Canada wheat farmers say railways overcharging

 

 

Canadian farmers are overpaying the country's two major railways by as much as CA$275 million (US$270 million) a year to transport their crops, the Canadian Wheat Board and five other farm groups said.

 

According to rail analyst John Edsforth, he concluded that farmers paid CA$8.81 a tonne more, or CA$275 million overall, in 2008-09, than what is considered fair under a federal grain transportation law. In the previous year, they paid CA$4.61 a tonne, or CA$123 million too much.

 

The cost of rail transportation - the main way Canadian grains and oilseeds get to port or domestic buyers - is one of farmers' biggest expenses, along with fertiliser. Western Canadian farmers generally have to move their crops longer distances to reach port than US and Australian growers, and do not have a river transportation system to compete with rail.

 

Canada is the world's top exporter of spring wheat, durum and canola, with the bulk of the crops produced in the Prairie Provinces.

 

The federal government caps the revenue that Canadian National Railway and Canadian Pacific Railway can earn by hauling crops. For the 2010-11 crop year, which begins August 1, the index used to calculate the revenue cap rises 7%, mainly due to higher fuel prices.

 

However, Canadian National (CN) spokeswoman Kelli Svendsen said that railways are not overcharging farmers and in fact charge some of the lowest rates for grain transportation in the world.

 

CN is trying to improve the efficiency and reliability of grain rail transportation by setting certain days to deliver cars to grain elevators for pick-up later, she said.

 

Canadian Pacific spokeswoman Breanne Feigel said the company is still reviewing the report and could not yet comment on whether railways have overcharged farmers. She noted that CP has demonstrated the importance it places on grain shipments by upgrading 50 grain-handling facilities in the past decade.

 

Meanwhile, grain shipments may be lower this year as record rain are expected to result in the largest unplanted acreage in Western Canada in 39 years. But smaller crop volumes are unlikely to fire up competition between the two big railways and generate lower rates for farmers, Edsforth said.

 

The farm groups urged the federal government to review rail costs, saying that carriers have not passed along savings to farmers after a sharp reduction in the number of grain elevators during the past 20 years made the system more efficient.