The Canadian Pacific Railway, which plays a vital role in getting potash fertilizer to U.S. farmers, says it will lock out employees Sunday if an agreement isn’t reached with union leaders who have threatened to go on strike.

"For the sake of our employees, our customers, the supply chain we serve and the Canadian economy that is trying to recover from multiple disruptions, we simply cannot prolong for weeks or months the uncertainty associated with a potential labor disruption," Canadian Pacific President and CEO Keith Creel said in a statement issued late Wednesday.

That could have a major impact on U.S. farmers who depend on Canadian fertilizer supplies. Canada is the world’s largest producer of potash and Canadian Pacific Railway is the primary transportation method to get that potash from producers such as Nutrien and Mosaic to customers. CP tracks stretch all the way from New York to Vancouver, running through southern Canada and branching out to Milwaukee, Chicago and Kansas City.

“We service major potash and nitrogen facilities in Canada, combining direct service to Alberta production and Mississippi River system terminals with significant interline business from other carriers,” the company says.

And that’s a major reason why U.S. farm groups say they are concerned.

“Approximately 10-15% of CP’s business is fertilizer,” the National Grain and Feed Association, The Fertilizer Institute, American Farm Bureau Federation, American Feed Industry Association and American Soybean Association and other organizations wrote in a recent letter to President Joe Biden. “A CP railway strike would severely curtail fertilizer supply and shipments into the United States and would happen at the worst possible time as farmers are planting their 2022 crops.”

Nutrien, a major potash producer in Canada that ships substantial amounts to the U.S., says it's concerned.

“We are disappointed that CP Rail and their main operating Union, the Teamsters Rail Conference Canada (TCRC), have been unable to achieve a resolution to their dispute,” a spokeswoman for the company told Agri-Pulse. “A rail disruption at a time when fertilizer supply chains are already stretched may have immediate and significant global consequences. Nutrien relies on rail transport to move fertilizer and retail products in Canada, to the US, and to export ports.”

The railroad company says it tendered a new offer on salaries and benefits to the union Wednesday, which the union rejected.

“Please know that we are very concerned with the prospect of a lock out or strike for not only our members, but for all Canadians,” TCRC said in a statement issued Thursday morning. "We understand the potential impact of a work stoppage and are committed to getting a resolution. At the same time, our demands are not unreasonable and there is no excuse why we should not be able to negotiate an acceptable collective agreement.”

But Creel said Wednesday the two sides are not close to an agreement.

“We have been negotiating in good faith since September and over the past week, Canadian Pacific and the TCRC leadership have been meeting daily with federal mediators to reach a new negotiated collective agreement in hopes of avoiding a labor disruption,” he said. “Despite those talks, our positions remain far apart.”

And the situation has the potential to offset a new effort announced this week by Nutrien to increase potash production to compensate for global supply problems. The company said it is ramping up production capacity with the goal of producing about 15 million metric tons, 1 million more tons than Nutrien had previously planned.

The extra capacity is expected to come online in the second half of this year.

“A rail service interruption at this time will severely impact the ability to deliver those increased potash tons to export ports and to move some of our products for the upcoming spring application season, potentially reducing crop yields later in the year,” the spokeswoman said. “We urge CP and the union to come to a speedy agreement and get goods moving again.”

Nutrien Interim President and CEO Ken Seitz said in a statement: “Nutrien is responding to this period of unprecedented market uncertainty by safely expanding potash production to help provide our customers with the crop inputs they need. Our thoughts and sympathies are with those impacted by the crisis in Ukraine and we hope for an immediate de-escalation of this conflict. The impacts of this conflict extend beyond Eastern Europe as a disruption in supply of key agriculture, fertilizer and energy commodities could have implications for global food security.”

Russia and Belarus are major potash suppliers to the world, but the countries are not exporting.

Russia shut down exports earlier this month and Belarus is also not shipping because of troubles getting the product through the port of Klaipeda in Lithuania. The U.S. is scheduled to impose steep tariffs on Belarusian potash in April.