The Canadian Transportation Agency is projecting a 4.1 percent increase in the cost of moving western Canadian grain by rail this year.
The increase is in the volume related composite price index (VCRPI), which is used to determine maximum revenue entitlements for Canadian National Railway and Canadian Pacific Railway.
MREs, which are also known as railway revenue caps, limit the amount of revenue that Canada’s major railways can generate by moving a tonne of grain over a given distance to export terminals in Churchill, Man., Thunder Bay, Ont., or British Columbia.
The VCRPI is similar to an inflationary index.
Each year, the CTA accepts submissions from the railways, assesses railway operating costs for items such as labour, fuel and materials, and uses the information to determine the VCRPI.
The CTA is required to announce changes to the VCRPI every calendar year before April 30.
An adjusted VCRPI of 1.3817 will be applied when the agency determines the railways’ grain revenue entitlements for the 2017-18 crop year.
In a CTA summary document, the agency says the increase for the 2016-17 crop year was the result of higher projected costs for fuel and railway labour.
“The agency forecasts a 1.3 percent increase in labour for the 2017-18 crop year, with projected increases in general wages partially offset by projected declines for some of the wage-related and fringe benefit components,” the summary document stated.
Regarding fuel costs, “the average of third party forecasts for the price of crude oil used in the development of the 2017-18 railway fuel price index is US$53.70 (per barrel) for 2017 and $56.10 (per barrel) for 2018,” the document said.
“(Overall), the agency forecasts an 11.4 percent increase in fuel prices for the 2017-18 crop year, with larger increases projected in the price of crude oil in 2017 mitigated somewhat by more moderate increase in 2018.”
The CTA established a base VCRPI rate of one in the 2000-01 crop year.
Since then, the rate has grown at an average compounded rate of 1.9 percent per year.