A third of the grain that American farmers ship by rail incurs a higher freight rate than what Canadian farmers are accustomed to.
Competitive grain freight rates in the United States are $25 to $30 (Cdn) per 1,000 ton-miles, similar to Canadian rates, said Terry Whiteside, a lobbyist for U.S. shippers.
But 35 percent of the grain incurs rates of $40 to $60 per 1,000 ton-miles. This is usually charged to farmers captive to one railway, Whiteside told a meeting of Keystone Agricultural Producers here last week.
He warned farmers that rail deregulation in the U.S. has not been a panacea of competition and efficiency.
Read Also
Land crash warning rejected
A technical analyst believes that Saskatchewan land values could be due for a correction, but land owners and FCC say supply/demand fundamentals drive land prices – not mathematical models
It’s true that freight rates have decreased since the industry was deregulated in 1980, said Whiteside. But he said rates have been declining since 1932, and are part of a larger trend.
Since 1980, the spread between rates from captive and competitive areas has widened.
“The question is, who protects the captive shipper?” said Whiteside, adding re-regulation is not the whole answer because it tends to create inefficiencies.
Since deregulation, Whiteside noted the number of major U.S. railways has decreased from 42 to four: two west and two east of the Mississippi River.
Rates have been a function of what the market will bear.
“Duopolies sometime are simply efficient ways to collude,” said Whiteside, delighting his farmer audience.
More co-operation
He said he has hope for the changes Canadian players are making to the system here. Railways seem willing to work with shippers on issues, Whiteside said.
And he likes CN’s customer bill of rights, assurances of good service and competitive prices, released four months after a similar document in 1998 from his lobby group, the Alliance for Rail Competition.
Brent Dornian, manager of grain marketing for CP Rail, also spoke to farmers, basing his remarks on the railway’s submission to the recent Estey review.
“We believe there is some real competition out there,” he said, explaining CP believes a commercial system would lower overall costs and increase accountability.
Dornian said the company recognizes and wants to address farmers’ fears about rates seen in states like Montana, captive to one railway.
“CPR is not in the business to go out there and screw everybody, or anybody, for that matter,” he said.
At their meeting last week, farmers involved with KAP agreed to the removal of the freight cap as long as farmers get a long list of guarantees, including:
- Open running rights on rail lines, and access for short-line railroads.
- Access to producer cars.
- Lower rates through shared efficiencies, and access to the $144 million in efficiencies to date that railways have not shared.
The lobby group agreed with a move to a commercial, contract-based system with performance penalties and incentives.
But KAP wants the Canadian Wheat Board to be given three to five years to participate in the transportation system using contracts with grain companies and railways, with a review of the arrangement afterward.
