Higher freight rates expected in 2019-20

Rail freight rates for moving western Canadian grain to market will be going up in the 2019-20 crop year.

In a determination dated April 30, the Canadian Transportation Agency announced that the Volume-Related Composite Price Index (VRCPI) will be increasing at Canadian National Railway and Canadian Pacific Railway beginning Aug. 1.

The VRCPI is used to determine how much Canada’s major railway companies can charge for moving grain on federally regulated railway routes under the maximum revenue entitlement program.

Citing higher operating costs for labour, fuel and materials, the transportation agency determined that CN’s VRCPI in the 2019-20 crop will increase by 1.82 percent over 2018-19 values.

CP’s VRCPI will increase by 3.7 percent, based on higher costs for fuel, materials and investments including leased hopper cars, amortization and the cost of capital.

The MRE limits how much revenue CN and CP can generate from moving a tonne of western grain over any given distance.

Recently introduced regulatory changes were aimed at encouraging investments in railway infrastructure and ensuring that MRE limits would reflect those investments.

In its April 30 ruling, the agency said one of the factors contributing to the higher VRCPI values at CN and CP was a cost component adjustment related to the acquisition of new hopper cars for the movement of Canadian grain.

It remains to be seen how much extra the adjusted VRCPI values will cost grain shippers to move western Canadian grain to market.

Total freight revenues collected each year also depend on the amount of grain transported annually and the distance grain is moved by rail.

Contact brian.cross@producer.com

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