SASKATOON (Staff) – The current maximum freight rate on grain would probably become a minimum rate in a totally deregulated system, says a report by an Ottawa-based transportation consultant.
“We see $27 to $30 a tonne as the minimum price in a competitive deregulated system,” said Darrell Richards of Transport Concepts.
In a report written for the National Farmers Union, Richards said without regulatory control, the railways would charge whatever the traffic would bear without killing production.
Rates would no longer be based on costs, as has been the case in Canada under the Western Grains Transportation Act. Rail companies could decide to boost rates in line with higher grain prices, on the grounds that farmers could afford it.
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Richards said based on the American railway Burlington Northern’s rate of $42.60 (Cdn) from Great Falls, Mont., to Portland, Ore., and including a premium for guaranteed access to hopper cars, rates could be around $47 to $50 a tonne.
Double the money
“This is about double the maximum rate for 820 mile (1,300 kilometre) shipments under the current WGTA scale.”
Richards said the maximum rate scale will not be sustainable in a deregulated North American market. CN and CP will lose business from their southern routes to U.S. railways, but be unable to make up losses by raising rates in the northern prairies.
Rates will be lowest in areas where grain can be shipped from large inland terminals near the U.S. border. But farmers in the northern prairies won’t fare so well. “You can’t haul from Meadow Lake to Burlington Northern,” said Richards.
Programs like joint and reciprocal running rights have a limited ability to promote real competition, the report said. Ideas like treating the rail bed as publicly owned infrastructure, similar to highways, or requiring the two national railways to open their tracks up to competitors, could provide some benefits to producers.
Rail freight rates could double, says consultant
