The average freight rate will drop by almost $6 a tonne next year under proposed changes to grain transportation rules.
But that doesn’t mean every prairie grain farmer will pay $6 less to ship a tonne of grain to market.
Depending on where they live, what they grow and when they ship it, some producers may end up paying the same, or maybe more, than they do now.
Under the federal government’s transportation reform package announced last week, a limit will be set on the amount of money the railways can make hauling grain.
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That revenue cap will be set at $27 a tonne, which is 18 percent below the average “effective rate” of $32.92 that is slated to go into effect Aug. 1.
The effective rate refers to the railways’ average revenue per tonne of grain hauled. It is lower than the maximum allowable rate of $33.98, reflecting rate discount programs offered by the railways.
But the railways will have flexibility to fiddle with the actual rates charged to haul grain, as long as their total revenue remains under the cap.
“In theory, the railways can vary their freight rate by commodity, by time and by location,” said agricultural economist Richard Gray.
“So if you have two or three of those working against you, that could be bad news.”
Canadian Wheat Board director Ian McCreary said it would be misleading to suggest that the revenue cap will produce freight savings for all farmers.
“The average freight rate will be lower, but it is true that individual areas may experience greater declines and it’s possible that some areas will experience no declines.”
He expects the proposed legislation won’t prevent railways from basing rates on such things as the value of the grain being hauled, the short-term demand for cars, or the kind of rail line serving the delivery point.
The only restriction announced by Ottawa last week is that the tariff rates for single car movements originating on branch lines cannot exceed similar rates on main lines by more than three percent.
CP Rail vice-president Ray Foot acknowledged that the railways will be able to offer a variety of different freight charges, but said no decision have been made on things like commodity-specific or seasonal rates.
“The specifics are difficult to project until we see the details of the legislation.”
National Farmers Union transportation spokesperson Terry Boehm said that while the government is trumpeting the 18 percent reduction in average rates, many farmers will see no savings and some will see costs rise.
He said the railways are bound to use their new-found freedom to charge different rates for multi-car-loading, for high-value crops and during peak shipping periods.
And even for those who see their rail freight rate drop, Boehm said, that may be more than offset by increases in other costs such as trucking.
