Back in August, Canadian Pacific Kansas City (CPKC) and Canadian National Rail (CN) made the decision to simultaneously lock out nearly 10,000 railway workers. In the leadup to the lockout, a chorus of industry groups mounted a pressure campaign on the Canadian government to “move quickly” and respond to this “imminent threat to North American supply chains” with legislative intervention.
Many of those industry groups bore names like “International Fresh Produce Association,” “North American Export Grain Association,” and “Agricultural Retailers Association.” Media outlets ran stories about how the work stoppage would be disastrous for farmers.
Actual farmers, though, were not exactly chomping at the bit for back-to-work legislation. When asked to comment on the lockout, National Farmers’ Union (NFU) Board Member Will Robbins said:
“Using farmers' anxieties around harvest time to punish reasonable requests from railway workers is bad faith. As a farmer, I do not like being used as a bargaining chip. Railways are key infrastructure for farmers and for the production of food in Canada…. Farmers and railway workers have much in common – they are both looking for dignified work and a fair return for their labour.”
Robbins’ comments highlight that farmers should not have been brought into this dispute as ideological tools to gain sympathy for the railways. In fact, farmers and railway workers have a lot in common with each other.
Despite employer-stoked panic among the media and political class, grain movement would not even have been significantly affected in the short-term by the work stoppage.
Media reports in the leadup to the stoppage misunderstood how grain is moved. Most farmers have on-farm storage in large grain bins, and generally have enough bin space to store a large crop for several months. Grain companies also have huge amounts of storage space at their elevators. These elevators were basically empty in July, where approximately 3.65 million tonnes (that’s 50 per cent) of their storage capacity was available in country elevators between August 1 and August 12.
It is tough to blame workers for any crop transportation issues during harvest season, especially considering 80 per cent of the crop was still on the field at the time. Indeed it was CPKC and CN Rail that unilaterally escalated the dispute by locking out their workers.
The actual lockout lasted less than half a day. Federal Labour Minister Steven MacKinnon invoked Section 107 of the Canadian Labour Code,extending the current collective bargaining agreements and forcing a binding arbitration process, essentially forcing workers back to work.
Quorum Report, which monitors grain stock and movements in Canada, shows that the amount of car unloads of grain at port terminals from August 26 to September 1 is similar to the three-year average. The impact of the work stoppage on farmers was exaggerated, unfairly encouraging them to oppose the rail workers, and implicating them as a bargaining chip.
Between 2013 and 2023 CN Rail’s annual net income has doubled from $2.6 billion to $5.6 billion. During the same period, CPKC’s annual net income more than tripled from $875 million to $3.9 billion. Railways use their monopoly power to increase profits and maximize shareholder return while offloading the cost consumers, workers and farmers. Farmers bear the cost of longer trucking distances resulting from the rail line abandonment and the associated closures of country grain elevators. Between 1997 and 2022, approximately 2,300 km of rail lines have been abandoned in Alberta, Saskatchewan, and Manitoba.
Labour cuts put more pressure on workers, requiring longer shifts, more relocations, safety issues, and fatigue. Shipments and grain tonnages have increased, demanding more out of railway staff. While automation has had some positive effects that reduce risks, automation and labour cuts combined have translated into more profits, rather than worker safety.
The fact that only two companies control rail cargo transport in Canada is a problem. The grain companies in Western Canada are captive shippers, which is a term that describes a scenario, particularly in rail cargo, where shippers have no economic alternative to the only railway that services them. Curtailing monopoly power would help to ensure more value stays with workers and farmers, but how this power is curtailed is very important.
Under prevalent economic theories, the solution would be to have more companies compete with each other. Yet, railways are a natural monopoly, meaning that high start up costs create an astronomically large barrier to entry into the market. Few investors would consider it economically feasible to lay out new railway tracks across a country as large as Canada.
Relying on “competition and market forces” abdicates the legitimate role of accountable, democratic governments to make critical decisions regarding the parameters in which the transportation system should operate to promote the greater public interest. The real alternative strategy to govern Canada’s railways is public policy. Farmers, workers, and the general public would benefit from having a railway system that is designed to—and required to—deliver benefits beyond maximizing returns to shareholders.
Currently, rail freight rates for grain are regulated by the Maximum Revenue Entitlement (MRE) as a power balancing regulation. The MRE regulates the maximum amount of revenue per-tonne mile that can be earned by CPKC and CN when transporting grain. It is not a cap—if the railways exceed their revenue entitlement, they pay a portion of their overage to the Western Grains Research Association. The MRE is a safeguard against shipping rate hikes. The issue is that the formula for calculating the MRE is only designed to go up when costs increase but not to go down when efficiency improves, and has not been reviewed in decades. Stronger policy is needed to redirect more of this value back to farmers.
Farmers are caught in between two powerful railway corporations that are seeking to maximize shareholder returns. Farmers should not be used as pawns in disputes to support corporations that have cut services and offloaded costs onto them. Instead, farmers should be implicated in movements to create stronger policies which regulate the Canadian rail duopoly—to make the system work for both workers and farmers.
