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An update from Murray Hamilton

March 2018

As you know, the grain supply chain is currently experiencing challenges. While extreme weather has taken its toll on the entire supply chain, the challenges at CP are different than the challenges at our competitor, and I wanted to personally take the time to explain not only the challenges we are facing, but the successes we have had to this point and the opportunities we see moving forward.

While we know winter is coming each and every year, and that railroading is an outdoor sport, recently we have experienced unprecedented cold (46 percent* colder, 167 percent* more days below -25 Celsius) and snow along with some significant outages. Additionally, CP is experiencing unprecedented and unexpected demand being driven from dual rail-served territories in the northern catchment areas of our network. In spite of significant weather challenges our shipments are up 30 percent crop-year to date in this area. We continue to deliver overall for the grain supply chain with our year-to-date shipments, through Week 30, up 3 percent, or approximately 470,000 metric tonnes.

At CP, we strategically plan each year for the upcoming crop, which this year was originally forecast around 65 million metric tonnes, but will end up being closer to 71 million metric tonnes, close to a 10 percent difference, with much of that increased production occurring in the northern catchment area of the prairies due to dry conditions in the south. On top of the crop size, increased production in the north, weather and other challenges have created issues for the entire transportation supply chain over the last couple of weeks, these short-term challenges are episodic, not systemic and we expect our network to improve with improving weather conditions. It is also worth noting that extreme weather and line outages impact all commodity movements, not just grain.

The supply chain works best when all of the players are functioning at a high level, including both railroads. 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, just as it does when temperatures drop below -25 Celsius for long periods of time. We hope our customers, as key players within the supply chain, understand this reality.

Taken as a whole, the crop-year to date has been a successful one for CP. Our innovative Dedicated Train Program has 15 percent more subscribers this year, our cycle times were on target and generally, things along our supply chain were moving well. Our year-over-year compares would be even better if not for a very slow start to the crop-year for grain sales. A portion of CP's dedicated train capacity also sat idle for most of August and September, and some shippers struggled to fill their committed freight until November.

We continue to add both crews and locomotives to support volumes across all commodities and are confident that with the weather on our side, service and network fluidity will continue to improve. We also urge the senate and government to move forward on Bill C-49 and bring some further certainty to the supply chain moving forward.

In closing, rest assured: all hands are on deck at CP as we work to meet the needs of our customers and the North American economy. Provided all critical parties to the grain supply chain do their part, we remain confident that at the end of the crop-year, CP's performance will be strong and we hope it will be highlighted for what it is.

If you have any questions or concerns, feel free to contact me at grain_questions@cpr.ca.

Murray Hamilton
Assistant Vice-President, Sales and Marketing, Grain

* Previously, it said that this winter was 60 percent colder and had 78 percent more days below -25 Celsius, that calculation was actually based on a subset of the network. In fact, for the period of Dec. 20, 2017 to Feb. 4, 2018, system-wide it was 46 percent colder (or approx. 6 degrees colder on average) with 167 percent more days below -25 Celsius (or approx. an additional 10 days below -25C during that period, as compared to the previous year).

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