(Reuters circulated the following on September 15, 2009.)
WINNIPEG, Manitoba — Canadian National Railway’s (CNR.TO) closure of 30 percent of its farmer grain-loading sites in Canada may raise costs for farmers and benefit grain-handling companies, the Canadian Wheat Board said on Tuesday.
CN, Canada’s biggest railway company, closed 40 of the producer car sites earlier this month and plans to shut down 13 more this autumn as most of them have been unused for at least one year, said CN spokeswoman Kelli Svendsen.
Producer cars are railway hopper cars that farmers can order to load themselves, saving the expense of driving to a grain elevator or paying for grain handling.
“Whether they’re using them now or not, (farmers) see it as a right and they don’t want to see it taken away,” said Larry Hill, chairman of the wheat board and a farmer in the western province of Saskatchewan.
Farmers loaded a record 12,447 cars to move their wheat and barley to port during the 2008-09 crop year, according to the wheat board. Loading rail cars themselves has been an increasingly attractive option as the number of short line railroads increases and grain companies reduce the number of elevators they operate.
The trend toward producer cars suggests the closed sites may be needed in the future, Hill said.
The farmer-run wheat board has a government monopoly to market Western Canada’s wheat and malt barley.
The sites are little more than track branching off from main lines where farmers can unload grain from trucks into the cars with augers.
With fewer sites to load grain themselves, some farmers will have to deliver to elevators owned by companies such as Viterra Inc (VT.TO), where they pay handling fees, Hill said.
“(Producer cars) do compete against their bottom line, so it acts as a competitive wedge to (grain handlers).”
Farmers are concerned that CN and Canadian Pacific (CP.TO), the other major Canadian railway, will continue to close grain-loading sites, Hill said.
The farmer grain-loading system is working well, but is simply used in a concentrated number of sites, CN’s Svendsen said.
The railway will save on maintenance costs by closing the sites, but Svendsen declined to estimate the savings.