New rules designed to encourage more competition among grain companies will be irrelevant to many prairie farmers, says an official with the National Farmers Union.
In areas where producers have a number of grain handlers to choose from, they may be able to exert some market power under the new system for allocating rail cars, said Terry Boehm.
But those areas are few and far between.
“Most farmers are captive to one railway or another and more or less captive to one grain company or another,” said the NFU’s transportation critic. “They have the market carved up.”
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Under the new allocation system, cars will be divided among grain companies based on a combination of their past 18 weeks of grain receipts and the volume of Canadian Wheat Board grain slated to be delivered to the company under outstanding CWB producer contracts.
The board and grain handlers say the rules will encourage firms to compete more aggressively for farmers’ business to protect or expand their market share.
Paul Earl, policy analyst with the Western Canadian Wheat Growers Association, said that while the 18-week rule is an improvement over 52 weeks, it doesn’t go far enough.
“You’ve made an essentially bad system slightly better,” he said.
The wheat growers want rail cars to be distributed through a commercial bidding system, as recommended in the Estey report, rather than an administered formula.
“Then it would be based on what the companies are actually doing.”
Earl said the new system will be a nightmare to administer, lacks transparency and ignores basic commercial principles.
Boehm said he’s disappointed the board had to back away from its original proposal of basing the system on outstanding CWB contracts.
If the companies really believed in competition, he said, they would have gone along with the board’s original proposal.
“All of a sudden, competition wasn’t very attractive for them,” he said.
Nevertheless, Boehm called the new rules an improvement and praised the board for standing up to the grain handlers and looking out for farmers’ interests.
“It’s better than not having these rules in place,” he said. “Without them the companies would have the freedom to do solely what is in their best interests.”
