A REPORT that says Canada’s two main railways make $100 million a year in excessive returns at the expense of farmers demands a response by the federal government.
The Canadian Transportation Agency must perform a general railway service review this year and the government must ensure the CTA does a detailed review of the real cost of hauling grain by rail.
Such a review, which has not been done since 1992, is needed to determine whether the government should take further action to level the playing field between grain shippers and the two national railways, which have near monopoly control over Western Canada’s rail service.
Read Also
Rural emergency room closures continue to be vexing problem
Staffing issues are at the root of disruptions and closures in hospital emergency departments, both in rural and urban Canadian locations.
Farmers have long believed that they get an inadequate share of the savings generated by consolidation of the grain handling and transportation system over the last 15 years. Rail analyst John Edsforth’s report, commissioned by several farm groups and the Canadian Wheat Board, confirms the belief and puts a dollar figure on the injury.
The report found that in 2006-07 railway earnings on grain were about 150 percent more than what was considered fair and reasonable under the Western Grain Transportation Act, which governed the sector until 1996.
Such profits are not surprising because they are based on a 17-year-old cost base.
There has been no adjustment for such things as the decrease in the number of grain elevators to 370 from 1,500 and the fact that grain now moves mostly in 50 or 100 car unit trains.
This should have produced big efficiencies, but the rate for transporting grain from Saskatoon to Vancouver has risen to $42 a tonne from $30 in 1992.
The cost might be acceptable if it bought stellar service, but it hasn’t. Rail car turnaround times to the West Coast are virtually unchanged from 1992. Railways fail to deliver cars ordered and inadequate service compels farmers to pay demurrage on waiting ships and frustrates international customers.
The railways warn that creeping re-regulation could make grain transportation unprofitable, resulting in the kind of inefficiency, underinvestment and neglect that characterized the late 1970s and ’80s.
Farmers don’t want a system starved of investment. They know all business must make a profit.
But commercial systems work best, producing fair profits for all players, when balanced by competition, which as Henry Ford said is the keen cutting edge of business, shaving away at costs.
In this case, competition is limited to two railways and because of the separation of their lines, most farmers are captive to a single carrier.
Regulation is needed to balance the situation.
The federal government helped level the field by passing Bill C-8 to amend the Canada Transportation Act. The next step is a cost review and if it confirms unreasonable railway profits, then the formula that governs farmers’ freight rates must be adjusted.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.
