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Farmers pay the freight

That’s the message Transportation Minister Marc Garneau heard two weeks before he unveils a plan to revamp Canada’s transportation system

Western farm leaders’ meeting with Transportation Minister Marc Garneau in Saskatoon Oct. 20 appears to have been just in time.

Garneau is scheduled to present his strategic plan for the future of Canadian transportation Nov. 3 in Montreal to the Chamber of Commerce of Metropolitan Montreal. The plan, which follows a review of the Canada Transportation Act begun by the former Conservative government, is expected to result in amendments to the act.

“We wanted to make sure that Garneau understood the farmers are paying the bill for all the stuff (relating to grain transportation) and it is hurting Canada in general when we have to pay more then we should,” Keystone Agricultural Producers (KAP) president Dan Mazier said in an interview following the meeting attended by about 20 western farm leaders, including the president of the Agricultural Producers of Saskatchewan and the Alberta Federation of Agriculture. “That is why we are asking for the (railway) costing review and why we are asking for the MRE (maximum revenue entitlement to stay).”

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railcars at grain elevator

Last crop year, western farmers collectively paid the railways $1.4 billion to move their grain.

The MRE, which replaced fixed rail freight rates in 2000, allows the railways to set rates so long as total grain-shipping revenues don’t exceed the amount set by a formula overseen by the Canadian Transportation Agency. Rate flexibility lets the railways discount rates to efficient shippers and charge less efficient shippers a premium.

When first established, the MRE formula gave the railways a 20 per cent contribution to grain-shipping revenue over variable costs towards fixed operating costs. Regulators believed it was a fair and adequate return and reflective of what would occur in a competitive market.

Although the MRE is adjusted annually for inflation and the volume of grain moved, the railways say it discourages investments to improve grain shipping.

Although there have been some adjustments, a comprehensive review of how much it costs the railways to move western Canadian grain hasn’t been done since 1992.

Travacon, a consulting firm hired by four Saskatchewan farm groups, estimates in 2013-14, because of increased efficiency in the grain-handling and transportation system, the railways earned a 61 per cent contribution.

“This was $322 million, or $8.36 a tonne, in excess of the contribution level of 20 per cent that was deemed fair and adequate under the Western Grain Transportation Act, and which Travacon believes is the maximum that could be earned under effective competition,” Travacon said in its report from March 2015.

“Farmers are paying their fair share and then some,” Harvey Brooks, executive director of the Saskatchewan Wheat Development Commission, said on the sidelines of the Fields on Wheels conference in Winnipeg Oct. 21.

It was important for Garneau to hear directly from western farmers, Mazier said. Garneau was fully engaged in the meeting and acknowledged farmers ultimately pay for grain transportation. Agriculture Minister Lawrence MacAulay was also at the meeting.

“We understand the scope and importance of the grain sector, and that a strong rail-based supply chain system is essential so all Canadian producers and shippers can remain competitive in domestic and international markets,” Garneau said in a release following the meeting. “The input received today will serve as valuable information as we prepare to address the future of transportation in Canada.”

Manitoba Agriculture Minister Ralph Eichler and his Saskatchewan and Alberta counterparts met separately with Garneau and MacAulay Oct. 20.

“We talked about the (extended interswitching) interchange lanes of course and making sure that we keep that as well,” Eichler told reporters after speaking at Fields on Wheels. “We talked also about the MRE, which we are supportive of, but we need to make sure that we have the checks and balances to make sure that all parties are viable. Without that we get off track. Minister Garneau did take all this stuff very seriously.”

Western agriculture ministers and farmers presented a united front, Eichler said.

“I would say we were all singing off of the same sheet,” he said. “I certainly feel we spoke as one unit all across Western Canada, not just Manitoba.

“(W)orking collaboratively… is what we need to be doing in order to ensure that we get it right.”

Manitoba’s annual farm cash receipts are close to $6 billion and $3.2 billion of that comes from the sale of grain, oilseeds and special crops, Eichler said in his conference address.

“These figures illustrate the degree to which Manitoba shippers and producers rely on railways and the services they provide,” he said. “Manitoba is unique to Western Canada in that half of our rail traffic in the past crop year was moved to Thunder Bay and one-fifth to the United States, which surpassed all volumes moved to Vancouver.”

Grain transportation is key to Manitoba farmers and their customers, Eichler later told reporters.

“When I met with the different consulates, whether they be from Japan or China, this was the No. 1 issue that they wanted to talk to me about,” he said.

Grain has been moving well recently, in part because other rail traffic has declined, but it will come back.

“So how do we look at that going forward in order to ensure that we do deliver our products in a timely manner in order to maintain those markets, because once you lose that trust it is hard to get that back,” Eichler said. “So that message was delivered loud and clear.”

About the author

Reporter

Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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