As we close in on the final weeks of the 2017-18 crop year, I want to take this opportunity to reflect on some of our key accomplishments as well as the opportunity the supply chain has to increase grain movements as we enter the 2018-19 crop year. Last fall, in lock-step with our customers, we moved grain at a record pace. September was our best-ever month for Canadian grain movements, and October was our best October ever. This was possible because producers, grain companies, CP and port terminals all were aligned to maximize available capacity. We have remained consistently ahead of last year's numbers for tonnage moved.
Early in 2018, CP faced unexpected and unprecedented demand in the northern catchment areas of our network due to our competitor's capacity shortfalls, and the challenge was further compounded with extreme winter conditions. Despite those challenges, CP was able to maintain overall deliveries ahead of the prior year and all participants remained motivated to maximize available capacity. CP was able to recover quickly by remaining disciplined in the execution of our operating plan and by ensuring that we have adequate crews and locomotives to support the demand. CP was also able to largely maintain that fluidity as we worked through the brief work stoppage that occurred in late May.
As I view our network operations this June, there are empty grain cars staged across the Prairies awaiting grain deliveries to our elevators. Reduced demand for grain cars has been attributed to reduced farmer deliveries caused by a compressed seeding and spraying season, as well as by market conditions affecting farmer decisions to sell and deliver. Despite having capacity to move 5,500 weekly loads, we've seen an average of 4,150 cars per week load over the past four weeks. This capacity utilization shortfall represents more than 480,000 tons of grain capacity that is potentially lost forever. This lost capacity represents an industrywide missed opportunity to not only move more grain, but also to strengthen Canada's reputation as the most reliable grain-handling system in the world. CP stands by, open for business and ready to do our part in maximizing this capacity.
In light of the softening of demand, and in order to ensure that CP can continue to deliver efficient rail service as cost-effectively as possible, we are having to manage operating costs through layoffs and storage of cars and locomotives. It is important for the industry to understand that re-energizing the system requires a clear signal that demand is returning, and that sufficient ramp-up time is taken into account when planning shipments. The reality is that, similar to grain handling equipment, track, locomotives and railcars are all extremely expensive to build and maintain, and it is costly to hire, train and maintain train crews. Thus, it is imperative that we size our network reasonably and maximize the utilization of our assets and resources to the greatest extent possible at all times. Leaving costly capacity idle for any significant part of the year would not be a responsible use of our invested capital, and will hamper our collective ability to provide the low-cost supply chain that enables Canada to effectively compete in the world market.
If you haven't already, I encourage you to read through our news release on our plans to order 5,900 new grain cars , which we issued June 7. Demand for rail transportation overall at CP is growing, and we are stepping up to meet that demand. Our call to action now is to work collaboratively on ways to maximize our capacity year-round.
Finally, I want to be sure we're communicating with our customers. This is a time of change. Even as we receive new grain cars, we are transitioning to an 8,500-foot model for our dedicated grain trains that promises to take efficiency to new heights. The next generation of grain train is capable of handling upwards of 40 percent more capacity than the prior one. This will mean greater reliability for our grain customers, and when our customers win, we also win. We are in this business together, and it's truly my privilege to be in it with you.
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
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.
* 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).
As winter is now officially upon us, it seemed like a fitting time to talk about our winter preparations.
As we do every year, CP is taking special care to make sure that we are ready for the dropping temperatures. Each year we implement detailed winter-preparedness plans for each region, subdivision, yard and facility in order to ensure the best and most efficient service for you, our customers and supply chain partners.
At CP we pride ourselves on listening to our customers to ensure their business needs are met. In order to ensure this happens throughout the challenging winter months we are positioning additional snow relief crews at strategic locations across our network, along with snow mitigation equipment and dedicated locomotives. We are training snow plow/spreader operators, installing new snow fences and making great progress with our switch heater installation and renewal program. All of this equipment is dedicated to 24/7 winter service.
We are watching temperatures closely, as below -25C is challenging for not only railroads but for other modes of transportation as well, and across the supply chain. When we see the weather dip down to these temperatures, we must take additional steps such as reducing train speeds and train lengths in order to continue to move our customers product to its destination in a safe, efficient manner. We encourage our customers to also take the time to ensure that their facilities and operations are winter ready. For more information on how to prepare, please review page 7 of our Customer Safety Handbook available here.
Working closely with our customers and supply chain partners we have had a solid start to the crop year. CP's grain network is fluid and crop-year-to-date we have moved 6% more than this time last year. Well done all!
Another project I am excited to share an update on is our involvement in the brand new Discovery Channel show, Rocky Mountain Railroad, which many of our customers had the opportunity to participate in. You can learn more about the show here.
If you have any questions, concerns or even just a story of a recent success with our business, feel free to drop me a note at email@example.com. Until next year, I'd like to wish you and yours a Merry Christmas and a happy holiday season.
Murray HamiltonAssistant Vice-President, Sales and Marketing, Grain
While farming is anything but predictable, there is a certain rhythm to events that are cyclical and familiar. Cultivating, seeding, fertilizing, harvesting, storing… and then transporting. Of course, you could argue that some of those events are unpredictable with challenging inputs and unknowable outcomes, including transportation.
Over the last couple of years, we have made it our mission to be more accountable and more available to our customers and supply chain partners. Most importantly, that means moving your product to market and doing what we say we are going to do. But it also means getting out there and educating more people about the grain supply chain and the role rail plays in it.
On November 7, I presented at the Inland Terminal Association of Canada conference in Saskatoon, where I spoke about the many ways CP is improving rail efficiency and advancing our vision for Canadian grain. As many of you know, much of our success is tied to our Dedicated Train Program (DTP), which allows customers the ability to control origin placement, lock in capacity for designated corridors and have the flexibility to load on either side of the border and to multiple ports.
Like farming itself, our business is cyclical – each crop-year we deliver grain and grain products to market and then work to do it better, more efficiently and safer the next time. Our key input? Your input. Your feedback after the 2013/14 crop-year helped us implement the DTP. Working in close collaboration makes the supply chain stronger and more efficient.
So how are we doing this crop-year? CP moved more Canadian grain this October than any October before. That's on top of a record-setting September. October also featured an all-time best movement of grain cars to Vancouver. Through 15 weeks, we have moved 6 percent more grain than the same point a year ago.
The shipping demand we're seeing this fall is strong, and we're handling it efficiently in close consultation with you, our supply-chain partners. Your efforts to this point are worth celebrating, so let's keep it up.
As we approach winter, there will no doubt be challenges – those we can foresee and those we cannot. In the weeks ahead, I look forward to writing about our winter preparations and giving you more insight into our ongoing efforts to run smoothly and efficiently through the holiday season and beyond.
If you have any questions, concerns or even just a story of a recent success with our business, feel free to drop me a note at firstname.lastname@example.org. We had good engagement through email last month, and look forward to hearing from you again.
Murray HamiltonAssistant-Vice President, Sales and Marketing, Grain
As the leaves change colour and a chill enters the air here in Manitoba and across the prairies, we know one thing – harvest is upon us. This is the time of the year we at CP prepare for, and look forward to. As a grain railroad for more than 100 years, harvest is crucial to us at CP.
Through nine weeks of the crop year, we have moved 7% more grain than last year, which is a good start. September was a strong month for CP and the Canadian grain supply chain. In fact, an excellent
Grain Shipping Week (GSW) 9, ending September 30, helped push CP to an all-time record for monthly Canadian grain loadings.
Harvest appears well advanced from last year and is above the five-year average. Of course, what we don't know is how big the crop will be and how drought conditions and other factors, including snow in Alberta, will impact you and our supply chain partners. What we do know is this: we are ready to work with you to get your product to market safely and efficiently.
Our railway and the ports are fluid. Customer load to bill times in the country and unload times at the ports are all trending in the right direction. We are also seeing our time-to-lift (picking up loaded cars) and time-to-place (delivering cars to the ports) positively reducing as well. Overall, the grain supply chain is operating quite well, at this point in time.
This is the first of what will be regular updates from me, to you - our producers, shippers and supply chain partners. I look forward to talking with you again in the weeks ahead. In the meantime, if you have any questions or ideas for future notes, updates on your own harvesting efforts, or just want to say hi, drop me an email at email@example.com.
Murray Hamilton Assistant Vice-President, Sales and Marketing, Grain