Key agricultural organisations within Canada have this week expressed concerns a the possibility that the country’s rail freight operators may be profiteering at the expense of the nations farmers.

A report commissioned by the Canadian Wheat Board(*) has found that  Canada’s big rail companies make in excess of $100 million dollars a year at what the wheat board describes as excessive returns at the expense of Canadian farmers.  At a recent press conference, six agricultural representative organisations including the Canadian Wheat Board called for a review into the reports findings. 

Figures revealed by the report estimate that the railways made a total of $175 million dollars in 2006-2007 at $6.25 per tonne of grain transported, a figure greater than what was considered fair and reasonable compensation for moving grain under the previous Western Grain Transportation Act. Additionally the Canadian Wheat Board reports that the Canadian Transportation Agency found that the railways had been allowed to earn revenue that was triple their actual costs for rail car maintenance and reduced the revenue cap for grain by about $72 million per year. A gap of at least $100 million remains, while the railways appeal aspects of the CTA ruling.

The director of the Canadian Wheat board described the findings of the report “shocking” and has said that “it shows the railways earn far above what they would in a competitive rail market.”

Ian Wishart, President of Canada’s Keystone Agricultural Producers group went further, saying that “these results clearly show that something is not right with the revenue cap and the freight rates farmers are paying.” Wishart adding that “mechanisms like the revenue cap were meant to protect farmers. We need the government to step in, run the numbers and see if those mechanisms are serving farmers or if they need fixing.”

Speaking with Freightscene.com regarding the matter, Canadian National Railway Company’s Mark Hallman flatly rejected the reports conclusions saying that company did not agree with the information that was researched by the Canadian Wheat Board’s consultant, saying that the study was completed “without any participation or input from the railways” and that the consultant concerned “was not in a position to know or understand Canadian grain rail movement costs.”

Declaring  that the Canadian grain rail transportation rates were the lowest in the world and  considerably lower than those experienced in the neighbouring United States, Hallman spoke of the positive effects of de-regulation of the Canadian rail freight market, however he also expressed concern that  groups such as the Canadian Wheat Board are now pushing for re-regulation of the industry, a “turn back of the clock” that saw the rail freight industry “almost fall apart” two to three decades ago.  

Canada’s present form of economic regulation with regard to grain rail transportation is that of a revenue cap.  The cap, set down by the Canadian Transportation Agency, enables Canadian National and Canadian Pacific to set their own rates for services, provided the total amount collected remains below the revenue ceilings set by the CTA. Adjustments to the cap to allow for inflationary pressures are made yearly.

Article by Findlay Osborn

With thanks to: Mark Hallman - Canadian National Railway Company

Source:Canadian Wheat Board, Canadian National Railway Company, Canadian Pacific Railway Company and the Canadian Transport Agency

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