Research foundation gets $672,000 | Money supports research into development of new crop varieties and uses
Canada’s major railway companies have been ordered to pay more than $672,000 to the Western Grains Re-search Foundation to support western Canadian grain research.
The Canadian Transportation Agency announced Dec. 19 that Canadian National Railway and Canadian Pacific Railway exceeded their railway revenue caps for the 2011-12 crop year.
Railway revenue caps limit the amount of money that the major railway companies can earn from the movement of western Canadian grain.
CN earned revenues of $542.8 million on grain movement in 2011-12, roughly $240,000 above its revenue cap.
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CP earned roughly $494.4 million from grain, or $400,000 above its cap.
The companies have until mid-January to compensate the WGRF for revenue earned in excess of the caps, a total value of $640,000.
In addition, a five percent penalty is imposed on each railway company, accounting for an additional $32,000.
WGRF executive director Garth Patterson said the $672,000 will be directed into the WGRF endowment fund, which is valued at $90 million.
The fund will provide up to $15 million over the next four years to support research in agronomy, variety development, minor crop development, crop use, crop risk management and post harvest management.
It is over and above other producer contributions made through production levies.
“It (the endowment fund) has built up to the level now where we’re comfortable making significant expenditures out of it while still maintaining our goal of keeping it sustainable,” Patterson said.
He said the best case scenario for farmers is when the railways don’t exceed the revenue cap.
“Really, any time there is a payment, it’s a bit of a double edged sword,” he said.
“It can be used for research, which does return value to farmers, but on the other hand, that’s money that didn’t make it into farmers’ pockets.”
The $640,000 penalty accounts for less than 0.1 percent of total revenues generated through the movement of western Canadian grain last year.
Total revenues amounted to more than 1.03 billion in 2011-12, up from $952 million in 2010-11.
About 33.1 million tonnes of western grain were moved in the 2011-12 crop year, 6.2 percent more than total movements in 2010-11, the CTA said.
The agency determines railway revenue caps annually and then calculates every December if the railways exceeded their caps in the previous crop year.
Revenue caps are calculated using a formula that is based on several factors, including the volume-related composite price index.
It is an inflation index that accounts for forecasted increases in the costs of railway labour, fuel, material and capital purchases made by federally regulated railway companies.
The VRCPI increased by roughly 9.5 percent as of August 2012.
If all other factors remained constant, that 9.5 percent increase would translate into an extra $100 million in combined allowable revenues for the two rail companies in 2012-13.
