Two major Canadian freight rail carriers shut down operations Thursday after failing to reach an agreement with union leaders. The decision by Canadian National and Canadian Pacific Kansas City Southern leaves around 9,000 Teamsters Canada workers out of a job for now. It’s also a major blow for U.S. ag producers dependent on transnational shipping.

CN and CPKS account for nearly 80% of Canada’s rail capacity. For months, the two railroads have had contentious negotiations over scheduling, salaries and rest regulations. Railroad company officials have called for workers to stay on their shifts for up to 12 hours – two hours longer than current rules allow.

Teamsters officials balked at the proposal. They argue workers deserve policies that provide a better work life balance.

The Teamsters announced plans to go on strike in May but were prevented by a Canadian law prohibiting strikes at businesses deemed essential services.

In early August, Canada’s Industrial Relations Board determined that a work stoppage wound not pose a serious danger to public health or safety. The CN and CPKS decision to lock workers out was a preemptive move to prevent them from striking.

Impact to American agriculture

American agriculture groups have repeatedly wared of dire consequence should Canada’s two major rail companies shut down. American Farm Bureau Federation economist Danny Munch notes each country has a certain capacity of railcars and trucks that are supposed to be somewhere at a certain time. When they don’t arrive as scheduled, supply chain delays quickly compound. He expects upper Midwest states like Minnesota and the Dakotas to be most adversely affected.

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“Your heartland states that are expecting record spring wheat, soybean and corn yields are going to feel the pressure of this a little bit more,” Munch says. “A lot of those farmers are storing crops hoping for better prices. They have a bumper crop coming, and now one of their biggest export markets was capped off.”

As for freight alternatives, shipping via truck is typically two or three times more expensive than rail. Those estimates don’t take into account increased demand for trucks during a rail strike. It also takes more than four trucks to ship the amount of grain and dry goods that can fit in one rail car.

Fertilizer shipping costs could also be adversely impacted. Corey Rosenbusch, president and CEO of The Fertilizer Institute, says even a short rail stoppage could have significant and long-standing consequences. He’s calling on the federal government to push Canadian officials for a quick resolution.

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Rosenbusch also notes Canada is the United State’s largest supplier of potash. Approximately 90% of it is shipped via rail. The U.S. does not classify the key fertilizer as a critical mineral since Canada and the U.S. are typically stable trade partners.

“A Canadian rail stoppage shatters this notion, revealing just how vulnerable the U.S. is to disruptions in its potash supply chain,” Rosenbusch says. “Potash undoubtedly fits the definition of a mineral with a supply chain vulnerable to disruption and essential to our nation’s economy and national security.”

Those sentiments were echoed by National Feed and Grain president and CEO Mike Seyfert, who predicts a “severe shock” to the North American supply chain. In addition to potash, he notes Canada is the world’s largest exporter of canola, and the third-largest exporter of wheat.

More than 25,000 railcars of ag products are moved each week within Canada. Those numbers are even higher during harvest season. Seyfert predicts slowdowns or even shutdowns at facilities that rely on rail transport from both sides of the border.

“If the lockout continues, the repercussions will be devastating for Canadian and U.S. agricultural producers and agribusinesses who depend on CPKC and CN rail service for shipments through and within Canada to support both domestic and global food security,” Seyfert says.

Related:Canadian rail companies ready to halt operations

Interestingly enough, CN and CPKS operations in the U.S. and Mexico will continue as normal since their workers operate under different contracts. That is of little solace to ag producers dependent on shipments north of the border.