Western grain transportation should be completely deregulated, including elimination of the cap on railway revenues designed to protect grain farmers from railway gouging, says Wayne Atamanchuk, Canadian National Railway’s (CN) assistant vice-president of bulk commodities.
Meantime, CN has stopped investing in grain transportation fearing “creeping re-regulation” will inhibit CN’s ability to earn a profit from hauling grain.
“We’re looking closely at grain-specific investments and waiting to see more clarity on where the future direction is going,” Atamanchuk told reporters last week after speaking at the Fields on Wheels conference in Winnipeg.
“We’re kind of in a holding pattern right now. We haven’t said we’d never make an investment, but we’re uncertain about where the future goes.”
While CN might not invest in an elevator siding, it is spending on the rail system in general, which benefits all traffic, including grain, Atamanchuk said.
“Re-regulation” comes in the form of the Canadian Transportation Agency (CTA) adjusting what items the railways must include or exclude as revenue, shrinking its entitlement under the cap, according to Atamanchuk.
“Right now export grain in CN is one of the least profitable commodities we move,” he said.
Atamanchuk couldn’t say by how much changes to the revenue cap have cut rail revenues. “What’s more concerning for us is the trend, more than the actual magnitude.”
The revenue cap isn’t needed, he said, because the railways compete – a statement most farm groups, grain companies and Canadian Wheat Board do not agree with.
Western grain is the only commodity CN handles that is regulated, Atamanchuk said. “We think the grain companies, through their size can and do, exercise their clout so we’re not sure why Western Canada grain needs to be separate from every other commodity that the railways move.”
If “creeping re-regulation” continues, he warned, the federal government will be forced to subsidize grain transportation like it did in the 1970s, through the purchase of hopper cars and paying to fix grain-dependent branch lines.
Canada’s current grain transportation policy is like having a “belt and suspenders” to provide shipper protection. There’s the revenue cap and remedies shippers can use under the Canada Transportation Act if they believe the railways are underperforming.
But farmers fear they’d pay as much as rail-captive U. S. farmers if the cap was removed. According to Keith Bruch of Paterson Grain, CTA remedies, such as final-offer arbitration, are too time consuming and expensive.
Mark Hemmes, president of Quorum Corp., the firm hired to monitor grain transportation, told the conference the cap has kept the rates farmers pay for shipping grain down. Rates have not risen nearly as much as other farm expenses, he said.
Atamanchuk said he couldn’t explain why CN accounts for most of the “level-of-service” complaints made to the CTA. Last crop year, he noted, CN exceeded its shipping target and increased its market share.
“That’s not a sign of poor performance,” he said.