Producer cars and short line railways receive special treatment from the Canadian Wheat Board, according to the president of the Grain Growers of Canada.
“Producer cars are not always profitable,” Doug Robertson told a symposium put on by his organization and the Canada Grains Council last month.
“Sometimes certain agencies (CWB) make them profitable for certain groups unfairly.”
Robertson added he is not opposed to producer cars. “As long as they are on a commercial basis, I see nothing wrong with maintaining commercial access to producer cars.”
Producer cars are gaining in popularity. Farmers, who save around $1,000 from bypassing country elevators, have loaded an average of 12,000 cars annually during the past five years, including 12,198 in the last crop year.
When asked in a later interview how the CWB gives producer cars a break, Robertson, who farms at Carstairs, Alta., replied, “For instance this is the only country I know of where a one-car spot is effectively efficient as a 100-car spot.”
In fact, railways offer incentives to large shippers that are not available to farmers loading a single car. Shippers who load 100 cars within 24 hours pay $8 a tonne less for freight than a single car. The CWB does differ from grain companies in one respect – it will take delivery of grain delivered via a producer car at port while grain companies usually won’t because they want to earn money through their country elevators.
“Unfortunately our system likes to somehow try and iron everything out so we’re all equitable,” Robertson said. “I don’t think that’s the job of the wheat board – to make the world equitable for farmers.”
However, a CWB director who attended the symposium took issue with Robertson’s charge of special treatment.
“When he talks about a ‘special deal,’ it’s like planting that seed (of doubt) strategy,” said Bill Woods, director for District 4. “His remarks came across as if he didn’t support producer cars.”
Woods, who farms at Eston, Sask., has long been involved in producer car loading and is a founder of West Central Road &Rail Ltd., a producer car-loading facility. He said producer cars give farmers an alternative to the grain compa- nies and trucking grain long distances. He also said they make the grain transportation system more efficient and are the lifeblood of most short line railways.
“Nobody is going to build a whole network of Prairie elevators and a terminal at every port,” Woods said. “That’s just not reality. However, if you’ve got producer cars that’s huge competition. It’s a right. If producers aren’t happy with the way things are unfolding, they can order a producer car.”
There is a strong business case for producer cars, added Travis Long, general manager of Boundary Trail Railway Company, which operates 20 miles of track between Manitou and Morden.
A month ago, his short line shipped five cars of canola to a grain company’s Vancouver terminal, said Long. While grain companies prefer farmers deliver to their country elevators, some see producer cars as a way to get grain through their terminal they wouldn’t normally get, he said.
The farmer-owned firm, which started up in July 2009, handled almost 500 producer cars in the first 13 months in operation and spent about $1.5 million on three separate producer car-loading facilities. A fourth facility – an old wooden elevator – could start loading cars next year.
OPPOSES REVENUE CAP
Robertson also expressed sympathy for the railways in their opposition to the cap on the amount of revenue they can earn shipping grain, suggesting they are “getting screwed royally.”
“I understand why they don’t like the rail cap,” said Robertson. “Personally I don’t like it either. If I was forced to work for the rail cap I would do just barely good enough a job to satisfy that because if I do too good a job WGRF (Wes tern Grain Research Foundation) gets funding, right?” (If railways exceed the cap, they are charged a penalty which goes to the WGRF for plant breeding).
The cap is discouraging the railways from investing in improvements such as new, larger hopper cars, Robertson said, adding he’d prefer a “commercial” grain-handling and transportation system, which would eliminate the need for a railway revenue cap.
“I think everybody in the system has to make money,” Robertson said in an interview. “A lot of the times I hear from farmers who say, ‘Only the farmers should make money.’ We wouldn’t have a very good system then. Everybody should be free to make as much money as they can possibly make within a reasonable commercial setting so that nobody’s getting screwed royally over it.”
However, under the Canadian Transportation Act, the cost to replace government-owned cars that are no longer available is deducted from the cap. That means the cost is passed directly to the farmer and doesn’t cut into the railways’ earnings.
When the revenue cap was set up in 2000 it gave the railways a 27 per cent return against their constant costs. Since then, the cap has been adjusted annually for inflation on inputs such as fuel and labour. There hasn’t been a comprehensive review of railway grain-shipping costs since 1992 and it’s not known if a promise to share gains from efficiencies with farmers and grain companies has been kept.
However, a recent study prepared for the CWB and several farm groups estimated farmers paid $275 million more than they should have in 2008-09.
Until there is rail competition farmers would be wise to maintain the rail revenue cap, said John Edsforth, president of Seattle-based Travacon Research, which conducted the study.
“I wouldn’t give away anything like that,” said Edsforth. “The only thing that would happen if the cap was eliminated would be the freight rates would all go up.” [email protected]
“Producercarsarenot alwaysprofitable.Sometimes certainagencies(CWB) makethemprofitablefor certaingroupsunfairly.”
– DOUG ROBERTSON, GGC