Winnipeg Free Press - PRINT EDITION

Railways making hay while grain sits in bins

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Agriculture Minister Gerry Ritz has been doing his best to put a brave face on what appears to be a looming wreck when it comes to getting this year's bumper crop of grain to customers.

Industry officials say grain elevators are filled to capacity across the West, while export terminals sit empty and ships are lining up at Vancouver waiting to be loaded.

While rail movement of 5,000 to 5,500 cars per week to export ports is high by recent standards, grain companies are reporting a backlog of 18,000 cars ordered but not delivered, and that backlog is rising by between 1,000 and 2,000 cars per week.

To industry observers, the situation smacks of a smug realization by the railways whether they move the grain now or next year, they'll still get the business. And there's not much shippers can do about it.

It's a problem as old as commercial farming on the prairies.

From the time settlers started producing more grain than they needed, farmers here have been held captive by geography and the lack of competitive alternatives to the railways.

The late Willard Estey, a retired Supreme Court judge hired by the federal government in 1998 to report on the grain transportation issue, summed up the Prairie farmer's dilemma as unique among major grain exporters.

"Canada alone must face the grim reality that remaining competitive in the world grain market depends almost entirely upon reducing and holding to a minimum the cost of transporting grain to tidewater or to rail export point," he wrote.

Over the past century or so, governments have intervened on farmers' behalf with legislation and regulation designed to ensure farmers didn't get gouged. After decades of complaints by the railways, the ultra-low Crowsnest Pass freight rates ended in the 1980s and were replaced with a federal subsidy. That ended in 1995, leaving farmers to pay full freight themselves. Also gone is the Canadian Wheat Board, which was a monopoly big enough to tackle the railway duopoly over service issues in the courts -- and win.

The biggest stick remaining is the revenue cap, which gives the railways flexibility to set rates, but limits the total they can collect from hauling grain. That's indexed to ensure they can cover their costs plus make a profit. Farmers are quick to point out that doesn't apply to grain prices.

Some, including Ritz, are suggesting the revenue cap should be axed as well on the premise farmers might pay more but get better service.

Farmers and shippers have heard that rationale to support deregulation many times before. "It didn't happen," says Western Grain Elevators Association's manager Wade Sobkowich. Shippers just end up paying more.

Federal legislation passed last year, supposedly to address the accountability problem, fell far short of what shippers say is needed. While a grain company has 24 hours to load a train once it is delivered or face penalties, there are no such penalties for the railways, even if the train arrives three weeks late.

Farmers also bear the cost of lost sales if customers go elsewhere.

This won't change until shippers are given the clout they need to hold the railways accountable, either through commercial measures such as offering running rights on rail lines, or adequate legislation.

Laura Rance is editor of the Manitoba Co-operator. She can be reached at 204-792-4382 or by email: laura@fbcpublishing.com.

Republished from the Winnipeg Free Press print edition November 30, 2013 B10

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