As the federal government starts a review of the grain handling and transportation system, prairie provincial governments are warning against the seductive appeal of simple solutions or radical market proposals.
They are urging caution when evaluating proposals to move totally away from government regulation to a commercial, market-based system of organizing grain movement.
Before abandoning its regulatory, overseer role, government should make sure a commercial system would not simply create more profits and efficiency for some, and higher costs for others, the provinces said in a report prepared in July for federal and provincial agriculture ministers.
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“These are not simple issues,” Glen Werner, director of economic services for Alberta Agriculture, said in an interview. “We want to disentangle a very complicated system to get rid of inefficiencies but we don’t want to rush into other solutions which may have their own problems. Let’s be careful to look at all sides before rushing into anything.”
Lorne Martin of Manitoba Agriculture said in an interview there is need for system-wide planning.
Rail line abandonment does not necessarily improve the system if the only effect is to transfer costs from the railways to area farmers.
“And based on what we have seen elsewhere, a move to a commercial system does not necessarily mean the railways will compete,” he said.
In the U.S., railways charge higher freight on grain moving from areas where there is no carrier competition than on grain moving from areas in which farmers have transportation options.
“You can’t be completely reliant on a commercial system without some boundaries around it,” said Martin.
Manitoba led the effort to compile the report.
“There are early indications that at most points in western Canada, the development of a competitive railroad market is unlikely,” said the report.
It also predicts that the expected decision to eliminate the maximum grain freight rate now written into the transportation act will mean higher profits for the railways and higher freight rates on many branch lines.
Without making recommendations about how to fix it, the study predicts that west coast grain handling “will continue to be disrupted by frequent labor disagreements.”
It suggests streamlining decision making and injecting more accountability into the system are necessary and could have a dramatic impact on the pattern of grain flows. One prediction is that a system geared more to efficiency would direct more westward-bound grain through Vancouver and less through Prince Rupert.
