CN Rail apologizes to grain customers amid freight backlog

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Canadian National Railway Co. issued a rare apology to its grain customers on Wednesday, amid a freight slowdown that has seen the head of Canada's largest railway step down and drawn a rebuke from the federal government.

Montreal-based CN said it is spending $250-million to improve its western rail network and bringing on new engines and hundreds of crews to clear a backlog of wheat, canola and other field crops awaiting shipment to West Coast ports and overseas buyers.

"We apologize for not meeting the expectations of our grain customers, nor our own high standards," said JJ Ruest, named CN's interim chief executive after Luc Jobin departed on Monday with less than two years on the job.

Farmers and grain companies say the shortage of rail cars at both major Canadian rail companies has left growers facing financial crises and damaged Canada's reputation as a trading partner.

The railways have said rail traffic has slowed as an unexpected surge in freight was followed by a cold and snowy winter.

Ottawa this week told CN and Canadian Pacific Railway Ltd. to provide operational details on how they will clear the crop backlog. "[R]ailway performance has been disappointing," said the letter to CEOs of both railways, signed by Transport Minister Marc Garneau and Agriculture Minister Lawrence MacAulay. "Canada's international reputation as a reliable supplier is at stake."

Jeff Nielsen, president of the Grain Growers of Canada, said the exchange of "polite" letters between the government and the railways offered few solutions to farmers stuck with full storage bins. "It's a little late," he said. "This situation started last fall."

His sentiment was echoed by a grain industry representative.

"More important than an apology is taking action to rectify the situation. We look forward to seeing changes implemented and service improved," said Wade Sobkowich, executive director of the Western Grain Elevator Association, whose members include Richardson International and other big grain companies. "However, if the railways don't respond by providing more capacity for grain in the short term, then the government needs to be prepared to consider other steps."

CP tried to distance itself from its larger rival on Wednesday, issuing a statement that blamed the rail slowdown on cold weather and a larger-than-expected crop.

"When one railroad struggles, or a shipper is dealing with a labour outage, or a vessel captain refuses to load in Vancouver due to rain – the entire supply chain suffers," CP said. "While our challenges have been significant, they are different than that of our competitor's and the success of the supply chain depends on both railroads running at optimum levels."

A group of farmers and grain companies that tracks grain shipping says rail service has deteriorated in recent weeks. CN has met 17 per cent of hopper-car orders while CP has supplied 50 per cent in late February.

Mr. Nielsen, who farms near Olds, Alta., said neither railway has proved it is able to provide reliable winter transportation year after year. "CP is slipping somewhat now, too," he said. "It's kind of cyclical with the railroads. We see one year is good on one side, one year is bad on the other side."

Winter slowdowns are inevitable in the rail industry. Train brakes work poorly in cold weather and trains run more slowly with fewer cars. And customer complaints about rail service are as old as the rail network itself.

But the grain industry says poor planning, layoffs and cuts are to blame for the failure to move this year's crop, which is average in size. The railways have diverted crews and trains to more competitive freight lines, including containers, Mr. Sobkowich said. "They can put grain at the back of the queue and know that we have limited options," he said by phone.

The Canadian Federation of Agriculture says the shipping crisis has left many farmers in financial straits. The group on Wednesday called on Ottawa to provide short-term aid to growers by expanding a government-guaranteed loan program.

"Efforts to get more trains moving will not resolve the dire cash-flow crunch happening now. Grain growers require additional tools to bring their operations back to sustainable levels," the group said in a statement.