(The Canadian Press circulated the following on April 4.)
OTTAWA — Farmers are calling for a review into rail costs after a study says grain growers in Western Canada overpaid railway companies more than $100 million.
Commissioned by the Canadian Wheat Board, the study suggests that Canadian National Railway (TSX:CNR) and Canadian Pacific Railway (TSX:CP) made $175 million more in 2006-07 than what was considered fair under the old Crow rate that was repealed in 1996.
Several farm groups released the study, which said a farmer shipping 1,500 tonnes of grain would have overpaid about $9,000.
A review hasn’t been done since 1992, meaning the numbers used to calculate revenue caps for grain freight are out of date, and it’s unacceptable, says Bob Friesen, president of the Canadian Federation of Agriculture.
“If farmers said, ‘Well, I’m as efficient as I was in 1992’, they would be laughed out of the room,” Friesen said at the news conference.
With more than 1,000 grain elevators shut down since the early 1990s, railways have realized efficiencies but service has suffered, the wheat board says.
“Just as railway revenues have moved … the railway performance has dropped,” said Ian McCreary, the wheat board’s farmer-elected director.
Study author John Edsforth said Canadian railways don’t have much competition for handling commodities like grain, coal, and sulphur and “as a consequence they can get away with poor service.”
Jim Feeney, a CN rail spokesman, said they disagree with the study’s overall conclusions, noting the railway did not provide its own numbers for the report.
Even with the extreme weather in many parts of the country over the past winter, CN has already moved seven per cent more grain this crop year compared to the same period last year, he said.
The demands for a rate review, said Feeney, appears to be an attempt to re-regulate the grain transportation industry.
“In effects, these groups want to turn back the clock. The trouble that we see – the Canadian industry has been moving in the opposite direction for 25 years,” Feeney said.
McCreary downplayed that suggestion, noting shipping costs could come down if more competition was introduced in the market.
“Both railways have sort of tried to put the idea that information in some way puts us in a regulatory box. We certainly haven’t had that as our call, we’ve just said we believe there’s a problem,” McCreary said.
“There is more than one way to solve the issue of railway market power.”
In January, the Canadian Transportation Agency determined the railways charged farmers an extra $72 million, leaving the figure of roughly $100 million in overpayments that was discussed in the wheat board’s study, said Kieran Green, a spokesman for the Canadian Federation of Agriculture.