Ag News
Canada railroads resume operations as negotiations continue
Posted on Aug 31, 2024 at 4:33 AM
An Aug. 27 order from the Canadian Industrial Relations Board (CIRB) prompted resumption of operations for Canadian National Railway (CN) and Canadian Pacific Kanas City (CPKC), ending a lockout by the two companies. According to published reports, the CIRB order requires the railroads to continue operations while labor negotiations continue.
Teamsters Canada Rail Conference approved a strike on May 1, and CIRB reviewed the possible ramifications of a strike then approved the strike on Aug. 9. On Aug. 22, the two railroads locked out more than 9,000 union employees and halted operations.
According to an Aug. 21 Market Intel report from the American Farm Bureau Federation, CN and CPKC combined own 80% of the railroads in Canada, with the rest owned by short-line rail companies that provide “first-mile/last-mile” service. CN and CPKC also operate track in the United States, and U.S. companies Burlington Northern Santa Fe (BNSF) and CSX have tracks that extend into Canada.
AFBF said the interrupted rail operations in Canada would severely disrupt U.S.-Canada agricultural trade, leading to commodity and input delivery delays, shortages, commodity price volatility and other rippling impacts on the integrated North American agricultural supply chain.
From Market Intel:
A recent USDA-Agricultural Marketing Service Grain Transportation Report summarized U.S.- Canadian agricultural trade, emphasizing agricultural products moved by rail. The report noted that in 2023, $28.2 billion of U.S. agricultural products were exported to Canada, making Canada the third-largest destination for agricultural exports (behind China and Mexico). In the same year, the United States imported $40.1 billion of Canadian agricultural products, making Canada the second-largest origin of U.S. agricultural imports (behind Mexico).
In 2023, Canada was the leading destination for several key U.S. agricultural exports, including ethanol and barley, with 76% of U.S. barley exports and 44% of ethanol exports heading north of the U.S. border. Canada also ranked as the fourth-largest market for U.S. soybean meal and rice, and the fifth largest for corn (Figure 2). Interestingly, a portion of these exports is transported to Canada, then moved westward across the country before being re-exported through Pacific Northwest ports on both sides of the border. This complex logistical flow means that a Canadian rail strike could disrupt not only trade with Canada but also with key markets in Asia and Oceania, further amplifying the potential risks and impacts on U.S. agricultural exports.
In addition to being a major destination for many U.S. agricultural products, Canada is a key source of fertilizer for U.S. farmers. Though the U.S. is the third-largest producer of fertilizer globally, it still relies on imports to fully meet domestic demand. For example, Canada holds potash deposits not found in the U.S. that are vital to produce potassium-based fertilizers. USDA noted that in 2023, from all sources, the U.S. imported 13 million tons of potash, with 85% originating in Canada. Canada is also a primary source of nitrogen-based fertilizer imports. USDA reported, on a nitrogen-equivalent basis, just over 25% of all U.S. nitrogen imports came from Canada in 2023. This corresponded to 3.1 million tons of nitrogen-based fertilizers, including 1.2 million tons of anhydrous ammonia, 510,000 tons of urea and 420,000 tons of urea ammonium nitrate. For perspective, between 2005 and 2020 the U.S. imported between 30% and 59% of its ammonia-based fertilizer use.
More than 85% of fertilizer trade between the U.S. and Canada is transported by rail, with the remainder handled by trucking (12%) and waterborne vessels (3%). The vast majority of this trade — over 90% — occurs at border crossings in five states: North Dakota (90% by rail), Minnesota (100% by rail), Idaho (99% by rail), Michigan (29% by rail) and Montana (29% by rail). In 2023, Over $2.1 billion in fertilizer trade occurred across the border crossing in International Falls, Minnesota; $1.3 billion occurred across the border crossing in Pembina, North Dakota; and $839 million occurred across the border crossing in Portal, North Dakota.
Disruptions to railway access between the U.S. and Canada could severely jeopardize farmers' ability to secure essential inputs critical for crop growth. This is particularly concerning with nitrogen fertilizer, a key input for many crops, with a significant portion applied in the fall. Specifically, 36% of nitrogen for winter wheat, 21% for spring wheat, 20% for corn, and 7% for cotton is typically applied during this season. Given that a significant portion of nitrogen fertilizer is sourced from Canada, this situation creates a perfect storm of conditions, where the reliance on Canadian supply chains and the critical timing of fall applications could converge to significantly impact future crop yields and farm operational schedules.
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