The Evolution of Grain Processing
JUN 16, 2023

The Evolution of Grain Processing and the Primary Elevator Network in Western Canada

Some people would have you think that all the grain grown in Western Canada is captive to one railway or the other – to make that statement is misleading.

In fact, 100% of grain handling and processing facilities in Western Canada have access to more than one rail carrier. Before we cover that statement in depth, let’s look at the competitive landscape of the grain handling and processing business in Western Canada.

It All Starts in a Truck

Think of the grain handling network of the 1980s and you’ll think of a three-ton truck hauling six or seven tonnes of grain five or ten miles down the road to a wooden grain elevator. And that farmer’s grain typically went to a single grain handling company.

The three-ton truck has been replaced by the Super B hauling 40 metric tonnes of grain or more over much greater distances. The availability of larger truck capacity and the associated economies of scale have created options for grain producers. Farmers today have access to multiple grain companies served by different rail carriers. Almost 85% of the primary elevator system on the Prairies is within 50 miles of a grain handling facility located on a different rail network or is served by more than one rail carrier. That gives farmers options they didn’t have in the 1980s.

This new system is the result of a lot of private investment. Investment in Prairie grain handling infrastructure really took off in the early 2010s with government’s elimination of the Canadian Wheat Board. Farmers invested in semi-trailer units and on-farm storage. Grain companies invested in high throughput elevators, many with loop track capable of spotting 150-plus cars. Rail companies invested in new locomotives and high-capacity hopper cars, replacing obsolete government-owned hopper cars. Strategic deregulation directly supported investments and efficiencies in the grain supply chain.

The Dramatic Shift Towards Grain Processing on the Prairies

However, focusing solely on changes in the primary elevator network does not do the grain industry justice. The region’s oilseed processing industry is now a huge destination market for canola seed. Since the first rapeseed crush plant was built in the mid-1940s in Saskatchewan, the annual capacity of the industry’s oilseed processing business has grown to more than 9 million metric tonnes (MMT). Over 6 MMT of that capacity is served by two railways. The same can be said of the malting industry, with three of four Prairie malt plants dual-served.

When you combine the primary elevator network with domestic canola and malt processing, over one-quarter of the Western Canadian grain can be directly accessed by multiple rail carriers. For farmers, who have the reach of modern trucking assets, the options are even greater. The days of farmers as “captive shippers” are over.

Partial De-Regulation of Rail Rates Revolutionized the Prairie Grain Handling System

Canada’s grain industry has come a long way. From the 1930s through the 1980s, the primary elevator system on the Prairies was stagnant, with thousands of inefficient wooden grain elevators and limited investment in infrastructure. Government grain freight rate regulations, namely the Crow Rate, stifled investment in rail infrastructure and held back grain companies’ development of more modern grain handling infrastructure. Government was eventually forced to use taxpayer money to backfill the investment shortfall in the 1970s, launching a hopper car build program.

In the 1980s, government finally began to deregulate, a process that culminated with the repeal of the Western Grain Transportation Act (and the end of the Crow Rate) in 1995.

In 1999, former federal Deputy Minister of Transportation Arthur Kroeger recommended the introduction of the Maximum Revenue Entitlement (MRE) – a type of revenue cap on railways - to help transition the grain industry to a completely deregulated market. The arrival of a supportive regulatory environment triggered large-scale hopper car fleet renewal in 2018. New high-capacity hopper cars helped Canada keep pace with the growing crop production volumes of modern agriculture.

Unfortunately, new regulatory intervention by government now threatens to jeopardize those gains.

Less Regulation is the Answer

The Emerson Report, a 500-page review completed in 2015, recommended an end to extended interswitching as it stifled private infrastructure investment, and further recommended the elimination of the market-distorting Maximum Revenue Entitlement (MRE) for grain.

Long-Haul Interswitching was the government’s solution to issues associated with extended interswitching. It opened 100% of the Prairies’ grain handling and processing assets to access to multiple rail carriers.

Yet today government wants to bring back extended interswitching and the revenue cap remains in place. The fact that this measure will only apply in the three Prairie provinces demonstrates this is not an evidence-based supply chain policy.

Extended interswitching means more resources are required to move the same amount of traffic. That slows down the network. A customer who wants to use extended interswitching on a rail line already at capacity creates congestion and hurts everyone on that line. As the efficiency of the rail network declines, costs go up across ALL rail traffic segments including regulated grain. Expect more cost, not less, from extended interswitching.


CN believes there are tremendous opportunities to grow Canada’s grain supply chain. CN invests in its network and increases supply chain performance through collaboration with customers and a fact-based approach to improve efficiency. Extended interswitching regulations based on incomplete data and anecdotal evidence will again stifle investment and constrain capacity, effectively putting a cap on industry growth potential. History shows deregulation is the best way to grow the economy.

If Canada hopes to improve how supply chains work, we also need to change how we measure and report on data. A balanced approach that considers all parts of the supply chain will help decision-makers better understand what is going on when problems arise and why. Government and industry need to bring transparency to all the components of the end-to-end grain supply chain. All the links in the chain need to be working together to deliver results. It is time we measured performance in a new way.