Grain lifts rail profits

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Published: February 7, 2008

Both national railways have reported slightly higher profits for 2007, thanks in part to increased revenue from hauling grain.

Canadian National Railway recorded net income of $2.16 billion on revenues of $7.89 billion. That’s up about 3.4 percent from 2006.

Canadian Pacific Railway’s net income totalled $946.2 million, on revenues of $4.71 billion. That’s 18.8 percent more than in 2006.

For both companies, grain was a big factor in attaining those profit levels.

For CPR, revenue from hauling grain was up by 3.8 percent to $938.9 million, representing 21 percent of total commodity freight revenue of $4.56 billion.

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Grain ranked second behind intermodal traffic, which produced revenue of $1.32 billion, and ahead of other commodities like forest products, coal, sulfur, fertilizers and industrial and consumer products.

The railway generated more revenue shipping cars loaded with grain than any other commodity, taking in $2,439 per car, up 3.2 percent from the previous year.

Altogether the railway shipped 385,000 carloads of grain, ranking it second behind intermodal.

The story was much the same at CN, although its grain numbers include fertilizer.

Revenue was $1.3 billion, up four percent, accounting for almost 17 percent of CN’s total freight revenue. Grain and fertilizer ranked third behind forest products and intermodal.

Revenue per carload was $2,181, second behind forest products.

CN shipped 601,000 grain cars, third behind intermodal and forest products.

Paul Beingessner, a farmer from Truax, Sask., with an extensive background in grain-related railway issues, said there’s a clear message in those numbers.

“I think it shows that we are in need of a full costing review,” he said. “If we’re going to continue under a regulated regime, it’s time for a recosting.”

The last such review was done by the Canadian Transportation Agency in 1992, something that was required every four years under the old Western Grain Transportation Act. That legislation was repealed in 1995, and despite repeated requests from shippers, no review has been conducted since.

Beingessner said the contribution to constant costs being collected by the railways from grain has risen from around 20 percent at the time of the last review to around 60 percent, according to grain industry estimates.

“I know the railways need significant profits to invest in their infrastructure, but that shouldn’t come on the back of grain,” he said.

In April 2007, the CTA for the first time officially informed the minister of transport that shippers wanted a full costing review. That raised hopes that the government might order a review, but it hasn’t happened.

“The government shows no enthusiasm for a costing review and they know the railways would fight it tooth and nail,” said Beingessner.

“The fact is, there is not adequate competition in the industry and the government does not seem interesting in doing much to enhance competitive aspects of the (Canada Transportation) Act.”

In announcing their financial results, officials with both rail companies said a number of circumstances combined to keep revenue from being higher, including adverse weather at various times throughout the year, the strong Canadian dollar, weakness in certain markets particularly forest products, increased fuel prices and, for CN, labour disruptions.

About the author

Adrian Ewins

Saskatoon newsroom

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