THE $59.8 million in overpayments charged to prairie grain farmers by Canadian National Railway and Canadian Pacific Railway should, by rights, be repaid to them.
As determined by the Canadian Transportation Agency, the railways didn’t adjust their freight rates during the 2007-08 crop year to reflect lower allowable costs for hopper car maintenance. As a result, they overcharged farmers by an estimated $2.23 per tonne on 26.8 million tonnes of prairie crop. The CTA has also imposed a 15 percent penalty of about $9 million.
The expected response to overpayment is repayment, plain and simple, and that would be the ideal scenario in this case.
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When the railways overcharge, the money is paid into the Western Grains Research Foundation, which banks the principle and uses the interest to fund research. In the past, the amounts have been smaller. A nearly $60 million payment into the WGRF is a windfall no one anticipated, but it is a one-time occurrence that won’t be repeated.
The Western Grain Elevators Association and the Canadian Wheat Board support direct repayment of the overcharges to prairie farmers. The research foundation says it would have no objection.
Simple, right? Except, typical of Canadian grain policy, it isn’t.
To repay farmers their specific amount of overcharges, designated officials would essentially have to obtain the freight bill for every farmer in Western Canada who shipped crop in the 2007-08 crop year. Freight rates vary at different times of year, and the different shipping points each have a different rate.
While records might be relatively accessible for board grains, the same cannot be said for oilseeds, pulses and container shipments, which have no centralized bookkeeping.
The determination of amounts and the administration involved in collection, calculation and delivery of the money would almost certainly use up a chunk of the total, unless funding for the project came from elsewhere. And the paperwork might be sufficient to reopen one of Saskatchewan’s paper mills!
The difficulty in correctly calculating per farm overpayments was probably one of the reasons, perhaps even the primary reason, that the CTA chose the WGRF as the recipient of overcharges in the first place. It’s unlikely, however, that it bargained for a repayment of this size.
Farmers must also consider their likely return. Applying the conversion factor for wheat, just for figuring purposes, to a repayment of $2.23 per tonne tallies out to about six cents per bushel. That would vary depending on commodity, location and freight rates at the time of shipping.
Grain industry groups and officials are considering options, as they should. Among them is the idea of putting the $9 million penalty into the WGRF and then reducing next year’s revenue cap by $60 million.
That idea or any other change to the existing scenario will require a change in regulations, which come via direction from Parliament or the minister of transport.
Just because a problem is complex doesn’t mean it can’t be solved. Thorny problems are tackled all the time in the agricultural industry.
But this project nevertheless must be approached with knowledge of its complexity and the time it may take to resolve.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.
