How a rail stoppage could affect freight, farming, french fries and more

For the first time, Canada’s two main railway companies, Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC), are on the verge of a simultaneous labour stoppage.

The companies say they will start locking out workers in the early hours of Thursday if they cannot reach a deal, while the union says it is ready to call a strike for that day. 

The Teamsters union is demanding better wages and benefits, including provisions for fatigue management and better crew scheduling. 

The two rail lines play an outsized role in the Canadian economy, moving roughly $1 billion worth of goods per day, according to the Railway Association of Canada.

Here’s a look at how a stoppage could affect business, and people’s everyday lives.

Getting around

For most people, a freight rail stoppage won’t have an immediate impact on how they get around. But more than 32,000 rail commuters could be affected in Toronto, Montreal and Vancouver. 

Transit authorities say select commuter lines that run on CPKC tracks will be suspended should dispatchers walk off the job alongside 3,200 other workers.

The commuter lines affected by the potential work stoppage are TransLink’s West Coast Express in the Vancouver area, Metrolinx’s Milton line and Hamilton GO station in the Greater Toronto Area, and Exo’s Candiac, Saint-Jerome and Vaudreuil/Hudson lines in the Montreal area.

Via Rail would also see service disrupted along a route in northern Ontario that runs through Sudbury, a spokesperson said.

Grocery stores

The threat of a rail stoppage could also have an effect on what we see on grocery store shelves, especially if the dispute drags on.

Already, some perishable food is not being shipped by rail, said Michael Graydon, chief executive officer of Food, Health & Consumer Products of Canada, an industry group. 

Graydon said frozen food, such as french fries, could already have stopped being shipped. Meat and fruit such as bananas, which often arrive in Canada by rail after first arriving in the United States, could also be affected, he said.

He said parts of Western Canada and Atlantic Canada area likely to be most affected.

Graydon also raised concern the type of “consumer hoarding” we saw during the pandemic could compound any potential shortage and put additional strain on suppliers.

Small businesses

A stoppage would have consequences for many businesses if a strike were to drag on — particularly small ones with a smaller stockpile of goods and fewer options to get more.

Fraser Johnson, a professor at Western University’s Ivey Business School specializing in supply chains, said small businesses “don’t have the flexibility to be able to redirect freight as large companies.”

He said retailers like Walmart can make “contingency plans” to move goods through alternate routes in the U.S. “and back up into Canada to its various stores.”

Dan Kelly, president of the Canadian Federation of Independent Businesses, said in some cases small businesses are already feeling the effects.

“The impact would be huge,” he said. “Even in retail, there’s so many goods that into Canada and retail part of their journey to get to their final destination.” 

Farmers

Canada’s agricultural sector, particularly in the Prairies, is heavily reliant on rail for shipping out its product.

Stephen Vandervalk, who farms near Fort Macleod, Alta., and is the vice-president of the Wheat Growers Association, called the situation “completely out of control.”

“Harvest is right now. We’re combining. Bids are dropping daily because elevators don’t want grain, and they’re stopping deliveries from grain,” Vandervalk told CBC.

Fertilizer Canada, an industry advocacy group, warned that even the threat of a work stoppage has taken its toll.

“Farmers around the world rely on Canada’s fertilizer industry to maximize crop yields, and the fertilizer industry relies on rail to get our products to market,” Karen Proud, head of Fertilizer Canada, said in a statement.

The supply chain

In addition to the agricultural sector, the automotive sector and Canada’s ports would be among those most affected by a stoppage, said Western University’s Fraser Johnson.

Johnson said rail is “an integral part of our supply chain that handles, for example, 50 per cent of all Canadian exports, but it’s incredibly important to a number of [domestic] industries.” 

Car manufacturers, for instance, “still receive a lot of components from suppliers via rail and certainly ship out cars from their assembly plants via rail as well,” he said.

International shipping giant Maersk said it is making contingency plans, but for now continues to ship goods into Canadian ports.

Some companies rely exclusively on rail to ship out their product. Toronto’s Chemtrade Logistics Inc., for instance, said it provides chlorine for 40 per cent of Western Canada’s drinking water, as well as much of the western United States. 

Its product cannot move by truck or ship, and safety regulations cap the amount that can be stockpiled.

Bob Masterson, CEO at the Chemistry Industry Association of Canada, told The Canadian Press if a stoppage were to drag on for more than a week the lack of chlorine shipments could affect the water supply in some municipalities. 

Possible consequences

It’s unlikely a stoppage could have an immediate effect on the price of goods, said Johnson.

CN went through an eight-day strike by more than 3,000 workers represented by Teamsters Canada in November 2019.

That strike halted shipments and disrupted industries across the country, but the overall economic impact was still “relatively small,” according to RBC analysis. RBC found the strike reduced annualized quarterly growth by only 0.1 percentage points.

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This time around, a full stoppage of both rail lines for both rail lines would be more consequential, at least on the sectors directly affected, Johnson said.

“The major impact will be the potential for lost sales for businesses and layoffs and lost wages in these areas,” he said.