(The following story by Joe Friesen appeared on the Globe and Mail website on March 26.)
WINNIPEG — Canadian farm groups say a new report shows the rail industry is earning excessive profits on the backs of farmers.
A study commissioned by the Canadian Wheat Board argues that Canadian National and Canadian Pacific Railway, which own nearly all of Canada’s rail lines, have taken more than $100-million a year in “unreasonably excessive returns” for transporting Prairie grain to port.
“Farmers are being held captive by railway monopolies,” said Bob Friesen, president of the Canadian Federation of Agriculture. “They’re victimized by that monopoly and they’re currently being gouged in what is being charged for moving that grain.”
A coalition of farm groups gathered at a grain terminal near Winnipeg yesterday to demand that the federal government review rail shipping costs.
They say such a review hasn’t been done since 1992. As a result, the revenue cap, which governs how much the rail companies are allowed to charge, doesn’t reflect changes that have made rail shipping cheaper and more efficient in the intervening 16 years.
Jim Feeny, a spokesman for CN, said his company disputes the conclusions reached in the consultant’s report, which was compiled from public sources and without input from the railways.
“Rail rates to move grain out of the Prairies are among the lowest in the world, and they’re considerably lower than for equivalent moves in the United States,” Mr. Feeny said.
“What we believe is happening here is an attempt by the Wheat Board and these farm groups to re-regulate one sector of grain transportation.”
A spokeswoman for federal Transport Minister Lawrence Cannon said the government has no intention of reviewing the cost of grain transportation, but will commence a review of rail service in the coming months.
Glenn Blakley, president of the Agricultural Producers Association of Saskatchewan, said farmers have been concerned about freight rates for years, and the latest study will raise a lot of eyebrows.
“It seems every year we’re seeing a higher freight rate and we’re not seeing any correlation to better service,” he said. “The challenge is there’s no real competition.”
In a truly competitive market, prices would be driven down, according to Ian McCreary, a farmer-elected director of the Canadian Wheat Board. He said farmers would prefer to see an industry where other rail companies were allowed to operate on CN or CP rail lines, in an arrangement similar to rules that opened the telecom industry to competition. Failing that, the government should do a better job of regulating what the rail companies are allowed to charge.
“When Canada deregulated its transportation system there were no competitive disciplines put on the railways. You have a deregulated industry with no competition,” he said.
“We have to get a market discipline, either through competition or some regulatory framework.”