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Key issues for grain producers in the CTA review

In July, Sask Wheat, Sask Barley and APAS hosted the 2015 Farmer’s Forum on Transportation in Saskatoon, an event which focused discussion on the current Canadian Transportation Act review, which is scheduled for completion in December. The forum brought together some of the most informed presenters in the area of grain transportation and handling issues. My top takeaways from the conference are as follows:

1) Railways are a vital “utility” for the health and growth of the western Canadian economy. Most of our export-driven growth potential will depend on the availability of affordable and dependable transportation and the only realistic option for most commodities is rail shipment to the West Coast.

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2) Failure to plan for future West Coast export movement will not only have serious repercussions for western Canadian grain producers but also for many sectors of the economy.

3) The maximum revenue entitlement (MRE) or railway revenue cap guarantees railways a fair return on investments and operations for grain shipments, but does not guarantee good service to grain handlers and ultimately producers.

4) Producers are paying their fair share for grain transportation and then some. In 2013-14 producers paid more than $322 million over what was deemed fair and adequate for grain movement under the Western Grain Transportation Act.

5) Removing the rail revenue cap would mimic the environment in the United States, which has seen steady upward growth in rail rates since 2002. U.S. rail rates have increased 70 per cent for large car spots and 80 per cent for small car spots from 2002-13. This is the largest growth in U.S. rail rates for any commodity except coal.

6) Increasing rail rates did not provide increased service levels in the U.S. Higher rates and increased railway profitability have not led to improved service for grain shippers in the U.S., nor have they for non-regulated rail shipments in Canada.

7) The lack of export grain transportation and handling capacity has cost Prairie producers a conservative estimate of at least $5 billion since 2013-14, as the higher export basis resulted in lower farm gate prices.

8) In order for the market to operate more effectively, more transparency is required in pricing, sales, movement and shipments.

9) The MRE, or railway revenue cap, is at risk under the CTA review.

10) Producers want the MRE maintained and they also want a formal railway costing review to determine the appropriate level for the MRE.

11) Producers want their interests represented in the planning and decisions regarding grain handling and transportation — they have unique economic interests and want a seat at the table.

Producers who attended the forum are now keenly aware of what is at stake under the Canadian Transportation Act review, which is scheduled to be completed this fall. Producers will be uniquely impacted if the system does not plan for increased handling and transportation capacity, improved service levels, and appropriate regulation of rail rates.

Excepted from the Saskatchewan Wheat Development Commission’s Fall newsletter

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