CN says Canada's rail transportation system is ready for the new harvest
With commercial alignment driving grain supply chain back in sync, CN's Claude Mongeau urges Ottawa to carefully limit the scope of new rail regulations
MONTREAL, July 28, 2014 /PRNewswire/ - CN (TSX: CNR) (NYSE: CNI) said today Canada's rail transportation system is ready to accommodate the new harvest with a solid throughput rate in line with the grain supply chain. The supply chain will also be able to address the excess carry-over from last year's extraordinary crop by as early as next spring.
Claude Mongeau, president and chief executive, said: "CN posted a record performance in the 2013-2014 crop-year just ending - our movement of Western Canadian grain was a full 25 per cent greater than past average performance.
"We can be proud of our performance and for making good on the commitments we gave the federal government a month before the order-in-council requiring railways to move specific grain volumes took effect last March.
"By virtue of normal commercial incentives, the grain handling and transportation system is now fully back in sync and ready to accommodate the upcoming harvest.
"This positive development is very encouraging and calls for careful balance from the federal government in how it pursues the regulatory agenda it announced in haste in the midst of a very difficult winter."
Mongeau said CN transported record grain volumes last fall until extreme cold weather affected the rail industry's ability to move grain efficiently between mid-December and early March. In February, CN promised the federal government it would ramp back up to record performance as soon as the weather eased - and it did just that. The weather clearly challenged CN's operations, but the company's winter grain shipments ultimately turned out to be only two per cent below normal winter volumes.
CN's run rate of spotting approximately 5,500 grain hopper cars per week since April 2014 has exceeded unconstrained orders placed by its customers, and its wait-list has declined significantly in the last few months due to a high level of order cancellations. As such, CN's wait-list now represents a normal level of only one week of shipments.
With the rail transportation system running efficiently, Mongeau said the grain supply chain is very well positioned to handle the coming harvest.
"According to Agriculture Canada, the carry-over from the crop-year just ending will be about 18 million tonnes, only 5.5 million tonnes higher than an average carry-over. Given a late-planted crop this spring, the supply chain will have another five or so weeks to deplete stocks further by five to six million tonnes prior to the harvest starting in full gear. All this means there should be sufficient storage capacity available in the system.
"Looking forward, given Agriculture Canada's latest 2014-2015 crop forecast of 59 million tonnes - slightly higher than a trend-line average crop - the current throughput level for the rail industry should be sufficient to eliminate all the excess carry-over of grain by as early as next spring."
Mongeau concluded: "End-to-end balance has been restored to the grain supply chain through hard work and normal commercial incentives. As there is no structural problem to fix, the government of Canada should limit the scope of new rail regulations, and instead focus on encouraging true supply chain collaboration.
"CN urges the federal government to adopt such a commercial approach and is ready to play its key role in the grain handling and transportation system for the benefit of Canadian grain growers."
CN (TSX: CNR) (NYSE: CNI) is a true backbone of the economy, transporting approximately C$250 billion worth of goods annually for a wide range of business sectors, ranging from resource products to manufactured products to consumer goods, across a rail network spanning Canada and mid-America. CN - Canadian National Railway Company, along with its operating railway subsidiaries -- serves the cities and ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the metropolitan areas of Toronto, Edmonton, Winnipeg, Calgary, Chicago, Memphis, Detroit, Duluth, Minn./Superior, Wis., and Jackson, Miss., with connections to all points in North America. For more information on CN, visit the company's website at www.cn.ca.
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