national
farmers union
national
farmers union
SASKATOON, Sask.- "A costing review is a good idea because it provides us with key current information about our largest cost. It would be a positive contribution to transportation reforms, whatever direction farmers eventually choose to take," said NFU Transportation Committee Chair Terry Boehm. He was speaking following a meeting of farm groups convened by the CWB to discuss the need for a costing review.
Western grain freight rates are calculated by a formula which is supposed to take into account increased costs due to inflation and decreased costs due to productivity gains (eg. fewer employees, more fuel-efficient locomotives, better technology). Since 1992, however, while rates have been adjusted upward to account for inflation, the government has not conducted the costing reviews necessary to measure productivity gains. This lack of costing reviews since 1992 is currently costing farmers approximately $168 million annually. Stated another way, freight rates today are $5/tonne higher than they should be, and would be had regular costing reviews continued.
"No matter where you want to go on transportation reforms, who would be opposed to starting out $5/tonne lower? What is there not to like about this? Farmers can't imagine that any farm group could be opposed to lower freight rates. A costing review would provide key information about a key cost," said Boehm.
At a March 30 meeting convened by the Canadian Wheat Board (CWB) in Saskatoon, Keystone Agricultural Producers (KAP), the Saskatchewan Association of Rural Municipalities (SARM), and the NFU all agreed that there needs to be an immediate costing review and freight rate adjustment.
Attendees also saw a presentation on the U.S. situation by Terry Whitesides. That presentation pointed to higher rates and poorer service under the deregulated U.S. system. "Whitesides' presentation demonstrated where you can go if you are not careful and how hard it is to come back," said Boehm.
This calculation assumes: 2% annual undistributed productivity gain since 1992 and $1.2 billion in freight costs annually (McKinsey and Company, p. 53). 2% x 7 years x $1.2 billion = $168 million. This number is increasing. It will be approximately $192 million in the year 2000 and $216 million the following year.
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