Prairie grain farmers will have to pay about $2.50 a tonne more to ship grain by rail in 2010-11.That comes after an average decline of about $2.26 a tonne last year.The Canadian Transportation Agency announced April 30 that the pricing index used to determine the rail freight revenue cap will increase by seven percent next crop year.The increase is due mainly to higher fuel prices, said the agency.As a result, the revenue caps for the two railways will increase by roughly that same percentage, enabling the railways to increase their rates and remain under the cap.Rates will vary for different services, programs and customers, but the average rate should be seven percent higher.Assuming normal grain volumes and hauling distances in 2010-11, that will result in an average single car rate of around $37.50 a tonne in 2010-11, up from $35 in 2009-10.Ian Wishart, president of Manitoba’s farm lobby group Keystone Agricultural Producers, said it’s no surprise the rates will be going up.”We do fuel surveys all the time and we knew prices were going up.”Wishart said that in the absence of a full review of railway costs, the current formula does an adequate job of regulating freight rates and is preferable to an open market bid system.”A formula with indexes for changes in inflation probably seems like a fair approach,” he said.”Every farmer I know would like to be on a cost-plus formula like those guys (the railways) are,” he added.National Farmers Union president Terry Boehm said it’s galling that the railways should get paid more to haul grain while at the same time they’re closing lines, tearing up track and providing poor service.He said the rate formula doesn’t take into account increases in railway efficiency and productivity, which should translate into lower rates.”It’s a one-way street,” he said. “Farmers pay more if railways’ costs go up and there is no reduction in rates if railways’ costs go down as a result of system restructuring and efficiency gains.”While other factors go into the determination of the revenue cap and freight rates, the volume-related composite price index is the most significant. It measures inflation-related changes in the prices paid by the railways for labour, fuel, material and capital.For 2010-11 the index is increasing by seven percent due to higher fuel and labour costs.In 2009-10, the price index declined by 7.4 percent, due mainly to lower fuel prices.In 2008-09 the index increased by eight percent, mostly due to higher fuel prices.In 2007-08 the index fell by 5.4 percent, due mainly to a one-time reduction of 8.4 percent to reflect hopper car maintenance costs. The previous year, the index increased by eight percent, with fuel prices again the main factor.
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