Farmers fighting for fair rail rates in the United States are looking north with envy, says a U.S. rail industry consultant.
What they see, said Terry Whiteside, is a powerful farmer-run agency willing to go to bat to defend farmers’ interests against the railways.
Whiteside, chair of the U.S. Alliance for Rail Competition, said most rail shippers in the U.S., particularly farmers, would love to have a single agency like the Canadian Wheat Board to help them deal with the railways.
“Keeping the wheat board as a farm producer voice in the transportation area just makes sense,” he said. “What grain shippers don’t have south of the border is some very large entity representing their long-term transportation interests.”
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An influential, powerful organization like the board can help ensure that the railways are accountable to farmer shippers and can put pressure on the rail companies to ensure that productivity gains are passed back to shippers, he said.
Whiteside delivered his message to farm groups attending a meeting organized by the wheat board to talk about grain transportation reforms.
He painted a grim picture of a western U.S. rail system dominated by two non-competitive railroads, which he said are gouging farmers, providing poor service and operate largely unfettered by government regulation.
Mixed reaction
His remarks about the board were welcomed by some in the room, like National Farmers Union transportation committee chair Terry Boehm.
“It’s an interesting comment and it’s good to hear,” he said later, noting that the board won millions of dollars in compensation for farmers from the railways by launching a service complaint with the Canadian Transportation Agency.
He added that U.S. shippers have price and service problems that aren’t encountered in Canada, due in large part to the wheat board’s influence: “On a good percentage of the export crop, the wheat board ensures equitable access to service and I think that’s important to producers.”
However Greg Rockafellow, chair of the Prairie Farm Commodity Coalition, said he sees no need for an organization like the board to stand up for farmers’ interests in dealing with the railways.
Under the commercial, contract-based transportation system favored by the coalition, the railways and others would be held accountable for their performance and have to live up to the terms of their shipping agreements.
“What we envision is that under a contractual system, when a farmer gets his product to the door, if there is demurrage and if there are mistakes, that’s somebody else’s problem,” he said.
A properly functioning contracting system should eliminate inefficiencies from the system.
“We don’t see a whole bunch of canola sitting idle in storage somewhere, because someone other than farmers will have to pay that bill,” he said. “Those things won’t happen.”
Whiteside, a native of Calgary who now works as a transportation consultant in Billings, Montana, offered a five-point prescription for ensuring that Canadian farmers are well-served by the railways:
- Maintain a strong degree of regulatory protection for captive shippers.
- Improve competitive access to the rail system.
- Keep the CWB involved in the transportation system to act on behalf of farmers.
- Develop a strong network of short-line railways.
- Conduct a review of railway costs to provide standard data for determining fair rates in the future.
Whiteside said farmers who want to move to a deregulated, commercial system should be patient and recognize the value of moving in a measured and orderly fashion.
“I hope farmers see the wisdom of maintaining protection before competitive rates start to work,” he said. “Competition is the ultimate answer, but we can’t just forsake those who need protection.”
Deregulating and throwing open the rail industry to competitive forces without providing regulatory protection for captive shippers will create “huge economic dislocation” as has happened in the U.S., he said.
U.S. regulators consider that a return of 180 percent on variable costs for a railway constitutes market dominance. Thirty-one percent of U.S. rail traffic generates a return of greater than 180 percent, 45 percent is in the range of 100 to 180 percent and 24 percent generates less than 100 percent.
For captive grain shippers, the returns garnered by the railways are “astronomical,” said Whiteside.
In Montana, the railways achieve a return of 250 to 350 percent, in North Dakota 250 to 300 percent and in Idaho 200 to 270 percent.
“When you hear that U.S. deregulation has been good because rates are lower, that’s not the case for captive shippers,” he said.
