Canada sets grain shipment minimums for railways amid bottleneck

|By:, SA News Editor

Canada's government takes the unusual step of introducing tough new railway regulations aimed at easing a grain bottleneck that has sent the price of oat future contracts soaring to record highs.

The government will require Canadian National (CNI -0.5%) and Canadian Pacific (CP -1.5%) railways to ship at least 500K metric tons of grains, equivalent to about 5,500 railcars, each week; if they fail to meet the targets, they will be charged C$100K for each day they aren't in compliance.

The two railways are each currently moving ~2,500 cars/week of grain, a rate that is set to rise by ~500 cars/week until the government's quota has been met.

The legislation comes as a record grain crop remains stuck in grain elevators across western Canada amid rail-shipping delays resulting from several issues, including harsh weather conditions.