the work stoppage, leading to backlogs. The disruption also exposed how dependent Canada’s agriculture giants are on the two railway companies, opened the industry to reputational damage overseas and begged the question about why – given these stakes – the federal government didn’t step in sooner.

According to Cereals Canada, more than 85 per cent of grain moves by rail in Canada, from grain elevators to ports and markets across the country and North America.

The rail lockouts happened right at the start of harvest, when grain elevators are receiving product and moving toward full capacity. And, before the federal government’s announcement, this choke point was fast approaching. Viterra, one of Canada’s largest exporters of grains, oilseeds and pulses, said in a statement to The Globe and Mail their elevators would have reached capacity within a few weeks had the stoppage continued.

“Viterra relies heavily on sound infrastructure and a fluid supply chain to be successful,” said the statement. “This work stoppage has an immediate and severe impact on our ability to serve our global customers.”

This would have put farmers in a perilous position. An individual farmer could be on the line for hundreds of thousands to millions of dollars in operating loans, said Roger Chevraux, chairman of Alberta Canola and chair of the Canadian Canola Growers Association. These funds are essential to pay for planting for the next season.

“We’ve worked all year long. We’ve borrowed money. We’ve put crop in the ground,” said Mr. Chevraux. “We’ve done all the work that we have, and we haven’t been paid for anything.”

Farmers also do not have storage capacity for grain. Delays in movement to the elevators would mean investing in grain bags or paying for other types of storage, all when no cash was coming in.

Or farmers might have been forced to dump grain on the ground, exposed to the elements, which could lead to spoilage, said Gunter Jochum, president of the Wheat Growers Association.

Rail lines owned by Canadian National Railway CNR-T and Canadian Pacific Kansas City CP-T are largely the only options for grain farmers. Trucking product from the Prairies to the ports of Vancouver or Montreal is not a viable option, Mr. Jochum said. There isn’t capacity and the distances would make it cost prohibitive. The port infrastructure is also entirely built around rail lines, not truck loads, he said.

With news that the rail lines should be reopening, Mr. Jochum is relived. However, the industry will still face delays. It will take weeks to bring it back up to speed, said the Wheat Growers Association in a statement.

Soybean meal is a source of protein in pork feed, and U.S. imports are being delayed because of the slowdown and then the shutdown of Canadian rail lines, said René Roy, chair of the Canadian Pork Council. U.S. rail companies don’t want to send cars into Canada for fears that they won’t be returned, he said. Prices for soybean meal have therefore climbed, at least in Eastern Canada where he is based.

Soybean meal is fed to pigs throughout their lives however is essential to the fattening stage. Producers have had to switch to suboptimal feed. This leads to changes in growth, and animal welfare concerns.

Olymel, Canada’s major hog producer, said in a statement to The Globe that it had started using road transportation to deliver goods to customers in Western Canada and to ports to be shipped to Asia, at extra cost.

However, Olymel was monitoring closely how a prolonged stoppage would lead to logistical problems at ports. This would affect exports.

Seventy per cent of Canadian pork is exported. For that reason, a global reputation as a reliable exporter is essential to the sector, said Mr. Roy. After the Port of Vancouver strike in 2023 and a Canadian Pacific rail strike in 2022, Mr. Roy heard complaints from international buyers who are growing more concerned with continual delays.

“This is an on-time business,” he said, adding that buyers were looking to other markets. “This creates business decisions that are negative for Canadians.”

Given the large-scale implications of the railway lockouts, producers are left wondering why the government took so long to intervene.

“We’ve been warning about this since May,” said Mr. Jochum, who added that negotiations between the union and the two railway companies have been going on for months. And he said that his association, alongside a number of other producers, had been urging Ottawa to classify the rail lines as an essential service throughout.

The federal government’s delay in taking action has had a real impact on Canada’s global reputation, he said. A number of customers had started looking elsewhere, frustrated by a series of labour issues over the past few years.

“We just can’t be trusted any more.”