CWB report: railroad profits have come from the pockets of farmers

REGINA (July 6, 1999) – The loss of the Crow Rate has been a gain for the railroads’ profits, according to a report released by the Canadian Wheat Board.

The study, conducted by two railway costing consulting groups, said freight rates in 1997 and 1998 were $172 million and $124 million higher respectively than what they would have been based on actual railway costs on a Prairie-wide basis.

In 1997 and 1998, the rates, on a per-tonne basis, were $5.30 and $4.89 higher.

Under the previous Western Grain Transportation Act (WGTA) which was in place until 1995, farmers shared in the gains in railway productivity through an adjustment to the cost-based maximum rate, also known as the Crow Rate. However, with the demise of the WGTA and the Western Grain Stabilization subsidy, also known as the Crow Rate, the railways no longer have to share productivity gains with producers. The CWB opposed the repeal of the WGTA.

The report sparked criticism of the railways in Saskatchewan, where farmers paid $95 million in 1997 and $68 million in 1998 in additional freight charges under the current arrangement.

“This study confirms what many farmers, the CWB, many farm groups and the provincial government have said: that the railways have achieved large gains in productivity since the last costing review, and little of these gains have been passed back to producers,” said Saskatchewan Agriculture and Food Minister Eric Upshall.

“Because of the decision by the federal government to allow the railways to keep the gains in railway productivity, the railways continue to pocket millions of dollars that rightly belongs to Saskatchewan farmers. While the railways are keeping well over $100 million of producers’ money every year, the realized net farm income for Saskatchewan farmers is projected to be less than $100 million. How can this be fair to farmers?”

Highways and Transportation Minister Judy Bradley expressed skepticism that reforms to the grain transportation system being considered by a federal review panel would result in better returns for farmers.

Bradley said Saskatchewan has a set of expectations that it wants achieved from the federal transportation reform process. One of these expectations is that productivity gains captured by the railways since the last costing review must be reflected in the freight rates.