By Chris Clayton, DTN Ag Policy Editor, and Mary Kennedy, DTN Basis Analyst
This article was originally posted at 7:18 a.m. CDT on Thursday, Aug. 22. It was last updated with new information at 5:37 p.m. CDT on Thursday, Aug. 22.
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MINNEAPOLIS and OMAHA (DTN) -- Canadian Labour Minister Steve MacKinnon announced late Thursday afternoon that the government will get involved in the railway shutdown that has brought Canada's two largest railways to a standstill.
"Under Section 107 of the Canada Labour Code, I've directed the Canadian Industrial Relations Board to assist the parties in settling the outstanding terms of their collective agreements by imposing final, binding arbitration," he told a press conference. "I've also directed the board to extend the term of the current collective agreements until new agreements have been signed, and for operations on both railways to resume forthwith."
Canada's rail shipments were halted early Thursday, after Canadian Pacific Kansas City (CPKC) and Canadian National (CN) railways locked out union workers. The action immediately raised concerns among agricultural groups on both sides of the border about disruptions to supply chains and the further dragging down of prices for farmers in the process.
It's the first time the two largest railroads in the country have shut down at the same time, and it could have significant effects on customers and shipping on both sides of the border.
MacKinnon noted millions rely on the railways every day: "Workers, farmers, ranchers, commuters, small businesses, miners, chemists, scientists. The list goes on and on, and the impacts can't be understated, and they extend to every corner of this country," he said. "Our railways have impacts on the water we drink with the shipment of chlorine, and they help grow the food we eat, with potash mined for fertilizer.
"It is the government's responsibility to ensure industrial peace in this critically vital sector."
He added the government will also examine why there have been repeated conflicts in the railway sector and the conditions that led to parallel work stoppages in what the country is seeing. He said Canada is a trading nation: "Our government will do everything in its power to preserve the stability and certainty that our railways and entire economy are renowned for the world over."
The Canadian government's response followed a chorus of pleas from industry groups in both Canada and the U.S. asking the federal government to intervene, DTN Basis Analyst Mary Kennedy noted early Thursday.
The two railroads reportedly handle 40,000 carloads of freight per day. This includes grain, oil, meal and other commodities. A prolonged strike will be detrimental to Canadian commerce. It will also stall any cross-border traffic normally engaged by U.S. Class 1 railroads.
U.S. AG IMPACTS
Mike Seyfert, president and CEO of the National Grain and Feed Association, said a lot of grain elevators in Northern states are harvesting spring wheat, which is often shipped out to the Pacific Northwest (PNW) for export. Those rail routes typically cross into southern Canada, then drop back into the PNW.
"So, for those folks served by the CPKC in particular, that route is now shut off to them," Seyfert said. "So, they're not going those shuttle trains moving."
He added, "I think there is going to be a pretty good impact as this goes on."
There are already going to be impacts with the early shutdown of shipments by some processors. Even if the lockout is short, it's going to cause some problems for ethanol plants or other commodity processors.
"You're still going to have some ramp-up because everything is going to be out of position, and it's going to take time," he said.
Seyfert also noted all eyes were on the Canadian government to see if they would force binding arbitration. In 2022, Seyfert said, it was a tough call for the Biden administration, but officials did not hesitate to step in to avoid a shutdown of the U.S. economy.
"The Canadian government approach to this has been very different from the U.S. government approach two years ago," he said.
Seyfert said NGFA has been fielding calls from U.S. officials and members of Congress in both parties looking to gauge the impacts of the lockout. Pointing to the volume of cargo carried by CN and CPKC, Seyfert said it's hard not to affect trade.
"They are operating in the U.S. and in Mexico, but the longer it goes on, the harder it is not to have impacts across the border."
NGFA released a statement on Thursday calling on the Canadian government to end the lockout.
"We strongly urge the Canadian government to act swiftly to stop these disruptions and protect the stability of the North American agricultural economy," the group stated.
CONTENTIOUS TALKS
As Kennedy noted, the situation is contentious. One reason is the Canadian Industrial Relations Board ruled earlier this month that a work stoppage on the two railroads "would not cause an immediate threat to public health and safety." Since that time, talks continued even as both railways issued lockout notices. The Teamsters Canada Rail Conference (TCRC) also issued a strike notice to the CPKC earlier this week.
The U.S. government stepped in multiple times in 2022 to avoid a similar rail strike in the U.S. President Joe Biden pressed the union and railroads to reach a tentative deal just hours before the strike was set to happen.
U.S. farm and fuel groups on Monday sent a letter to Canadian Prime Minister Justin Trudeau calling on him to take action to avoid a rail stoppage, which they stated would be an "imminent threat to North American supply chains."
MacKinnon had met separately with the parties in Calgary on Aug. 20 and Aug. 21 and conveyed a message encouraging the parties to reach a deal, which failed to materialize.
Under binding arbitration, which the Canadian government said it would call for on Thursday, the railways and the union would submit their sides of a contract resolution to a neutral party who in the end makes the final decision and both parties must live with that decision.
Farm groups stated agriculture is responsible for about 25,000 rail cars per week, all of which stop moving across the Canadian networks.
"Agriculture is particularly exposed to rail stoppages due to robust fertilizer and other agricultural input trade and a sizable livestock industry that depends on rail for the timely delivery of feed grains, dried distillers grains, and further feed ingredients," the groups stated in the letter.
Along with that, biofuel operations, mills and other agricultural and food-processing companies are going to struggle with storage capacity or face shortage of raw materials, the farm groups wrote to Trudeau.
The Canola Council of Canada, Canadian Oilseed Processors Association and Canadian Canola Growers Association issued a joint news release on Thursday saying the work stoppage "will further damage our global reputation as a reliable supplier and risks future exports and loss of market share to competitors."
"Lost exports of canola seed are currently estimated at approximately $11 million per day and halting canola processing will cost the industry approximately $20.5 million per day in lost sales of canola oil and meal, which will reverberate throughout the canola supply chain," the groups stated in the release.
The groups called on the Canada minister of labour to "invoke section 107 of the Canada Labour Code and bring swift resolution to this work stoppage through binding arbitration while suspending the ability for lockouts or strikes pending an agreement."
Read the canola industry's full response to the lockout here: https://www.ccga.ca/….
RAIL TALKS
The CN released this statement after 12:01 a.m. EDT on Aug. 22: "The CN has formally locked out employees represented by the Teamsters Canada Rail Conference (TCRC) as of Aug. 22 at 00:01 ET, after the union did not respond to another offer by CN in a final attempt to avoid a labour disruption. This offer improved wages and would have seen employees work less days in a month by aligning hours of service in the collective agreement with federally mandated rest provisions. The offer also proposes a pilot project for hourly rates and scheduled shifts on a portion of the network as CN continues to believe this is a better and more predictable framework for our employees. Without an agreement or binding arbitration, CN had no choice but to finalize a safe and orderly shutdown and proceed with a lockout." (Read the full statement here: https://www.cn.ca/….)
The CPKC also released the following statement after 12:01 a.m. EDT Aug. 21: "CPKC said today it has locked out employees who are members of the Teamsters Canada Rail Conference (TCRC) -- Train and Engine (T&E) division effective 00:01 Eastern Time on Aug. 22. That will be followed by the lockout of employees who are members of the TCRC -- Rail Traffic Controller (RCTC) division effective 00:01 Mountain Time on Aug. 22. Throughout nearly a year of negotiations, CPKC has remained committed to doing its part to avoid this work stoppage. CPKC has bargained in good faith, but despite our best efforts, it is clear that a negotiated outcome with the TCRC is not within reach. The TCRC leadership continues to make unrealistic demands that would fundamentally impair the railway's ability to serve our customers with a reliable and cost-competitive transportation service.
"At this time, the responsible path forward for the union, the company, our customers, the Canadian economy and North American supply chains and the public interest is for TCRC and CPKC to engage in binding arbitration to resolve all outstanding disputes. Binding arbitration is an effective, reasonable and fair process that ultimately has been used many times in the past to resolve disputes with this union." (Read CPKC's full statement here: https://www.cpkcr.com/…)
Teamsters Canada Rail Conference and Train & Engine (T&E) division represents CPKC's roughly 3,200 locomotive engineers, conductors and train and yard workers, and the TCRC and Rail Canada Traffic Controllers (RCTC) division represents approximately 80 rail traffic controllers, all in Canada. TCRC union represents approximately 6,000 conductors, conductor trainees, yard coordinators and locomotive engineers across CN's network in Canada. These workers have been negotiating for a new contract for over 10 months. On Dec. 31, 2023, the collective bargaining agreement expired and was extended under Canadian law until the parties reach an agreement.
TCRC noted on their website earlier this week, "On Aug. 18 the Union provided CPKC with a strike notice, consistent with the Canada Labour Code and your Charter rights, in order to protect us from the unfavourable terms of the Company's lock out notice. Our legal strike can take place effective 0001 EDT Thursday, Aug. 22, 2024, concurrent with the effective time of the lockout."
TCRC explained it was done to protect the union workers in the event the CPKC canceled the lockout at the last minute.
"By suspending the grievance procedure as of Thursday, CPKC is effectively rendering the entire agreement unenforceable and inoperable. This creates a dangerous situation where the company could cancel the lockout at the last minute, forcing us to return without the protections provided under the collective agreements," noted the TCRC. (Read more here: https://teamstersrail.ca/….)
Mary Kennedy can be reached at Mary.Kennedy@dtn.com
Follow her on Twitter @MaryCKenn
Chris Clayton can be reached at Chris.Clayton@dtn.com
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