November 30, 2009

 

Rail dispute threatens Canada's grain exporter status

 

 

Canada's status as a reliable supplier of grains and oilseeds is being threatened by a labour dispute between Canadian National Railway Co. (CNI) and its 1,700 locomotive engineers.

 

The union representing the engineers, the Teamsters Canada Rail Conference, served CN officials with a 72-hour strike notice Wednesday after the company said it plans to incorporate a 1.5 percent wage increase coupled with the requirement to have locomotive engineers work an additional 500 miles per month over the amount required by the present collective agreement.

 

Unless an agreement is reached, union-represented engineers will begin a strike at 12:01 a.m. local time Saturday.

 

"Canadian National Railways has forced us to serve strike notice after they informed us of unilateral changes to the terms and conditions of the collective agreement which effectively locked out our members," TCRC President Daniel J. Shewchuk said earlier this week.

 

"If the locomotive engineers go out on strike, the entire rail car movement on CN's lines is bound to slow considerably," said Mike Jubinville, an analyst with ProFarmer Canada.

 

Some sort of backlog of rail cars will certainly come out of this work disruption as CN is unlikely to be able to keep its system running efficiently without these employees, he said.

 

"Any strike/lockout will not be good for Canada's grain and oilseed export programme," Jubinville stressed.

 

CN supervisors will try to take over from the locomotive engineers where possible, Jubinville said, but that won't be enough to cover all the freight service the company provides, resulting in delays.

 

"We are aware of the potential for the disruption in rail service on CN," said John Lyons, a spokesman for the Canadian Wheat Board.

 

"It is still too early to say what will need to happen as we are optimistic they can still work these issues out," Lyons said. However, he did acknowledge that contingency plans would be initiated by the CWB if seen as necessary.

 

The CWB in the past has used the US railway system to move commodities, brokers said.

 

The potential for the labor disruption on CN rail lines has helped to stimulate selling in canola futures traded on the ICE Futures Canada exchange.

 

"We've seen some extra commercial selling hit canola because of the potential rail service disruption," said Keith Ferley, with RBC Dominion Securities. "Without rail movement, buyers from importing countries shy away from taking Canada's canola as do domestic processors, who have no way of moving canola byproducts such as canola oil and canola meal."

 

Federal mediators who have been working with the company and the union have called a meeting for Friday in an effort to avoid a work disruption.

 

The last contract between the two parties expired December 31, 2008.