April 30, 2008

Canada grain farmers to face more strain from rising freight costs

Canada's 8-percent rise of freight costs, to take effect on August 1, will compound the high fertilizer expenses already eating up grain farmers¡¯ profits, industry players said.

Ian McCreary, a farmer from Bladworth, Saskatchewan, said it would add nearly US$5,000 to his annual US$60,000-freight bill.

Higher freight rates will also add to growing concerns about food inflation in Canada.

Economists predict that food prices will jump by 3.5 per cent this year, outstripping the overall inflation rate.

Meanwhile, Canada's railway companies insisted the rate increase simply reflects soaring fuel bills.

Grain freight rates are regulated by the Canadian Transportation Agency, which sets an annual cap on the rates CN and CP can charge in the coming crop year.

The calculation is based on the railways' costs for fuel, labour, rail car leasing and other inputs.

Last Friday the CTA said the cap will increase by 8 per cent for the 2008-09 crop year, a record increase that has alarmed many farmers.