Kevin Hursh is a farmer and agrologist.
The grainhandling system is supposed to become more efficient now that the Crow Benefit is ending. Farmers will pay the full cost of moving grain to export, but we are supposed to benefit from a leaner, lower-cost system.
Some say that won’t happen. Some of the free-enterprise crowd call it “suffocation by regulation.” They say the Crow may be gone, but “Crow Two” is going to be alive and well.
One of their main bones of contention is the cap on grain freight rates. Until 1999, and perhaps well beyond that time, there will be a legislated maximum.
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Many farm groups believe this is a good thing. It’s protection for farmers. The railways won’t be able to gouge producers. There will still be some control in the system.
However, executives at CP Rail claim the cap will actually hurt producers. The railways will be unable to charge high rates on lines they consider to be inefficient. That also means they will have limited ability to cut rates to encourage efficient movement.
It boils down to the classic argument over incentive rates. Are they a good thing or not? Inland grain terminals, including the farmer-owned ones, like them. They get freight-rate deductions for multiple-car loadings.
However, CP says the discounts for loading a block of cars are already higher than the actual amount of money saved by the railway. Without the power to charge more on inefficient lines, they say, there will be a retreat on discount rates in the new crop year.
While some in the grain industry side with CP on this issue, others say the railways have too much power to go totally unregulated. They point to Burlington Northern in the U.S., which charges very high rates to captive grain customers, while charging much lower rates in areas of the states where it has to compete against water transport. According to CP, the Canadian system is competitive. Some 65 percent of the grain originating on CP is within 20 miles of a competitive railway.
Would farmers be better off with a deregulated system or a re-regulated one? The truth may be that either type of system can produce some results.
Since we aren’t entirely comfortable with either of the extremes, we have produced a regulatory hybrid that’s somewhere in the middle.
Will we have the best of both worlds, or just an ugly mongrel?
