Business & Policy
CFA urges government to renew grain transport systems
The Canadian Federation of Agriculture (CFA) has submitted recommendations to a consultation on a Canadian Transportation Agency review, urging federal Transport Minister Marc Garneau to commit to meeting with western farm leaders to hear their concerns about grain transportation.
October 3, 2016 By Canadian Federation of Agriculture
With another bumper crop already on its way to grain collection bins, CFA said farmers are deeply concerned about a repeat of the backlog in 2013/14, due to the railway companies’ inability to fulfill shipping contracts and deliver grain to exporters on time.
During the crop years from 2012 to 2014, losses to the Prairie economy due to export capacity constraints were estimated at between $5 billion and $6.5 billion, according to a study by Richard Gray, an economist at the University of Saskatchewan.
“At the core of these issues is the reality that [the] western grain transportation system is nearly devoid [of] competitive freight options. Most farmers can only access one railway to transport their grain to export positions. That’s why CFA stresses that regulation through maximum revenue entitlement (MRE) and provisions like inter-switching are essential: they protect farmers from monopolistic practices of rail companies,” said Ron Bonnett, president of the CFA, in a press release.
Bonnett added farmers strongly disagree with a government report that recommends dismantling the MRE program within seven years and sunsetting inter-switching options.
“Policy makers must understand that grain farmers are on the hook for all shipping costs. Farmers paid the railways a total of $1.4 billion to move grain to port last year, plus fees for disruptions and delays, and even penalties charged by shipping companies when their vessels have to wait at port,” Bonnett said. “It’s imperative that Minister Garneau takes the time to meet with farm leaders. They have a critical financial stake in this matter. We are certainly grateful for the discussions we’ve had with Agriculture Minister Lawrence MacAulay, but we understand that the final decisions coming out of the CTA review will rest with Minister Garneau.”
CFA recommended that in addition to maintaining the MRE, the government should change the way the MRE is calculated by using more accurate measures than an inflation index based on freight cost data from 1992. The group said the MRE must emulate freight rates that would be in place in an open and competitive rail transportation system.
CFA also recommended Minister Garneau immediately initiate a costing review of the rail system to ensure the railways are not abusing their monopolistic position – a promise made during the 2015 election campaign. Current rates are determined through rates established from a costing review conducted almost 25 years ago.
In addition, CFA argued increases in efficiency and technology should be factored into the costs for rail companies. For example, the CFA said pick-up points for grain have been reduced from over 1000 elevators in the Prairies to roughly 240 for the whole region, allowing trains to stop less and pick up more per stop. This also means farmers have further distances to truck their grain to rail terminals, which adds to their costs. None of this, CFA argued, is reflected in the current MRE calculations.