If the railways earn too much money hauling grain this year, the big beneficiaries could be prairie plant breeders.
Transport Canada has proposed that money earned in excess of the grain revenue cap, along with penalties, be paid to the Western Grains Research Foundation.
The Saskatoon-based organization, funded by a producer checkoff, finances a variety of wheat and barley breeding projects.
Some farm groups told Transport Canada this week that while they have nothing against the foundation, they don’t like the proposal.
“Any overpayment should be used to reduce overall freight rates,” said Don Dewar, president of the Manitoba farm lobby Keystone Agricultural Producers.
Read Also
Federal government supports soil health strategy
Sophie Beecher, director general at Agriculture Canada, said at a soil conference in Winnipeg that the feds support the idea of a national soil health strategy.
But an official with Transport Canada said repaying excess revenue directly to farmers isn’t feasible, given the amount involved.
Based on average shipments of 30 million tonnes at a rate of about $27 a tonne, the combined revenue cap for CN and CP Rail would be around $800 million.
“If you think about a one percent penalty, you’re talking about $8 or $9 million,” said department spokes-person Colin McKay.
“To distribute it to every producer means you’d be paying out very small cheques.”
He added that most industry players do not believe the railways will exceed their maximum revenue entitlements anyway.
Unlikely scenario
Ian McCreary, chair of the Canadian Wheat Board’s transportation committee, said he thinks the railways will come close to their revenue cap for 2000-01.
If they exceed the cap by a small amount, then it might be appropriate to repay it to a third party like the research group, he said.
“But if it ends up being a big number, there should be a mechanism there to get it back directly to farmers.”
He acknowledged the roadblock is figuring out how to do it. It would be relatively simple to repay shippers of board grain through the pool accounts, but for other grains there is no obvious solution.
Stewart Wells, of the National Farmers Union, said the government should reduce the following year’s revenue cap by the amount of the excess revenue, plus penalties.
“While no plan can ensure that the reward to an individual farmer exactly matches the overcharge the farmer suffered, our plan does a better job of approximating that goal than does the government’s proposal,” he said.
Too costly
Paul Earl, policy manager for the Western Canadian Wheat Growers Association, said his organization would like to see the money go directly back to farmers, but realizes that sending out a few dollars to every producer doesn’t make sense.
As for the NFU’s proposal to reduce the following year’s revenue cap by the amount of the overcharge, Earl said that would set an undesirable precedent.
“What if they’re under? Should next year’s revenue cap be increased?”
Interested parties had until April 23 to comment on Transport Canada’s proposal, which consisted of three parts:
- If a railway exceeds the cap by one percent or less, the penalty is five percent of the excess revenue.
- If it exceeds the cap by more than one percent, the penalty is 15 percent.
- The railway must pay the excess revenue plus penalty to the research foundation.
McKay said the penalties reflect the view that a railway could exceed the cap due to accidental miscalculation or unexpected events beyond its control.
Some farm groups said the penalties are woefully inadequate and barely match the interest the railways could earn from the excess revenue.
McKay said the government chose the foundation to get the money because it has an efficient administration system already in place and provides benefits to all farmers.
Rod Scarlett, executive director of Wild Rose Agricultural Producers, said if the money can’t be sent directly to farmers, then the foundation is probably the best alternative.
