December 1, 2009

 

Canadian grain industry says rail strike could be costly

The labour dispute between Canadian National Railway and locomotive engineers has already started to affect grain and oilseed movement in western Canada, and costs could quickly skyrocket to C$1 million (US$947,944) per day, industry officials said Monday (November 30).

 

Locomotive engineers represented by the Teamster Canada Rail Conference went on strike Saturday after last-ditch talks on Friday failed to produce an agreement. The previous contract between the two parties expired Dec. 31.

 

"The CN strike is very critical and is being monitored closely," said John Lyons, a spokesman for the Canadian Wheat Board. "It is serious and the longer the duration of the labor dispute, the cost to farmers will grow exponentially, especially as shipping penalties and demurrage begins to add up."

 

Lyons said if the strike continues for any length of time, shipping and demurrage penalties could easily add up to C$1 million a day at some point.

 

"I want to make it clear, we are not at those levels yet, and the CWB is still hopeful that the two sides will resolve this dispute sooner, rather than later," Lyons said.

 

Mike Jubinville, an analyst with advisory service ProFarmer Canada, said the strike has already caused grain companies in western Canada to widen their basis levels.

 

"By widening these levels, it is a clear sign to the producer that the grain companies do not want their grain or oilseeds as there is no clear sign that they will be able to move these commodities given the ongoing labor dispute," Jubinville said.

 

Industry representatives are worried that an extended strike could jeopardize Canada's reputation as a reliable source for grains and oilseeds and cause potential customers to buy elsewhere.

 

The Canadian government introduced legislation Monday to force the striking engineers back to work.

 

Labour Minister Rona Ambrose, who introduced the legislation in the House of Commons, said it was important to act quickly to end the strike to avoid any economic fallout.

 

However, official representatives of the New Democratic Party and the Parti Quebecois said they would oppose the bill being put forward by Ambrose. This could result in delays in the passage of the back to work legislation of up to two weeks.

 

The union served CN officials with a 72-hour strike notice on Nov. 25 after the company said it planned to incorporate a 1.5percent 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.

 

TCRC President Daniel J. Shewchuk said CN forced the strike with the unilateral changes to the terms and conditions of the collective agreement, which effectively was seen as a "lockout."

 

US$1 = C$1.05 (Dec 1)