UPDATE 1-CN Rail apologizes for Western Canada grain backlog, vows improvement

By Yashaswini Swamynathan and Rod Nickel

March 7 (Reuters) - Canadian National Railway Coapologized on Wednesday for delays moving Western Canadian grainand its new interim chief executive said the company would spendmore than C$250 million ($193 million) this year to improve itsinfrastructure.

CN Rail has struggled with capacity constraints amid growingdemand to ship Western Canadian grain.

Transport problems, affecting both CN and smaller rivalCanadian Pacific Railway Ltd, have left rural grainstorage sites brimming with grain as they wait for trains.Farmers say they are unable to sell as much of last year's cropsas they want, crimping cash flow ahead of planting in theworld's largest canola-exporting country.

Transport problems extend to railroads and trucks in theUnited States as well. Railways have blamed harshwinter conditions in part.

CN on Monday installed Jean-Jacques Ruest as its interimchief executive after Luc Jobin stepped downabruptly.

"We apologize for not meeting the expectations of our graincustomers, nor our own high standards," Ruest said in astatement on Wednesday.

Ruest added that the company was directing additionalworkers and equipment to clear grain backlogs.

"I think they’re feeling a bit embarrassed that they droppedthe ball," said Lynn Jacobson, president of farmer group AlbertaFederation of Agriculture. The poor service is a result ofservice cuts made by the railways in past years, he said.

Grain handlers, who move crops by rail and ship tocustomers, are paying penalties for delivering grain late towaiting vessels of C$11,000-C$13,000 per day, said WadeSobkowich, executive director of Western Grain ElevatorAssociation. Its members include Cargill Ltd andRichardson International.

The backlog is untimely for farmers eager to sell theirwheat and canola before spring and who fear prices will fallonce sowing season begins, Jacobson said.

In a statement, CP said its year-to-date grain shipmentswere up 3 percent over the previous year, and weather is nowimproving.

Railways have already improved grain flow by some measures,according to data compiled by the Ag Transport Coalition, agroup comprised of Canadian farmers and grain-handlingcompanies.

As of Monday, about 3,700 rail cars stuffed with grain hadnot moved in 48 hours or more, marking a sharp decline frommid-February.($1 = C$1.29)(Reporting by Yashaswini Swamynathan in Bengaluru and RodNickel in Winnipeg; Editing by Maju Samuel and Tom Brown)