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UPDATE 1-Canadian government says it is monitoring the CN Rail strike closely

(Adds details, fresh comments from CN)

By Kelsey Johnson and Allison Lampert

OTTAWA/MONTREAL, Nov 19 (Reuters) - Canadian Prime Minister Justin Trudeau's government on Tuesday said it would monitor the Canadian National Railway strike that is set to disrupt grain and oil deliveries as thousands of workers walked off their jobs for the first time in a decade.

About 3,000 workers, including conductors and yardmen from CN Rail, the country's largest railroad operator, hit picket lines, after both parties failed to resolve contract issues at a time of softening demand for freight service. CN employed a total of 25,720 employees, as of Dec. 31, 2018.

The two sides will continue talks on Tuesday in Montreal, a spokesman from Teamsters Canada (TCRC) said, over what the union calls health and safety issues.

"The Government of Canada understands the importance of the rail industry and its workers to the Canadian economy. While we are concerned about the impact of a work stoppage on Canadians, we remain hopeful they will reach an agreement," a joint statement from the Labor and Transport Ministries said.

Canada, one of the world's biggest exporters of farm products, relies on its two main railways to move canola and wheat over the vast distances from western farms to ports. Crude oil shippers in Alberta have also increasingly used trains in the past year to reach U.S. refineries as an alternative to congested pipelines.

"We've made no progress with the company," Teamsters Canada spokesman Christopher Monette said on Tuesday. "All the same sticking points are still on the table." CN said in a statement "that the TCRC has initiated strike action, but added operations in the United States will continue operating despite the strike in Canada. (Reporting by Kelsey Johnson in Ottawa and Allison Lampert in Montreal; Additional reporting by Rod Nickel in Winnipeg and Steve Scherer in Ottawa Editing by Chizu Nomiyama and Sandra Maler)

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