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The situation this year appears to be unfolding in a more typical fashion. Pre-harvest primary stocks were in a range around 2.5 million tonnes and had been at that level for most of summer. With the advent of harvest, primary elevator stocks rose by about 20 percent to a level typical of recent year, 2013 experience excluded of course. Subsequent to late September they have trended lower.

In the context of grain movement, lower primary elevator supplies means the pressure is off the railways. This is evident from Ag Canada's supply/disposition projections which anticipate total use, exports and domestic, of 86.8 million tonnes compared to 90.2 million tonnes last year.

This in turn suggests rail movements of all crops for the crop year at about 50.0 million tonnes, 3.2 million tonnes below 2013-14. Rail movements to export and domestic use destinations by week 11 of the current crop year were running 1.0 million tonnes above a year ago. To meet the Ag Canada projections, other things being equal, rail movement over the balance of the crop year will only need to be 90 percent of last year's level.

It should also be noted that Ag Canada's all crop crop year ending stocks projected at 8.9 million tonnes, the lowest level in at least five years and is possibly a little optimistic forecast. It is becoming increasingly evident that farmers are in no hurry to market their grain.

The 90 percent or lower target might seem a fairly easy one for the railways. But there is likely to be considerable pressure with record US corn and soybean crops for the railways to devote more facilities to moving US crops this year.

The USDA reports that hard red spring wheat spreads between North Dakota points and Portland Oregon are double levels of a year ago. And if this does not sound familiar the USDA noted as of October 10 Canadian Pacific was reporting open orders of 1,675 grain cars and were an average of 24 days late. To give a perspective of CP's commitment to the US market, it filled 2,386 orders during the week, not much less than half its Canadian business.

It is also evident that there is a growing discrepancy between the anticipations of Ottawa in late July l implicit in its "Order Specifying the Minimum Amount of Grain to Be Moved" by the railways and the actual amount of grain available to be moved.

This is well illustrated by demand for rail car spots. The number of Outstanding CN Grain Car Orders was running at the equivalent of about 6 weeks of supply in the early spring. It is now equivalent of less than a week's supply (Chart 2).

And any bulge in farmer marketing after harvest did not create any backlogs for the railways. Fortunately it would seem that legislation anticipated this eventuality as the mandated targets are "subject to volume demand" and as this has fallen away so the order-in-council would seem to have become obsolete.

It is also noted that the current order-in-council covers the period to the end of November. Most probably there will be continuing debate until then as to what should follow on with political and economic realities at variance. In view of the political nature of anything relating to the railways and grain, the issue is likely to fade quietly away rather than be subject to any formal burial.

David Walker
October 24, 2014