Terry Whiteside from the Alliance for Rail Competition (a U.S. lobby group), and Kevin Doyle from the Calgary-based Sultran group, have been speaking at transportation meetings in Canada lately.
These individuals have vast experience with rail transportation in Canada and the U.S. Their evidence shows that in the U.S. captive shippers are paying 300 percent of the variable costs of rail transport, and these same captive shippers receive the worst service. Their evidence also shows that since rail traffic was deregulated in the U.S., competition has decreased and now only occurs where there is a conjunction of major highway, water and rail traffic.
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In these rare locations, rail shippers are only paying 30 percent of variable rail costs and receive the best service.
What I find important is that their practical experience meshes exactly with economic predictions published last December by a team of western Canadian ag economists – Murray Fulton, Kathy Baylis, Harvey Brooks and Richard Gray.
The economists predict huge increases in freight and handling charges if the Canadian system is deregulated the way that Estey suggests. In southwest Saskatchewan, the export basis for wheat would increase $26 per tonne, and the canola basis would increase by $35 per tonne. The study also predicts rail rates increasing to trucking rates in some cases, and a 17 percent drop in exports.
Something else for us to keep in mind is that prairie-based value-added processing doesn’t automatically mean higher commodity prices. As long as we are exporting the majority of a given commodity from Canada, the farmgate price will be the world price minus freight.
Therefore, a dollar per bushel increase in my rail rates will mean a dollar per bushel decrease on the durum that I intend to haul to the local pasta plant (even though the durum is never on a train). It is only when we become an importer of a given raw commodity that this will change.
Both the theory and the practical experience are telling us that the major Estey proposals on rate caps, CWB involvement, CAPG and hopper cars are huge mistakes for farmers. We can still improve our transportation system by making careful adjustments to make shortlines viable, recapture productivity gains for farmers and gain farmer ownership of the government hopper car fleet.
If we look before we leap, we will be able to avoid the mistakes that the U.S. and other countries have already made. The more I learn about the Canadian transportation system, the more I am convinced that it is the worst one in the world … except for all the others.
Comparative advantage doesn’t just mean working harder than your rival, it means working smarter as well.
– Stewart Wells,
NFU Sask. Co-ordinator,
Swift Current, Sask.
