(Bloomberg) -- A work stoppage at one of Canada’s largest railways stretched into a second day, snarling shipments of grains and fertilizer and lifting fears of a broader economic impact if the labor dispute isn’t resolved quickly.
Talks between the railway and the union resumed with mediators Monday, and while they are “at an impasse,” Canadian Pacific Railway Ltd. remains willing to bargain in good faith, company spokeswoman Salem Woodrow said by phone.
The strike in Canada, a top exporter of crops such as canola, is disrupting shipments at a time when supply chains are already stretched, Russia’s invasion of Ukraine is worsening a food shortage, farmers need fertilizer before spring plantings and cattle raisers need feed for their herds. CP halted service Sunday after it failed to reach a settlement with the union representing about 3,000 locomotive engineers and conductors.
“When there is a work stoppage, especially this time of year, it can be devastating,” Karen Proud, chief executive officer of Fertilizer Canada said in an interview with BNN Bloomberg Canada Monday. Shipments were already running two to three weeks behind schedule due to supply chain disruptions, and the latest blow means “Canadian farmers may not have access to the fertilizer they need.”
Canada is also a major supplier of potash used as fertilizer, with the bulk of shipments traveling by rail. Spring seeding is four to six weeks away in Canada and even sooner in the U.S., and the government needs to “act immediately” to resolve the dispute, she said.
Fertilizer prices are at all-time highs after the war in Ukraine derailed supplies from top producers Russia and Belarus.
Shares of Nutrien Ltd., the world’s top crop-nutrient supplier, climbed as much as 5.8% to touch an all-time high of C$132.29 in Toronto.
The work stoppage is forcing oilseed processors to curb production and will cause delays executing customer contracts, the Canadian Oilseed Processors Association said in a statement Monday. Canada is the world’s top canola exporter and grower.
“This is very disruptive to the industry and damaging to our supply chain overall,” Kelcey Vossen, spokeswoman for Richardson International, said by email. “We had hoped the federal government would direct their full attention to this matter to effectively resolve negotiations, as opposed to seeing the CP rail work stoppage announcement.”
CP provides key deliveries of grain and potash to U.S. grain elevators, said Mike Steenhoek, executive director of the Soy Transportation Coalition. The war in Ukraine is placing additional pressure on U.S. agricultural production and inputs, and the work stoppage in Canada will “compound that stress,” he said.
Canada’s cattle industry is already feeling the effects of the work stoppage after last year’s drought parched as much as 40% of the country’s grain output, prompting the nation to turn to the U.S. for corn imports to feed its cow herds.
“Rail strikes have not affected us this badly before because this is the first time we’ve ever had to import this much feed,” said Bob Lowe, president of the Canadian Cattlemen’s Association.
Canada has imported about 3.2 million metric tons of corn from the U.S., according to U.S. Department of Agriculture data, up 600% from 457,000 tons a year ago.
“We’ve got approximately two weeks of corn left in the supply chain, which isn’t very much when you’re looking at over a million cattle,” said Lowe.
Lowe, who uses about 35 tons of U.S. corn a day to feed his herd of 5,000 cattle, has been anxiously keeping tabs on news from the grains elevator in southern Alberta that supplies him feed. The latest update showed the elevator had several trainloads of corn stranded in the U.S., unable to cross the border without crews to drive them.
“Every day these trains aren’t moving is one day closer to a real animal welfare disaster,” said Lowe.
The Mining Association of Canada said Sunday the work stoppage “could not come at a worse time” as the supply chain was already dealing with sharp swings in customer demand and shipping disruptions from the pandemic.
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