Canadian Railways Warn Of Lower Grain Shipments Due To Drought

·2 min read

Canada's two largest railways are warning of lower grain shipments this year due to unfavourable weather conditions in the country’s prairie provinces.

Canadian National Railway (TSX:CN) says it moved 31 million tonnes of grain through the end of July, beating the previous record of 29.4 million tonnes a year earlier. That's above its forecast for the year and 2.9 million tonnes more than the three-year average.

Calgary-based Canadian Pacific Railway (TSX:CPR) says it moved more than 30 million tonnes of grain, up from 29.52 million tonnes during the 2019-2020 crop year. The railways were helped in transporting the harvest by investing in the purchase of larger hopper cars.

CP is investing $500 million to renew its fleet of hopper cars. It has more than 4,600 owned and leased high-capacity hopper cars in service, with plans to add 1,600 more by the end of this year as it aims to have 7,400 new hopper cars by the end of 2022.

However, despite the success over the first seven months of the year, the railways say record high temperatures and drought in Western Canada have stressed crops and could have a negative impact on future yields if conditions persist.

Montreal-based CN says it expects production of six major grains, including peas and lentils, to be down about 5% to 73.8 million tonnes for the entire year, while total available supplies should be down 8.6% to 80.7 million tonnes.

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Canada’s grain exports are also expected to be below three year average levels at 45.2 million tonnes and significantly below the 52.2 million tonnes in 2020-2021.

Both railways say the acquisition of U.S. railway Kansas City Southern (NYSE:KCS) would expand their capacity to move more grain products and provide new options for Canadian farmers. CN is awaiting shareholder and regulatory approvals for its $33.6 billion U.S. offer for KCS.

Grain and fertilizers accounted for 20% of CN's 2020 revenues and 24% of CP's revenues.

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