Blog: The Wheat Sheaf

Western Canadian Wheat Growers Convention, Winnipeg

I had the pleasure of attending the Western Canadian Wheat Growers’ Convention in Winnipeg this year from January 7th to the 9th. This annual meeting delivers on its promise to engage participants in lively agriculture policy discussions both during the sessions as well as the many opportunities to network before and after the conference.

As always, the agenda was packed with thought provoking presentations including the one given by Barb Haertling, the General Director of Agricultural Commodities with BNSF. The United States was not immune to the challenges faced by Canada’s agriculture sector last year. Record crops and record cold temperatures affected shippers in the United States much in the same way they affected Canadian grain farmers’ ability to deliver their crops to international customers. In Canada, Bill C-30, the Fair Rail for Grain Farmers’ Act, was largely a product of Canadian rail companies’ unwillingness to work with government and customers to develop meaningful solutions to address the crisis.

BNSF took a different approach to last year’s record crops and record harvest and as a result, ended up in a very different place. Increased demand for crude oil and related inputs as well as an increase in the price of natural gas, all during one of the coldest winters on record, contributed to a situation not all that dissimilar to the one faced by Canadian shippers. The difference was in how BNSF was proactive in engaging with their customers to reassure them that they would do everything in their power to address their needs. Representatives from the rail company met with regulators and customers to develop and plan. As a result, BNSF committed to have the grain backlog cleared to make room for the upcoming harvest.

How did they do this? They spent $5.5 billion across the United States in 2014 alone to increase capacity and create efficiency. They increased the size of their fleet by investing over $1.6 billion in locomotives and freight cars. They invested in new sidings, expanded existing sidings and established double tracking in areas with increased traffic. Haertling referred to this strategy as “over-resourcing,” ensuring that BNSF has the infrastructure and capacity to service the growing needs of their shipping customers.

Other measures included a new approach to resource management. Instead of laying employees off over the winter months, BNSF keeps staff on call to mitigate winter weather-related emergencies and keep the trains running.

Now, BNSF is not doing this out of the goodness of their heart; they are doing this because they operate in a more competitive environment in the United States, and because Warren Buffet knows there will be a return on his investment.

So, with the new increased inter-switching limits in Canada, can we expect BNSF to increase their presence in the Canadian marketplace? Not likely according to Haertling. BNSF does not have the resources to enter into the Canadian marketplace in any meaningful way at this point.

If the new inter-switching limits are made permanent, Haertling indicated that BNSF would consider making the investment required to take on new Canadian customers. Haertling also pointed to what she referred to as “the rate cap in Canada” as a disincentive to American rail companies and their willingness to bring their operations north of the border.

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