A massive rail shutdown in Canada has become effective this week after the country’s two largest railroad operators issued unprecedented and simultaneous lockout notices on Sunday to the Teamsters union, representing nearly 10,000 workers.

The Canadian National Railway and Canadian Pacific Kansas City have locked out workers from early Thursday as last-minute talks with the Teamsters Union were inconclusive and unable to prevent the costly stoppage.

Concern for the country's overall economy and various industries that depend on the local railway system is growing. 

The coalition 'Stopthestrike.ca' which gathers members of the agriculture sector sent a letter to the Canadian Minister of Labor, Steve MacKinnon stating: "Rail service disruptions jeopardize the timely delivery of our products to international markets, leading to delayed shipments, contract penalties, and canceled orders."

They added that this not only harms farmers and consumers but also impacts global food affordability and security.

The coalition organized a virtual media conference on August 21 just thirteen hours before the potential strike, which they said would be a "catastrophe."

Terry Youzwa, a farmer from Saskatchewan, Canada opened the conference by saying this train stoppage is of historic proportions, and that the possibility of a strike on both national rail carriers could be prevented by the federal government "with the stroke of a pen by invoking Section 107 of the Canada Labor Code."

Hundreds of millions of dollars in agricultural products are loaded on the Canadian railway system every week, making it crucial for the country's economy. 

Apart from the economic threats, farmers are concerned about the damage this could cause to the reputation of Canadian farmers and exporters as reliable suppliers. 

"The government must act now and save our country the economic pain and reputational damage," said Youzwa.

The Canadian grain industry is perhaps one of the most affected by the rail stoppage, with over 65,000 grain farmers, and 94% of the country's grain transported by rail, there is simply no alternative. 

The biggest concern expressed by grain farmers at the conference was that they are in the midst of harvesting season, and the rail stop could cost them $43 million a day next week. 

On the other hand, Dean Roberts, a member of Canada's granola industry said they risk losing $11 million a day worth of exports. 

"The effect of this strike on the supply chain is massive and likely impossible to recover," Roberts said. 

Pierre Lampron, the vice president of the Canadian Federation of Agriculture (CFA), which represents over 190,000 farmers in the country was also present at the conference. He voiced his concern about the strike and said farmers not only depend on the railroad for exports but also the importation and distribution of fertilizers and propane. 

"The simultaneous strike affecting services on both railways will have a devastating impact on the transportation of goods during the fall harvest," Lampron said. 

Effects on fruits and vegetables

Railway transporters already cut the transport of perishable products last week, in anticipation of the strike, and panel members said this will have devastating effects on fruits and vegetables. 

Keith Currie, president of CFA said the country does not have the storage capacity for all perishable products, so the lack of movement for the products means farmers can't harvest and sell their products. 

Another concern he raised is the loss of international markets, saying it not only jeopardizes farmer's incomes this season but also in the future. 

Additionally, Currie said there is a concern for labor, as fruits and vegetables rely heavily on seasonal workers. 

"If they can't harvest, because of the lack of storage then those workers don't have a job either," Currie said. 

Effect on Canada's reliability as a trade partner

Meeting international market demands is critical for Canada's agriculture, and Terry Youzwa said "Every time we meet with customers, reliability of supply is a concern because we operate in a competitive environment."

Youzwa said he is concerned because once the country's reputation is damaged, it's forever damaged, and they have to work hard to maintain that relationship. 

Shawna Mathieson, Executive Director at the Prairie Oat Growers Association, noted that in a recent visit to an Asian country, a few companies mentioned that Canada has a great product. Still, it is not reliable for on-time shipments.  

"We are definitely losing our reliability, and we need a long-term solution to this issue, considering there have been multiple transportation crises in recent years," Mathieson said. 

The unreliability of Canada in the supply chain is leading global buyers to turn to the country's competitors to maintain a steady flow of products. 

US concerns about the strike

Dean Roberts explained that a letter was recently sent to to Canadian Prime Minister's office from 35 U.S. agriculture industry groups voicing their concern about the impact the strike can have on trade. 

"They are concerned about the integrated supply chain between our countries and how exposed agriculture is to this disruption because railways are an essential part of our supply chain," Roberts said. 

Lack of alternatives

Asked about any possible alternatives for the transportation of goods during the strike, the members of the industry said that the short answer is no. 

Many regions in the country, for example, Alberta, have over 90% of its production relying on trains to be transported to ports, so there is no feasible option available at the moment. 

It would require thousands of trucks per day to move all the cargo being transported in trains to the coast in order to replace the operation, and there are not enough trucks, nor truck drivers to execute this sort of operation. 

Additionally, Canada's economy relies heavily on the rail system not only for the movement of agricultural products, but also fuel sources for heating homes in the winter, and oil, among others. 

Mathieson said she expects delays, "even once everything gets moving again because some trains have been stopped even as early as August 12, so catching up on that will take some time, even if no official strike happens."

UPDATE

After months of negotiations, the Canadian National Railway Co. and Canadian Pacific Kansas City Ltd. were unable to agree on a new contract before the established midnight deadline. 

As a result, 9,300 engineers, conductors, and yard workers have been locked out, simultaneously halting all operations on the country's two largest railways. 

Despite pressure from industry groups and the government to resolve the issue, the sides accuse each other of failing to negotiate seriously. 

"The railroads don't care about farmers, small businesses, supply chains, or their own employees. Their sole focus is boosting their bottom line, even if it means jeopardizing the entire economy," said Teamsters president Paul Boucher in a statement early Thursday morning.

The companies haul a combined $1 billion in goods each day, according to the Railway Association of Canada. Many shipments were pre-emptively stopped to avoid stranding cargo.

This is the first time that both major Canadian railroads have shut down at the same time due to a labor dispute.