The railways have unveiled pricing policies they say will achieve their required 18 percent reduction in grain-hauling revenue in the 2000-01 crop year.
Beginning Aug. 1, the cost of moving a single grain car from the Prairies to export position will decline by four percent for CN Rail and 1.7 percent for CP Rail from this year’s rate.
More significantly, both railways are introducing sizable rate discounts for the movement of large blocks of cars.
For example, 50-car blocks will qualify for discounts of $4 per tonne on CN lines, while 100-car blocks will qualify for $6 a tonne. CP’s discounts for similar sized blocks work out to reductions of 27 and 37 percent respectively from the single car rate.
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For one farm organization official, that translates into the railways working with grain companies to reshape the grain collection system to their own financial advantage.
National Farmers Union executive secretary Darrin Qualman said those big incentives for loading large blocks of cars will be more than enough to divert grain from older wooden elevators on branch lines to the big concrete facilities on the main lines.
“As a lot of people predicted, they’re going to use their ability to discriminate in rates to push the grain to where they want it and close down the lines and elevators they don’t want to service any more.”
But the railways say they’re trying to operate a more efficient, accountable and competitive system.
“We’re providing greater reductions for more efficient behavior,” said CP Rail spokesperson Ian La Couvee.
He emphasized that the new rate packages are not set in stone and said the railway will monitor whether the new rates are having the desired effect.
Sandi Meilitz, CN’s vice-president for commercial development, said the new rate structure is just the first step toward creating a more efficient system.
“We want to take this in measured steps and understand in an orderly way how the grain will move,” she said.
“Overall, we have not made a lot of dramatic changes to the rate scale and that’s very important for stability.”
Some of the basic features of the existing system will remain in place. Rates will continue to be based on distance rather than costs, rates will be the same for all regulated grains and oilseeds, and there will be no special surcharge on non-main line shipments.
Meilitz said that should give farmers some assurance that the railways will maintain a sense of “fairness and balance” as the system evolves.
Both railways are also introducing a system of performance-based financial rewards and penalties that will apply equally to shippers and the rail companies.
She said CN may offer special advanced-booking programs for a significant amount of its movement each year, accompanied by guarantees of when cars will be spotted at country elevators and when they will arrive at port.
However, the details of those kinds of programs are still subject to negotiations with other players in the system, she said.
Canadian Wheat Board spokesperson Justin Kohlman said last week it would take a few days for the agency to fully analyze the railways’ new freight packages.
“It seems to be a good start in terms of the reductions, but we need to do the analysis to ensure it meets the criteria that the legislation sets forth.”
But he noted any new rate must be evaluated in the light of costing studies that show the railways have been pocketing almost $5 a tonne in productivity gains made during the 1990s.
“So there may be more room for possible reductions in there,” said Kohlman.
