Oh, Canada!

August 29, 2024 | Jeff Hutton

What happens north of the border could affect American farmers and overall trade.

That’s the concern after Canada’s two main railroads briefly shuttered service last week after contract talks with a labor union failed to reach a deal, potentially impacting the supply chain for North America.

The Canadian National (CN) and Canadian Pacific Kansas City (CPKC) are critical to Canada’s economy and an important link for exports to the United States, Mexico and other countries. Had the shutdown lasted, the stoppage would have forced shippers to find other modes of transport, but for some types of cargo, like soybeans and other grains, there are few practical alternatives to railroads.

Mike Steenhoek, the executive director of the Soy Transportation Coalition (STC), outlined the issues.

“On Aug. 9, the Canada Industrial Relations Board (CIRB) issued a ruling on the potential impact of a railroad stoppage at both CN and CPKC,” he says. “The CIRB ruled that a strike or lockout would not result in a serious threat to public health and safety under the nation’s Labor Code and that rail service was not ‘essential.’ Accompanying the ruling, the CIRB imposed a 13-day cooling off period before a strike or lockout could occur, which meant a stoppage was possible as early as Aug. 22.”

Indeed, service was shut down on Thursday, Aug.  22 for a few hours, but the CIRB issued an order imposing binding arbitration between the two parties over the weekend, Steenhoek says.  In addition, the CIRB ordered that no rail network stoppage – whether a lockout or strike – can occur during the arbitration process.  As a result, work resumed on both the CN and CPKC networks on Aug. 26.

While railroad workers have returned to the job, the Teamsters Canada Rail Conference (TCRC) has vowed to challenge the ruling by the CIRB in court. 

The current collective agreement between the TCRC, which represents close to 10,000 workers at both Canadian railroads expired on Dec. 31, 2023.  Both parties continued negotiations after that date, but in May TCRC announced their members voted to authorize a strike, which resulted in the possibility of a strike or lockout as early as May 22. 

“Subsequently, the CIRB announced their decision to evaluate the potential consequences if a stoppage occurs.  While the CIRB evaluation was ongoing, a strike or stoppage would have been illegal. When the CIRB issued its Aug. 9 ruling, the door was reopened for a stoppage to occur,” Steenhoek says.

Potential impact

While a potential strike or stoppage has been avoided, at least temporarily, there remains cause for concern.

“While any strike or shutdown would only be limited to the rail networks in Canada, U.S. railroads, including the U.S. based networks of CN and CPKC, operate under a different agreement with U.S. based railroad workers,” Steenhoek says. “The most recent contract in the U.S. was finalized in December of 2022. 

“However, any rail delivery originating in the U.S. and destined for Canada or originating in Canada and destined to the U.S. would be impacted by a strike or stoppage. Some U.S. agricultural exports do occur via Canadian ports,” Steenhoek continues. “Moreover, a substantial volume of fertilizer originates in Canada and is delivered via rail to U.S. markets. Those shipments would be impacted by a strike or stoppage.  Canadian ports would effectively be shut down since there is no alternative to rail for transporting freight being loaded or unloaded at Canadian ports.”

Railroad labor issues impacted Canadian railroads in 2015 and 2019, but only briefly. Of most concern, according to a recent New York Times article, is that if a sustained or long-term shutdown would occur, it could impact commodities like grains and fertilizer.

Ninety percent of Canadian-produced fertilizer going into the U.S. market is delivered by rail, according to industry group Fertilizer Canada. That could mean “inability to cycle products through the supply chain which could limit producers’ ability to deliver harvested crops,” the group said.

A potential Canadian shutdown could also impact automakers in the U.S. and Mexico, pulp and paper plants across North America, as well as coal interests.

And if railroad transport is shut down, the use of trucks would create a surge in truck demand, meaning higher trucking rates.

Steenhoek says he hopes a resolution is near.

“Hopefully a future strike or stoppage in Canada can be avoided and the negotiations will result in an agreement that benefits both railroads and workers and restores a degree of predictability to the supply chain,” he says. “The U.S. and Canada have prided ourselves on having the most seamless and economically dynamic border between two countries in the world. That reputation will erode if a prolonged strike or lockout is permitted.”

Water worries

Meanwhile, eyes are also focused on the America’s waterways.

Steenhoek says the current negotiations between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) relates to the current six-year contract that covers approximately 25,000 dockworkers employed in container and roll-on/roll operations at ports along the U.S. East Coast, Gulf Coast and Great Lakes. The current contract expires Sept. 30.

The USMX represents employers of the East and Gulf Coast longshore industry, which include container ocean carriers, port associations and marine terminal operators.   

ILA President Harold Daggett has said that ILA members will not work past Sept. 30 if an agreement is not reached.

“We will stand strong to win a new contract that adequately compensates our hard-working and dedicated ILA longshore workforce, and simultaneously are preparing to strike at all ports from Maine to Texas come Oct. 1 if a new agreement is not reached,” Daggett says.

Steenhoek says since bulk soybean and grain export facilities in the Gulf, East Coast and Great Lakes have a variety of arrangements for the workforce that loads ships (own company employees, different labor union, etc.), the negotiations between the ILA and the USMX would not impact the overwhelming majority of soybean and grain exports from the Gulf or East Coast. 

“However, it would impact the soybeans, soybean meal and other agricultural products that are exported via container,” he says. “It also would have a significant impact on chilled or frozen meat, eggs, etc. that are exported from the U.S.  Of course, the U.S. livestock industry cannot be harmed without simultaneously harming soybean and grain farmers.  We therefore strongly encourage both parties to come to an agreement without any disruption of service.”

Steenhoek says work must continue in earnest to avoid these potential shutdowns and disruptions to supply chains that are critical for U.S. agriculture.

“Uncertainty and tumult are kryptonite to any functioning supply chain,” he says. “Unfortunately, over the past several years, we continue to experience one challenge after another that continue to impede the ability of agriculture and the broader economy to be as successful as they can be.”

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