OTTAWA — The federal government will be reaping a $95 million Crow Benefit program windfall next crop year as its subsidy payments on Prairie export grain movement fall close to 15 percent.
Meanwhile, the total farmer freight bill will rise an estimated $18.5 million, 54 cents per tonne on average, even though the costs of moving that grain are falling.
And the railways will draw an estimated $55 million less in grain hauling revenues because their falling costs due to efficiencies have now been added to the freight rate formula.
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The changing financial impacts on the differing sectors in the business are the result both of the normal operations of the Western Grain transportation Act (WGTA) and some government political intervention to cut its Crow Benefit spending.
“It is the legislation working and it is the government reaping the rewards of some cuts,” said Alberta Wheat Pool transportation specialist Jay Halls.
Costs falling
According to figures supplied by the National Transportation Agency to grain and rail industry players, the total cost of moving the grain crop in 1994-95 should fall $55 million to $1.053 billion.
That figure, based on estimates of volume movement, was arrived at after the NTA completed its review of the 1992 cost base set under the WGTA. It must be reviewed every four years and the 1992 review has just been completed.
It concluded that grain transportation costs fell between 1988 and 1992, mainly because of “efficiencies” resulting from massive railway staff reductions and because interest rates have been low.
It means rail revenues next year, based on costs, will fall.
Because of that lower cost base and the impact of a 15 percent cut in government contributions to the Crow Benefit program, announced by the Conservatives and being implemented by the Liberals, Ottawa’s contribution next year will nose-dive to $555.6 million from $650 million in the current year.
It started at $720 million.
Farmers pick up difference
Farmers will pick up the difference between actual costs and government contribution.
Halls said that if volume predictions are correct, farmer costs will increase by four percent in 1994-95. The actual cost of moving grain a distance of 1,600 km, according to the NTA numbers, is expected to fall to an average $29.42 per tonne from $32.07.
It means that instead of the 55-45 government-farmer split in sharing the costs that the WGTA contemplated for 1994-95, the actual split will be 52.7-47.3.
