The National Farmers Union (NFU) is announcing ideas for positive change in the grain handling and transportation sector that, if enacted, will benefit farmers.
“We are proposing the establishment of Grain Car Receivers at the West Coast and at Thunder Bay. They would receive Producer Cars at port and direct them to whichever Terminal Elevator had space. The Receiver would have the grain graded by the Canadian Grain Commission at port and then offer the grain to whichever grain company was purchasing that grain. Any discrepancies in space allocations and sales could be cleared up on a monthly basis by the Grain Car Receiver,” said Terry Boehm, former NFU President and long time analyst of transport legislation in Canada.
“For this system to work it would require that grain companies be mandated to accept a certain portion of their supply from the Grain Car Receiver,” Boehm explained. “The Grain Car Receiver would benefit farmers by making Producer Cars once again a viable alternative to shipping through grain companies, allowing them to fulfill their original function as a discipline on grain company elevation and/or basis charges and by allowing farmers direct access to rail transportation services.”
To make this proposal work, necessary amendments to the Canada Transportation Act could be made through Bill C-49, currently before the Senate. The list of amendments would be as follows:
- Remove Railways’ ability close Producer Car loading sites.
- Reinstate the former right of a group of 10 farmers to petition for establishment of a new Producer Car loading site.
- Require that Producer Cars be given at least equal priority, if not first priority as was formerly the case, to any other rail car in car allocation by the railways.
Boehm went on to say that other legislation would be required to make the mandated Grain Car Receivers at port a legitimate and effective entity.
“Canada’s grain rail transportation system has been deregulated extensively to the point it is now able to extract money from farmers with impunity. Instead, why not do something daring in this country to make the system work better for farmers and the country as whole?”, said Boehm. “In the end, mandated Grain Car Receivers would force grain companies to truly compete for farmers’ grain with fair basis levels because farmers would have a real alternative with a fully functioning Producer Car option.”
“Unfortunately too many farm groups, along with the federal and some provincial governments, believe in the fallacy that reciprocal penalties between railways and grain companies will cure many of our problems,” Boehm observed. “What we have in Bill C-49 is a set of tepid and harmful amendments to the Canada Transportation Act that refuse to recognize the real power dynamics that exist in a system where most grain delivery points are captive to one railway or another.”
“Grain companies will be disadvantaged where they are served by a single railway regardless of their ability to negotiate a penalty for poor service – their actions will be tempered by the reliance on that one railway in the long term,” noted Boehm. “Meanwhile, farmers are standing by the sideline in any negotiations between shippers and railways. If a grain company ever brings a level of service complaint against a railway, Bill C-49’s current wording adds a long list of considerations the Canadian Transportation Agency must bear in mind when making its decision.”
“Under Bill C-49, the CTA would have to consider nine points that are so broad it is hard to imagine when, if ever, the railways would be in violation of their service obligations,” said Boehm. “This is a huge win for the railways. In effect they would be able to determine to a large extent, who they will do business with by making skillful use of these new loopholes.”
Bill C-49’s weakening of the railways’ common carrier obligation flies in the face of over a hundred and twenty years of transport legislation that was specifically designed to prevent the railways from exercising undue, self-serving power. On a positive note, the proposed legislation does reduce the time for a ruling on a service complaint from 120 to 90 days, however.
The Maximum Revenue Entitlement system remains in place but it still does not have any mechanism for freight rates to go down. The only calculation recognized is an inflation factor. This weakness could have been addressed by requiring a regular costing review that calculated the reduction in costs railways incur by running bigger trains, having far fewer pickup points than in the past, using smaller crews, and having more fuel efficient locomotives, for example.
“Why with recent drops in fuel prices in recent years have we not seen some reduction in freight rates?” asked Boehm.
Bill C-49 removes the definition of government hopper cars from the Transportation Act and allows railways’ acquisition of hopper cars to be calculated into their rates. This is a further measure that ensures rate adjustments can only go upward.
Freight rates should also be adjusted downwards to partially transfer benefits of the railways’ privileged position in the Canadian economy to grain shippers, and hopefully on to farmers as well. This idea is justified on two fronts. First, it has been known for some time that the railways are receiving more than $150 million in excess revenue using railway industry standard accounting measures that calculate a very generous return. Second, railways have been offloading costs onto farmers for years. Farmers have had to invest in more on-farm storage and larger trucks to meet railway demands for 24 hour fill times for 100-plus car unit trains. Being forced to bear a larger share of grain transportation system costs gives farmers a legitimate claim for lower freight rates. This inequity is not addressed by C-49.
“We cannot understand why there is support in some quarters for Bill C-49 when it does not result in any substantive change for the better for farmers.” concluded Boehm.
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For more information:
Terry Boehm, former NFU President: Email firstname.lastname@example.org