Major railways exceed revenue cap

The pandemic has hit railways hard, as shipments of commodities and consumer demand fell for much of 2020.

However, there was one bright spot for the railways — grain.

Canadian Pacific Railway’s grain shipping revenue was a hair below $1 billion as it earned $999,230,808 during the 2019-20 crop year.

Canadian National Railway’s grain revenue was slightly less at $933,502,041.

The two railways also exceeded their maximum revenue entitlement (MRE), determined by a formula from the Canadian Transportation Agency.

The CTA announced in December that CP exceeded its revenue ceiling by $2,170,010.

CN was $3,170,615 over the cap.

The railways must pay those amounts to the Western Grains Research Foundation, which funds crop research and other science on behalf of prairie farmers.

CTA statistics show the two railways moved 48,023,898 tonnes of western grain in the 2019-20 crop year, up 4.3 percent from the previous year.

The stats illustrate how grain-shipping volumes have climbed on the Prairies over the last decade:

  • 2009-10 crop year: 31.9 million tonnes
  • 2014-15: 41.3 million tonnes
  • 2019-20: 48.0 million tonnes

CN and CP’s revenue from grain shipping has also jumped:

  • 2009-10 crop year: $917 million (combined revenue)
  • 2014-15: $1.47 billion
  • 2019-20: $1.93 billion

The additional earnings from grain shipments were a game changer for the railways in 2020.

“Our strong bulk franchise, which included record movements for Canadian grain and potash in the first half of the year, help to offset some of the declines we experienced in other lines of business,” said CP president and chief executive officer Keith Creel last summer.

With record shipments and revenue, some farmers might assume the railways were well over the maximum revenue entitlement, but the MRE varies with tonnage moved.

“Entitlements are calculated using a formula containing numerous elements,” the CTA said.

“A railway company can remain under its entitlement so long as it does not charge more than the average rate per tonne as set by the first part of the MRE formula.”

The railways’ grain-shipping revenue might continue to rise in 2020-21 because exports of canola, wheat and pulse crops were moving at a record pace this fall.

Grain companies exported 12.2 million tonnes of bulk grain, oilseeds and pulses through week 12 of the 2020-21 crop year, a 29 percent increase over the same time last year.

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