Farmers could be sharing in the productivity gains railways are enjoying today if they hadn’t been so concerned about their Crow payouts, says a British Columbia economist.
Jim Vercammen said farmers lost the regular freight rate review when the Crow rate was eliminated and that is now costing them money.
“Everyone was so focused on the method of payment, and the size of the payment, when the Western Grain Transportation Act freight subsidy was eliminated, that they let something important slip by,” Vercammen said in an interview.
Read Also
Land crash warning rejected
A technical analyst believes that Saskatchewan land values could be due for a correction, but land owners and FCC say supply/demand fundamentals drive land prices – not mathematical models
Under the act, rates were allowed to rise with inflation, then reviewed every four years and adjusted according to the railways’ costs and productivity gains.
“You were always eventually getting rates equal to the actual cost through this mechanism,” Vercammen said.
Today, the railways are enjoying productivity gains because of rail line abandonment but farmers are not benefiting from lower rates. If, for example, the average freight rate is $27 and farmers are being charged $35, there is nothing forcing the railways to lower the rate, he said.
“That difference would have been returned in the good old days,” Vercammen said. “Every year there are hundreds of millions of dollars that farmers could have been capturing but they have no mechanism of capturing any more. (The railways) are becoming very productive but this is not being passed on to farmers. Their rates are just continuing to rise.”
He said farm organizations should have looked beyond the Crow payment and fought hard together to maintain the four-year review.
A complex formula for productivity sharing was proposed by the Senior Executive Officers group when it made recommendations on a redesigned transportation system in late 1995. It was accepted, conditional to the sale of the government’s hopper car fleet. The 13,000 cars have still not been sold.
