Railways doing 'adequate' job moving huge Canada crop -farm minister


By Rod Nickel

WINNIPEG, Manitoba, Nov 13 (Reuters) - Canada's two mainrailways, Canadian National Railway Co and CanadianPacific Railway Ltd, have done an "adequate" job movingthis year's record harvests to port, the country's agricultureminister said on Wednesday.

Western Canadian farmers produced the biggest grain andoilseed harvests on record this year, according to governmentestimates, straining the system of moving crops from farms toports for export.

Grain handlers have grumbled that railways are notdedicating enough cars for grain, a complaint dismissed byAgriculture Minister Gerry Ritz.

"I'm not an apologist for the railways, but I do agree with(Canadian National). Putting more cars on the freeway at rushhour doesn't make it more efficient," Ritz told reporters inWinnipeg, Manitoba.

He said the growing volume of oil moving by rail couldbecome a problem for farmers and grain handlers by displacingcrop shipments, but that it was not yet an issue.

Canada is the world's second-largest wheat exportingcountry, and the top shipper of canola. RichardsonInternational, Viterra and Cargill Ltd areits largest grain handlers.

"We've moved record amounts of grain in the middle of arecord harvest in Canada in September and October," CP Rail Chief Operating Officer Keith Creel said in webcast commentsfrom a Goldman Sachs investor conference in Boston.

"In fact, order of magnitude, about 20 percent more thanwe've ever moved before."

CP and CN say they have each dedicated about 5,500 cars perweek to hauling grain this autumn, a higher than usual numberand the equivalent of more than 500,000 tonnes each.

"The issue is that Western Canadian farmers have grown thebiggest grain crop in history, and the supply chain - countryelevators, rail, and port terminals - cannot move a whole year'scrop in 3 months. It is not physically possible," said CNspokesman Mark Hallman.

Ritz said he did not see any quick fix for smoothing theflow of grain from the Western provinces to ports on Canada'sWest Coast and Great Lakes. He suggested the government shouldrethink a cap it imposes on the revenue that railways can earnfrom western grain.

"I think in a market-driven economy, that needs to be lookedat. You're competing with oil, with potash, with coal, withtimber on the rail lines - and then there's a cap on onecommodity. Guess which one the railways aren't going to haul?"

The Canadian government implemented the grain revenue cap in2000 after it eliminated a subsidy for grain movement by railcalled the Crow Rate.

Ritz acknowledged that crops moved into the storage andhandling system more gradually in past years, when the CanadianWheat Board had a marketing monopoly on most western wheat andbarley. The Conservative government stripped the CWB of itsmonopoly, effective August 2012, a change that puts more stresson the logistics system in autumn, but it also gives farmersmore immediate cash flow, he said.

A new Canadian law this year forces railways to reachservice agreements with shippers that request them and couldimpose penalties on the railways if they fail to meet theirobligations.

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