Top Crop Manager

News
Farmers face highest ever increase in rail rates

The Canadian Transportation Agency (CTA) announced on April 24, that rates will increase eight percent in 2008-09 due to higher fuel and labour costs. In response, the Canadian Federation of Agriculture is leading a coalition of farm organizations calling for improvements in grain transportation.


May 1, 2008
By Canadian Federation of Agriculture

April 30, 2008


Ottawa – Farmers are facing the
highest-ever annual increase in rail rates for grain, renewing calls for a
long-overdue review of railway costs for grain
transportation.

Rates
will increase eight per cent in 2008-09 under the railway revenue cap for grain,
the Canadian Transportation Agency (CTA) announced on April 24, after adjusting
its volume-related composite price index due to higher fuel and labour costs for
the railways. The revenue cap sets a maximum limit to what the major railways
can earn from grain transportation.

We all
know fuel prices have increased, but we dont know the railways actual fuel costs
or consumption levels for grain transportation or how theyve changed since 1992,
saidBob Friesen, President of the
Canadian Federation of Agriculture (CFA). The CFA is leading a coalition of farm
organizations calling for improvements in grain transportation. Friesen noted
that the cost assumptions in the composite index are based on 1992 railway cost
levelsthe last time a full costing review was
done.

Farmers
not only have to absorb their own massive fuel-cost increasestheyre also
overpaying the railways for theirs, thanks to an outdated basis for all costs
related to grain movement, said Friesen.

For
example: for a producer nearSaskatoonwho moves
1,300 tonnes of grain to thePortofVancouver, the increase adds $4,300 in
annual freight costs. That producer paid $54,600 in rail freight ($42 a tonne)
in 2007-08. A costing review could save farmers over $8,000 a year, according to
a study by respected rail analyst John Edsforth, recently commissioned by the
Canadian Wheat Board (CWB). The study estimated the two major railways earned at
least $100 million above what they would make in a competitive, free-enterprise
environment.

We want
the railways to be profitable because farmers rely on good service, but todays
situation is beyond reasonable, said CWB farmer-director Ian McCreary. The big
railways are able to reap far more than they ever would if there was
competition.

National
Farmers Union Vice-President Terry Boehm said a costing review is a reasonable
request. We just want assurance that our rates are based on todays actual
railway costs, considering how much has changed since 1992. We would like to
share in the huge efficiency gains that farmers have paid for through longer
trucking distances and fewer delivery points.

The
railways have far fewer Prairie grain elevators to service today. In 1992, there
were 1,500 elevators, compared to only 370 now. The railways now insist on
moving grain mostly in large blocks of 50 or 100 cars and have repeatedly
introduced programs to rationalize service and car supply none of which have
decreased car cycling time since 1992.

A
full-industry railway service review is now underway by
TransportCanada, but it is not specific to
grain transportation. It is also unlikely to address farmers specific concerns
about the revenue-cap formula for grain freight.

We are
asking that the CTA be allowed to immediately conduct a costing review for grain
transportation. We cant wait 18 to 24 months until the Transport Canada service
review is complete, said Glenn Blakley, President of the Agricultural Producers
Association of Saskatchewan. A delay will only allow the railways to make
hundreds of millions more at our expense. It is unreasonable to expect farmers
to wait years for redress when we know there is a problem and have offered a
convincing body of evidence in support.

Ian
Wishart, President of Manitobas Keystone Agricultural Producers, said the
railways take advantage of farmers to make hundreds of millions in excess
profits. This money comes directly from our pockets, and we keep paying more
while service gets demonstrably worse. Farmers cannot continue to be slowly bled
through a revenue cap formula that puts the advantage squarely in the railways
court.

Humphrey
Banack, President of Albertas Wild Rose Agricultural Producers, said the railway
companies have unfairly dismissed producers concerns, falsely accusing farmers
of wanting to return to the inefficient regulated system of the 1970s. If the
railways are so confident that they are effectively and efficiently meeting the
growing needs of Canadian grain producers, they should have no objections to a
costing review that proves it, he said.

The CFA
has this week launched an e-mail postcard campaign urging the federal government
to reconsider a costing review. It is posted at
http://cfa-fca.ca/pages/emailer.php.