Canadian grain farmers are warning they’re on the brink of another rail transportation backlog in light of new industry figures that say Canada’s two Class I railways are falling behind on grain car orders.

Farmers are mobilizing. We are a strong voice when we come together. It’s time we get acknowledged for the dollars and jobs we contribute to the Canadian economy. We need proper and balanced regulations that prevents rail from holding us captive. #passc49 #moveourgrain — Daryl Fransoo (@DarylFransoo) February 27, 2018

The Ag Transport Coalition reported Friday that Canadian National Railway (CN) had filled 17 per cent of cars ordered from it, the sixth consecutive decline in as many weeks. Canadian Pacific (CP) filled 66 per cent of the hopper cars ordered. You can read the coalition’s report here. CN has said cold weather is to blame for the delays. (For its part, the country’s largest railway has struggled to meet demand for most of this shipping season because of what CN says is a shortage of locomotives and crews.)

The emerging situation has Prairie farmers fearful of a repeat of the 2013-2014 Great Grain Crisis – a logistics nightmare that left millions of tonnes of prairie grain stranded in farmers fields for months. That crisis, which lasted into the next crop year, is estimated to have cost Western Canada $5 billion in economic losses.

Need a recap of the 2013-2014 crisis? Wondering what’s changed? Don’t know what the #passc49 means on Twitter? We’ve got you covered.

Why is moving grain so important?

If farmers don’t move grain, they don’t get paid. Canadian grain farms – like any business – require cash flow to operate. A farm’s cash flow works on a series of loans. Farmers apply for a loan some time in the winter or early spring to purchase inputs like seed, fertilizer, insurance, chemicals and machinery. Those loans then carry them through from spring planting season to fall harvest. With spring planting just around the corner, it is not uncommon for many prairie farmers to have outstanding input bills, many of which come due in March and early April.

Farmers can sell their grain to the local elevator two ways: non-contracted or contracted. Non-contracted grain is grain that is simply delivered to the elevator where there is space and the farmer is paid whatever the day’s price is.Contracted grain means the elevator and the farmer sign an agreement that lays out the price, how much grain is being purchased and when it should be delivered. Most farmers will have at least some grain contracted in order to ensure steady cash flow.

Movement backlogs mean elevators don’t have the space to accept the contracted grain deliveries on time. It also means they can’t get the grain into the supply chain in time to fill the vessels waiting for their orders in the Port of Vancouver or the Port of Prince Rupert. Vessels that are forced to wait will charge the grain companies a penalty fee – called demurrage – which can often be in the thousands of dollars per day. The cost of those penalties, farmers argue, are almost always passed down to them through various fees charged by grain companies and elevator operators.

Grain Growers of Canada has launched a social media campaign around the cost to farmers. Farmers are tweeting their concerns and urging Ottawa to act fast using the hashtags #moveourgrain and #passc49.

What is Bill C-49?

Bill C-49 is the Liberals’ proposed overhaul of Canada’s transportation system, including rail, sea and air. It has not yet become law and is currently being studied by the Senate transportation and communication committee. You can find its legislative process thus far here. The full text of the bill can be found here.

What caused the last grain transportation crisis?

A perfect storm of a record crop, frigid temperatures, poor rail service and poor communication left millions of tonnes of prairie grain stuck in farmers fields and bins for months in 2013-2014. Then Agriculture Minister Gerry Ritz was first warned of poor grain movement during an industry grain meeting in Ottawa in November 2013, with Ritz attributing the delays to the sheer volume of the crop.

By January 2014, the wheels had fallen off, as Canada’s two Class I railways, already grappling with unexpected demand and a shortage of crews and locomotives, were forced to shorten the length of trains for safety reasons. The railways were also accused of cherry-picking shipments, favouring intermodal goods and other shipments that move in more competitive marketplace. (Grain movement in Canada is largely a captive market, with Northern grain farmers serviced on CN lines and Southern grain farmers located primarily on CP lines.)

So, what did the feds do the last time Prairie grain didn’t move?

The 2013-2014 grain crisis happened when the Harper government was still in power. With the on-farm cash flow situation growing more serious by the day, Agriculture and Agri-Food Canada reported a spike in applications submitted under its Advanced Payment Program that allows farmers to access up to $400,000 in loans, of which the first $100,000 is interest free. The loan must be repaid the next crop year. Agriculture lenders and most banks at the time also offered to extend existing loans, given the backlog.

Throughout January and February 2014, Ritz and then Transportation Minister Lisa Raitt tried to mediate a solution to the crisis. The House of Commons held an emergency debate on the crisis Feb. 5, 2015, while the House of Commons agriculture committee held several emergency meetings on the logistics jam, where frustrations sometimes flared – particularly when the railways blamed the weather.

In early March, Raitt met individually with then Canadian Pacific CEO Hunter Harrison and Canadian National CEO Claude Mongeau for two hours each at the Pearson Airport in Toronto to discuss the crisis.

A few days later, on March 7, Ritz and Raitt issued a cabinet order-in-council that forced CN and CP to move a minimum volume of grain per week or risk fines. Those fines were initially set at $100,000 per day but quietly changed to $100,000 per week later that Spring when The Fair Rail for Grain Farmers Act was tabled. That legislation was tabled in the House of Commons on March 26, 2014, with Ritz and Raitt holding a joint press conference in Parliament’s main foyer.

The emergency legislation expanded grain monitoring, data collection, and strengthened contracts between producers and shippers. It also extended interswitching distances and had a sunset clause of two years, unless otherwise extended.

Meanwhile, a bi-partisan effort that included several marathon agriculture committee meetings rushed the legislation through the House of Commons and the Senate, with the Fair Rail for Grain Farmers Act receiving Royal Assent in June 2014. At the same time, Raitt expedited a comprehensive review of Canada’s transportation system chaired by former cabinet minister David Emerson. His findings are included in the 2015 Emerson report.

The minimum volume requirements — while criticized because they were not corridor specific, allowing the railways to pick and choose which routes to ship — are widely credited by industry and observers as one of the key factors that ensured Western Canadian grain moved again. They were in place for one year, with Ritz and Raitt opting to let them expire March 28, 2015.

What happened when the Liberals took over?

Emerson was still in the middle his review, due to be submitted at the end of December 2015, when Prime Minister Justin Trudeau and the Liberals won a majority government in October that year. While Emerson submitted his findings on time – seven months before the Fair Rail for Grain Farmers Act was set to expire – the Liberals’ slow transition meant it was unlikely Garneau would be able to pull together a full piece of legislation by the time the act expired.

As such, parliament opted at the last minute to extend The Fair Rail For Grain Farmers Act for one year, until July 31, 2017, the start of the 2017-2018 crop year. (The crop year starts August 1.) For their part, both CN and CP changed the way farmers could submit orders for hopper cars.

The Liberals then embarked on months of consultations, some of which were rockier than others. Transport Canada initially closed its consultation before several provisional agriculture ministers knew they were happening. Saskatchewan and Manitoba’s agriculture ministers told iPolitics in July 2016 they have not had a chance to discuss reforms to Canada’s grain transportation system with federal Transport Minister Marc Garneau – the same day the federal transport department said it had wrapped up eight roundtables on the matter. (A meeting with Ralph Goodale, Garneau and Western Canada agriculture ministers and farm groups was later arranged.)

Garneau unveiled Bill C-49 in May 2017, with the hope of getting the legislation passed by the end of the year. At the same time, the transport minister decided against extending the Fair Rail For Grain Farmers Act – despite concerns from farm groups and Saskatchewan’s agriculture minister. Once passed, the legislation would allow for reciprocal penalties to be imposed between shippers and railways, among other changes.

Bill C-49 has yet to receive Royal Assent. The legislation is currently being studied by the Senate transportation and communications committee. In December, Garneau urged the Senate to pass the bill as “quickly as possible” – a demand that did not sit well with the committee’s chair Senator David Tkachuk, who is from Saskatchewan.

Garneau has repeatedly refused to split the omnibus bill so that the grain section could be passed more expeditiously, despite requests from Opposition MPs, Senators and industry.

What the heck is interswitching?

Interswitching lets farmers and shippers ask a railway, for a fee, to move their product to a junction with another railway, provided the junction falls within a prescribed radius. It allows producers greater freedom of choice in shipping by bypassing the geographic monopolies of the country’s two major railways. The policy is unpopular with this country’s railways, who argue interswitching overcomplicates an already complicated logistics system.

Under the Fair Rail for Grain Farmers Act, shippers in Western Canada were able to submit an interswitching request for distances up to 160 kilometres. Since the legislation has expired, those extended distances are no longer available to producers.

Interswitching’s effectiveness is largely based in anecdotal evidence. The Canadian Transportation Agency told the House transportation committee in September 2016 it does not have “hard data” that shows the extended interswitching rates have had a major impact on improving grain movement.

“What the facts say and what the anecdotes say are different,” Randall Meades, chief strategy officer for the CTA said, noting most of the interswitching has happened at smaller distances, slightly beyond the 30 kilometre mark. Two-thirds of the 16 shippers using the extended interswitching distances were moving grain, he said at the time.

On Monday, Conservative Agriculture Critic John Barlow asked Garneau to immediately reintroduce extended interswitching. The transport minister has so far rejected that idea.

Ottawa has proposed a new, long-haul interswitching program under Bill C-49. The program has been criticized by CN and CP, who told Business Insider the proposal gives American carriers a competitive advantage.