Fluctuating fuel prices are blamed for a 3.5 percent increase in the cost of shipping grain in the coming crop year.
That comes after an increase of $2.50 a tonne last year and a decline of $2.26 a tonne the year before that.
The Canadian Transportation Agency announced the increase in the volume-related composite price index (VRCPI) April 21 to establish revenue caps for Canadian National Railway and Canadian Pacific Railway in 2011-12.
The index has been set at 1.1777 for the 2011-12 crop year beginning Aug. 1.
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The VRCPI is an inflation factor that forecasts price changes for railway fuel, material, labour and capital bought by the two rail companies.
“The 3.5 percent increase announced for 2011-12 is largely attributable to fuel prices, which have resulted in significant fluctuations in the index in recent years,” said the CTA.
Rates will vary for different services, programs and customers, but at the end of the day the average rate should be seven percent higher.
The increases in 2011-12 include:
• 10.7 percent for fuel
• 2.8 percent for railway materials
• 2.3 percent for labour
• a decline of 0.6 percent for other inputs such as hopper car maintenance and capital for investment.
Those increases are passed on directly to farmers who pay to ship grain from farm to market.
The new rate represents an average freight rate of $38.81 per tonne for producers next crop year, up from $37.50 last year.
Farm group officials said they weren’t surprised by the fuel-generated increase in the revenue cap.
The cap was introduced in 2000 as a way to deregulate rail freight rates on grain, allowing the rail companies to set rates where they please as long they remain below the cap.
The VRCPI is one of the factors used to establish the caps. Exceeding it can result in financial penalty to the railways.
