The 2019-2020 harvest is here, and, once again, it's an exciting time to be part of the grain supply chain. CP is ready to move the crop to market safely and efficiently. We currently have more than 2,000 grain hoppers staged at CP-served elevators across the prairies in anticipation of harvest beginning in earnest, which, at the time of writing, we hope is around the corner. We've added more than 1,600 new high-capacity hopper cars to our fleet (part of our commitment to the $500 million investment in new hopper cars), with a plan to have more than 1,900 in service by the end of the calendar year, creating capacity and efficiency in our fleet.
CP understands and appreciates the challenges facing the agricultural sector this fall, including wet weather, lower commodity prices, geopolitical tensions and trade disputes, all of which are causing market uncertainty and resulting in lost opportunity for grain movement. I would be remiss if I did not emphasize that once peak capacity for grain movement is lost, it cannot be replaced. Delays to this year's harvest are substantially beyond what we had expected and planned for. We were anticipating much stronger demand driven by the estimated 11-12 million metric tonnes (MMT) of grain carried over from the 2018-2019 crop year.
While customers make their own determinations with respect to the timing of grain shipments, according to their own transportation needs and market conditions, it's important to highlight that the capacity CP has created on our rail network for all commodities, including grain, is a tangible asset that is lost when it goes unused.
September is a critical month for moving the Canadian crop to market. In the coming months, Canada will experience heavy snow, extreme cold and the seasonal closure of shipping through the St. Lawrence Seaway. Of course, CP has railroaded in these conditions for 138 years, and our team of talented railroaders will soon execute our winter plan to maintain operations through these challenging conditions. However, the grain supply chain simply cannot achieve the same momentum and throughput in the winter as it can during spring, summer and fall.
The economic challenges facing our Canadian customers are also being felt by customers in our U.S. franchise. U.S. grain shipments on our network moving to the Pacific Northwest for export are significantly lower this year than what we typically see. That said, CP has been working hard with our U.S. customers to develop alternative destinations to give customers options to access more markets.
On July 31, we submitted our
2019-2020 Grain Service Outlook Plan to the Minister of Transport. The plan provides an assessment of CP's ability to move grain during the upcoming 2019-2020 crop year, taking into account the total volume of grain expected to be moved. Later this month we'll submit our Winter Plan to the Minister. It will explain how CP plans to safely and efficiently move grain, along with other commodities, through the winter months.
Finally, I want to
recognize the efforts of G3 Pasqua, our 2018-2019 crop-year Elevator of the Year. CP presents this award annually to the grain elevator that achieves high volumes from a single loading point while consistently demonstrating efficient railcar loading and a strong commitment to safety. G3 Pasqua is more than deserving of the honour and we look forward to our continued shared success.
Above: Murray Hamilton presents the 2018-2019 Grain Elevator of the Year award to Trent Brister, General Manager of G3 Pasqua.
If you have any questions or concerns, feel free to contact me at firstname.lastname@example.org.
Murray HamiltonAssistant Vice-President, Sales and Marketing, Grain
April and May were record Canadian grain shipping months for CP.
In April, CP moved a best-ever 2.643 million metric tonnes (MMT) of Canadian grain and grain products, bettering the previous record from October 2018. This performance took place in a month when the workload on CP's network was close to the highest it has ever been. Gross Ton-Miles (GTMs) averaged 817 million per day in April – the second-highest average workload of any month on record.
Crop-year to date
through the end of May, CP moved 22.5 MMT of Canadian grain and grain products. To Vancouver, a high-priority outlet for the flow of export grain from Canada, CP moved 15.0 MMT through the end of May, breaking the prior record set in the 2015-2016 crop year by 5 percent. May was also a record month for Canadian grain products, not including whole grains, both from a carload and a volume perspective.
These records showcase the strength of CP's service and commitment to innovation in the grain supply chain, including investing in new high-capacity hopper cars. CP now has 1,149 new hopper cars on its system. At year's end, CP will have more than 1,900 new hopper cars in service. The fleet will continue to grow in the years ahead, as part of CP's $500 million commitment to invest in 5,900 new hopper cars. Customers can load up to 10 percent more grain by weight and 20 percent more grain by volume in these cars compared to the older, less efficient hopper cars they are replacing.
8,500-foot High-Efficiency Product (HEP) Train model, announced last summer, is gaining significant traction with CP customers. As more grain elevators are built or expanded to accommodate 8,500-foot trains via loop track or ladder tracks, CP and the supply chain will become more efficient. Coupled with the new hopper cars, the 8,500-foot model can move up to 44 percent more grain per train.
In August 2019, CP will implement a pricing framework to support our customers' transition to the 8,500-foot model. Shippers using the 8,500-foot HEP Train model will benefit from preferable freight rates in addition to gaining significant supply chain efficiencies. Together with our customers, CP is creating capacity and driving advancements for the grain supply chain.
As I write this piece, seeding is complete across the prairies. I wish farmers every success in the coming crop season, and we look forward to delivering for them and the entire grain supply chain. Through our commitment to communication, collaboration and innovation, CP is well-positioned to continue to deliver for our customers.
If you have any questions or concerns, feel free to contact me at
This past winter has been one of the most challenging in my 33-year railroading career. The tragic loss of three of our professional railroaders on February 4 impacted all of us in the CP family, and beyond.
We saw unprecedented cold weather and snow across our network – Alberta, Saskatchewan and Manitoba recorded the coldest winters in 40-plus years in 2019. We experienced extreme cold and increased snowfall across much of our network. Despite the challenges, the supply chain, and CP, showed its resilience. In January, CP shipped 2.07 million metric tonnes (MMT) of grain and grain products. That is 10 percent more grain than shipped in January 2018 and nearly 8 percent more than the historical high from 2012. To date for the crop year CP's grain shipments are nearly 2 percent ahead of last year. While still very early in April, I am optimistic for a strong finish to this month.
As spring takes hold, CP is actively monitoring water levels across the network. In mid-March, much of the
U.S. Midwest experienced extreme flooding, which included a washout of a CP rail bridge in northeastern Iowa. My hat is off to our Engineering team and their remarkable ability to get the bridge back in operation in a miraculous 12.5 days.
To prepare for flooding, much like with winter planning, CP stockpiles required materials and resources in strategic locations. These actions, including storing ballast and riprap, and monitoring bridges and piers, ensure the safe operation of trains while these events take place. Flooding has occurred along the Mississippi River near CP's lines in Clinton and Davenport, Iowa, and CP is actively monitoring the situation in the Red River Valley of Minnesota, North Dakota and Manitoba.
Challenges aside, the past three months have been very busy as we continue to collaborate with our customers and the broader supply chain.
CP celebrated Canada's Agricultural Day on Feb. 12. Please
read Joan Hardy's statement on why CP's commitment to shipping grain and grain products has never been stronger.
On March 1, the Honourable
Marie-Claude Bibeau was appointed Minister of Agriculture and Agri-Food. Joan Hardy, CP Vice-President Sales and Marketing, Grain and Fertilizer had the opportunity to meet and speak with the Minister at a roundtable held in Calgary on March 12. We congratulate the Minister on her appointment and look forward to an ongoing positive relationship with her and her team.
On April 2, CP awarded South West Terminal with the first-ever Elevator of the Year award, presented to the grain elevator that achieves high volumes from a single loading point and consistently demonstrates efficient railcar loading and a strong commitment to safety. The criteria for this award are based on total volume, participation in CP's products and services, loading consistency, safety and efficient loading of each car. Congratulations to everyone at South West Terminal for winning the 2018 award, and thank you for shipping with CP.
Above: Members of the South West Terminal grain team, wearing their commemorative jackets, join me to celebrate the win!
Above: Here I am joined by (left to right) Robert Chapman, grain manager, South West Terminal; Monty Reich, general manager, South West Terminal, and; Allison Vos, CP account manager
We are very pleased with the feedback we are receiving from the origin elevators and port terminals on the new high-efficiency grain hopper cars. We look forward to the velocity improvements these cars will continue to bring to the grain supply chain. To date, CP has integrated more than 600 new hopper cars from Hamilton's National Steel Car into our fleet. CP expects to have 1,900 new hopper cars integrated in to the fleet by the end of 2019.
As we move deeper in to April and see increased productivity with the Port of Thunder Bay re-opening, velocity on our grain network will improve even further. We are ready to handle your business, and look forward to a strong spring and summer.
As we finish off the 2018 calendar year, I'd like to reflect on how the grain supply chain has performed for the first five months of the 2018-19 crop year.
To this point, this crop year has been full of records for CP – which is a reflection of the efforts of the entire grain supply chain. October was
CP's best month ever for shipping grain and grain products across all destinations and November was a
record for carloads shipped to Vancouver. Then, in grain week 19 we had record unloads at Vancouver, significantly higher than our previous high. Thank you to all of our grain supply chain collaborators and terminals for their impressive performance.
In early December, we showcased CP's newest product offering and the grain train model of the future - an
8,500-foot, High Efficiency Product (HEP) train comprised solely of our new high capacity hopper cars. The event highlighted CP's innovative HEP train model and gave the industry a glimpse at the future of grain transportation. It's a future that's bright and built on continued collaboration, commitment to innovation and strategic capital investments.
We're finishing strong as the fifth month of the 2018-19 grain shipping season comes to a close. That's due in part to our grain colleagues making sure they're firing on all cylinders across the entire supply chain. Based on the latest Ag Canada estimations, western Canada crop production appears to be around 70.96 million metric tonnes (MMT) this crop year, four MMT higher than the estimate in August and 4.2% higher than the five-year average. Based on this, we expect to be a very busy railroad.
This isn't to say the grain supply chain hasn't had a few challenges in this first five months. While CP's network has remained fluid, congestion has continued to hinder the supply chain at Vancouver. This emphasizes the need for all supply chain participants to effectively manage their capacity and reinforces the need to operate on a 24/7 basis. We're continuing to work closely with the rest of the industry to get past these challenges.
CP looks forward to delivering for Canadian grain, and other commodities, safely and efficiently throughout the winter. To make sure CP's ready to ship this grain, we've invested in our fleet of hopper cars, we've hired more people and we've brought more locomotives on-line. Read more about this in our update letter to
Canada's Minister of Transport, the Honourable Marc Garneau.
As we move fully into our winter operating period, I must emphasize that everyone needs to go home safe. Make sure you're removing snow and ice buildup from switches and tracks and ensure your facility is safe for our employees to work in. More information on what you need to do is in the
Customer Safety Handbook.
If you have any questions or concerns, feel free to contact me at
email@example.com. Here's to a productive 2019 and to the continued success of the grain supply chain.
One of the questions I'm asked most is, "how does CP prepare for winter?" It's an important question and one I wanted to tackle.
Last month we shared our winter plan with
Canada's Minister of Transport, Marc Garneau. In it we detail the steps that CP is and has been taking to prepare for winter. Forecasts are constantly updated with the most recent specialized data, and this month we should have a more accurate prediction for what winter has in store. Severe winter weather can hamper rail operations: train lengths, speeds and weights have to be reduced under strict operating protocols as it gets colder. The reason for these changes to our operation in extreme cold is our continued commitment to safety. As in other modes of transportation, machinery just doesn't work as well below -25 degrees Celsius. These factors can play a significant role in reducing capacity and fluidity on the railway if winter is severe.
Every year the bulk of the questions regarding CP's readiness surrounds crew base and locomotives. While those are just two pieces to a complex puzzle, I can report that 100-plus remanufactured locomotives are now ready for service. We also have hundreds of new operations employees making their way through our training process to safely operate them.
White Paper: Railroading in the Canadian Winter for more information on everything we do for safe winter operations.
Want to know what you can do? The CP
Customer Safety Handbook gives clear direction on safe rail operations and can assist in educating your employees on the potential hazards of rail operations. It's a good resource to understand what your responsibilities are to ensure our employees can safely access your sites in winter.
In my last update (August 2018) the 2018-19 crop season was just getting underway. We had a large carryout from last year and this crop year was looking promising. While it still has great potential, we're off to a slow start getting crops off fields due to adverse weather hitting the prairies. Alberta has been hit particularly hard by early winter weather – harvest is only ~50 percent at this point, behind the five-year average of 80 percent. Manitoba and Saskatchewan are a bit further ahead with over 80 percent of the harvest completed. The weather has improved over the last 10 days and we know farmers are in the fields. The grain supply chain started a little choppy at first but it feels like we've found our collective supply chain rhythm. We'll continue to coordinate with our customers so that cars and trains are available when the grain gets to elevators.
As we approach snowfall and potential colder temperatures, we must reiterate the need for 24/7 operations throughout the entire supply chain. It's positive to note that some of our Vancouver port partners have moved to 24/7 operations.
Switching gears I'd like to share our success at CP's Investor Day on October 4, held in Calgary. Joan Hardy, CP's Vice-President, Sales & Marketing, Grain & Fertilizers, spoke about CP's grain playbook for the future and was able to provide a sneak peak at the new high capacity hopper car. CP is currently taking delivery of these new cars and will add 500 cars to our fleet by the end of this year, and a total of 5,900 over four years. That is a huge investment by CP for our customers and I look forward to getting these cars into the fleet. Joan also spoke extensively about our new 8,500-foot high efficiency product (HEP), or HEP train, and what that will mean for CP's customers. Moving from the old 7,000-foot to 8,500-foot model is an immediate 20 percent train capacity increase. Coupled with the new high capacity hopper car this will generate 44 percent more grain capacity per train. Another important component of this new model is power-on. I talked in my last update about this new model and our sales team getting out there to talk to our customers about the value of the 8500-foot model. If you haven't already heard from your account manager about these services, make sure you reach out.
We will continue to keep you informed through Customer Station, your account managers and these updates. If you have any questions or concerns, feel free to contact me at
As we begin the new crop year, I think it's worth reflecting on the year we're finishing.
Last September was our biggest-ever month for moving Canadian grain. Overall, we moved 1 percent more Canadian grain in 2017-18 than we did a year earlier, despite a challenging winter that affected the entire supply chain. On balance, the year was a success, achieved by working closely with you, our customers.
Looking ahead, we are almost at the most exciting point of the year for the grain supply chain: harvest. Leading up to this crucial point, we have spent countless hours internally assessing demand forecasts and developing our operating plan to ensure a successful fall shipping season. We have also met with our external partners from all points across the supply chain to better understand their plans and collaborate to move the crop safely and efficiently to market.
The 2018-19 crop-year promises to be another excellent year. It's still early, but considering what appears to be substantial carryout from last year, we are preparing for strong grain movement throughout the crop year. As always, we expect high demand in the fall season as crops are harvested. We are geared up for weekly fall programs of 5,500 unloads and 4,000 unloads during the winter season, with the annual Port of Thunder Bay closure. By the end of the summer we will have added more than 100 remanufactured locomotives to the CP fleet and hired more than 700 employees in various stages of the training process to safely operate them. It is important to note that our operating plan is sized to the available supply chain capacity, which includes in-country elevator capacity, port terminal capacity, and other facilities like canola crush and container stuffing operations.
For the upcoming crop year, CP is excited and ready to handle the strong demand levels as they materialize. You can read more about our detailed plan to move this year's crop in our
July 31 letter to Minister Garneau.
With the additional locomotive power in the system we are well positioned to deliver for our customers this year and beyond.
Speaking of the future, it starts with the expansion from unit trains of 112 grain hopper cars of varying capacities to 8,500-foot-long unit trains consisting entirely of the
modern high-capacity hopper cars, which are capable of carrying 10% more tonnes per car. Built here in Canada, these new hopper cars have a three-pocket design (versus four-pockets in older Government of Canada hopper cars) that is faster to load and unload than older models. An 8,500-foot train with the new hoppers will be able to fit up to 147 cars, making for a total train carrying capacity which is up to 44 percent higher than today's trains.
When I talk efficiency, I sometimes hear the question from shippers: What's in it for me? Well, there's a lot in it for shippers! Each train CP delivers to your elevator will carry away substantially more grain. You'll be able to load these trains at a faster rate. CP extends the option to leave locomotives at the elevator during loading so they're on site and ready to go when the train is loaded, what we call 'power on'. The three-pocket design of the new hopper cars will also improve efficiency on the terminal side, to the benefit of our port partners, shippers and the broader supply chain.
Altogether, you have a model for world-class efficiency in moving your commodities. It's an evolutionary step forward akin to the move from grain boxcars to hoppers, and the first unit-train-loading elevators, in decades past. My team is already talking with many of you about what it will take to handle 8,500-foot trains. If you're not already talking with us about it, I hope you'll reach out to your account manager. Power-on 8,500-foot grain trains are already running on CP's network.
In the right circumstances, the power-on system can help drive greater efficiencies within the supply chain – which benefits both CP and the shipper.
Success will depend on our ability to work together. For example, for the power-on model to work, we need our shippers to:
We'll be communicating more details directly to those of you that are interested in power-on, but I just want to emphasize the ways in which we'll have to coordinate to make this program a success. I believe we can do it together, and that faster train cycles will make this program a win-win.
I hope you share my excitement for the grain train of the future, and if you have any questions in the meantime, feel free to drop me a line at
Murray Hamilton Assistant Vice-President, Sales and Marketing, Grain