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CP, CN overshoot annual grain revenue caps

Grain research fund could get over $2.67 million

Both of Canada’s big two railways were found to have made more revenue from hauling Prairie grain in 2017-18 than their federally mandated limits allow.

The Canadian Transportation Agency on Monday announced Canadian Pacific Railway and Canadian National Railway overtopped their maximum revenue entitlements (MREs) for the crop year by $1,500,513 and $1,047,285 respectively.

CN’s MRE-covered grain revenue for 2017-18 hit $788.06 million, while CP’s came in at $709.5 million, the CTA said.

The two companies now have 30 days to pay those MRE overages, plus penalties of five per cent (for CN, $52,364; for CP, $75,026), to the Western Grains Research Foundation (WGRF), the mandated beneficiary. Income from the WGRF’s endowment fund is directed to research work.

In all, the CTA said, the two railways moved 40,618,285 tonnes of MRE-covered western grains during 2017-18, down six per cent from the previous crop year. CN moved 20.98 million tonnes, while CP moved 19.63 million.

The CTA said the average length of haul in 2017-18 came in unchanged from 2016-17, at 953 miles (1,534 km), with CN’s at 1,007 miles and CP’s at 896.

The railways’ annual MREs are calculated by way of a formula factoring in the tonnage of grain and average length of haul along with the volume‑related composite price index (VRCPI), a figure the CTA determines by April 30 each year.

The VRCPI — an inflation index reflecting a “composite” of forecast price changes for railway labour, fuel, material and capital purchases — was set in late April last year at 1.3817, up 4.1 per cent from 2016-17, based mainly on an expected 3.5 per cent increase in forecast price changes for “railway inputs.”

That forecast hike was based mainly on expectations for a rise in West Texas Intermediate (WTI) crude oil values on average in 2017, the CTA said at the time.

The VRCPI’s increase for 2018-19, meanwhile, was limited to 2.8 per cent, due in part to the CTA replacing its 2017 railway input price forecasts with actual data.

Since 2000-01, the VRCPI has grown at an average annual rate of around two per cent.

In recent crop years, CN and CP both overshot their MREs in 2016-17 for a combined overage and penalties of almost $7.2 million; in 2015-16, for over $4.4 million; in 2014-15, for over $9.45 million; and in 2011-12, for over $672,000. CN overtopped its MRE in 2013-14, while CP exceeded its MREs in 2012-13 and 2010-11. — Glacier FarmMedia Network

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