Canadian Rail Strike Threatens Trade Flows, While BNSF Stops Trains To Mexico

On Monday, Aug. 19, the U.S. Grains Council (Council) signed onto an industry letter comprised of 35 organizations that urged Canadian Prime Minister Trudeau to address concerns regarding a potential significant disruption to the North American supply chains and requesting he take action to ensure railroad operations continue to prevent serious damage to the Canadian and U.S. economies.

A lockout or strike – that came today, Aug. 22 - could lead to shutdowns or slowdowns of rail-dependent facilities resulting in harmful consequences for Canadian and American agricultural producers, the agricultural industry and both domestic and global food security.

Members of the U.S. Grains Council rely on freight rail transportation from the Canadian National Railway Company (CN) and Canadian Pacific Kansas City (CPKC).

The letter stressed that:

• Trucking is not a viable option for many agricultural shippers due to their high-volume needs and the long distances for many of the movements.
• Agricultural facilities have no viable alternative transportation options to supply Canada’s international customers and the inability to cycle products through the supply chain could limit producers’ ability to deliver harvested crops.
• Delayed shipments impact costs not only for the value chain, but consumers, who will ultimately pay a higher price after the strike is resolved.
• Biofuels operations, in particular, require uninterrupted rail service. Interruptions quickly lead to storage capacity issues and restarting these facilities are complex, often causing domino disruptions for several weeks.

The Council will keep members updated as soon as we hear something definitive.

Complicating matters, BNSF, a U.S. railway that operates one of the largest railroad networks in North America, with about 32,500 route miles in 28 states, announced yesterday it shut down all operations to Mexico immediately and for the next 30 days due to ongoing congestion and service interruptions resulting in critical equipment being held in Mexico.

Shuttles within BNSF loading facilities will continue to go through permitting to Mexico. However, customers with a trip falling within the 30-day window may cancel their shuttle free of charge or continue to reschedule with their marketing representative.

BNSF is one of the largest railways with five important gateways to Mexico – at San Diego, El Paso, Eagle Pass, Laredo and Brownsville.

The Council is concerned for more rail-dependent “just-in-time-delivery” customers located in Jalisco. This will compound existing pressure in the system and exacerbate ongoing delays for raw materials to Mexican customers.

The Council is eager to find a solution for both sides of the border to increase capacity and continue trade flows.