Canadian Rail Shutdown: Agricultural Trade and Rail Transportation at Risk

August 22, 2024

The agricultural sector and several key industries are grappling with significant disruptions following a rail shutdown that occurred in the early morning of August 22, 2024, in Canada. This shutdown, stemming from a critical labor dispute between major rail companies and unions, has far-reaching implications for both the U.S. and Canadian economies.

The American Farm Bureau Federation (AFBF), National Corn Growers Association National Pork Producers Council American Malting Barley Association, National Cotton Council and others had previously warned of the dire consequences of such a shutdown, emphasizing the potential "harmful consequences for American and Canadian Ag producers" and the threat it posed to global food security. Their warnings have now become a reality, as two major Canadian rail companies, Canadian National (CN) and Canadian Pacific Kansas City Southern (CPKC), halted operations just after midnight. The shutdown has effectively paralyzed nearly a third of the freight that crosses the U.S.-Canadian border.

The shutdown's timing could not be worse, coinciding with the fall peak shipping season, a critical period for the transport of goods, including agricultural products. Danny Munch, an economist with the AFBF, highlighted the importance of Canada in U.S. agricultural trade. In 2023, the U.S. exported $28.2 billion in agricultural products to Canada and imported $40 billion from its northern neighbor. Munch pointed out that while most Canadian agricultural products move by truck, essential commodities like cereal grains, corn, barley, and oats are predominantly transported by rail into Canada. "Our three biggest pathways into Canada for railways, there’s two in North Dakota, and there’s one in Detroit," Munch said, noting that the shutdown would have a ripple effect across Southern and Upper Midwest states.

According to CNN, this marks the first time that both CN and CPKC have shut down simultaneously due to a labor dispute. The shutdown is expected to disrupt not only agriculture but also other industries such as automotive, home building, and energy. The Anderson Economic Group estimates that a seven-day strike could result in over $1 billion in economic damage.

Despite mounting pressure, including a joint statement from the U.S. and Canadian chambers of commerce urging intervention, Canadian Prime Minister Justin Trudeau’s administration has so far refused to step in. The government's decision has left the dispute unresolved and industries on both sides of the border bracing for continued economic fallout.

As the rail shutdown continues, the agricultural sector and other critical industries face escalating challenges, highlighting the vulnerability of the interconnected U.S. and Canadian economies to such disruptions.

Western Ag Network, NAFB, CNN