Farm groups rail against revenue cap proposal

(Photo courtesy CN)

CNS Canada –– A key proposal in the recently released Canada Transportation Act review on Canada’s transport systems is getting thumbs down from several Prairie farm groups.

The Agricultural Producers Association of Saskatchewan (APAS) disagrees with the report’s recommendation for a seven-year phase-out of the maximum revenue entitlement (MRE), an annual upper limit on the amount of revenue Canada’s big two railways can make handling Prairie grain.

The MRE was created in August 2000 by an act of Parliament to replace maximum freight rates and essentially placed a cap on the average rate that the country’s two major railways could charge.

The federally commissioned review, launched in 2014 and chaired by former federal cabinet minister David Emerson, recommended that the MRE be “modernized” in favour of a more commercially-grounded framework.

APAS president Norm Hall said the MRE was originally designed to be a short-term measure.

“They were thinking the MRE would only last four to five years because by then the railroads would be competing so hard there would be no need for it; well, 15 years later they’re still saying the same thing,” he said by phone from Ottawa.

Hall said he and other farmer group representatives outlined these and other concerns to Transport Minister Mark Garneau during a meeting yesterday Feb. 25.

Hall argues the railways haven’t effectively competed for grain business for several decades and regulations, such as the MRE, are needed to keep rates competitive.

“That’s what the MRE was designed to do was stimulate competition. That’s why it was put in place, that’s why it remains, railways don’t seem to compete without this,” he said.

Dan Mazier, president of Manitoba farm group Keystone Agricultural Producers (KAP), noted in a separate release that while he was on a sub committee of the Crop Logistics Working Group, a stakeholders’ committee that developed a submission for the review, “we strongly recommended the MRE be maintained because it’s working just as it’s supposed to.

“It’s based on a complicated formula, but the bottom line is railways are penalized if they charge more than allowed to ship our grain — and the money from the penalty goes into grains research.”

For its part, Canadian National Railway (CN) replied in an email that it appreciated the report’s recommendations which urged continued reliance on commercial forces in transportation.

It also was encouraged by the call for a greater supply chain focus, but did not have a specific response to the MRE issue at this time.

The Alberta Wheat Commission, meanwhile, echoed Hall’s disappointment in the federal government’s proposal to wind down the MRE.

In a release, the group’s chairman Kevin Auch said “We believe the elimination of the MRE will impose higher costs on farmers with no evidence it will lead to better service… this is important for our industry when there are only two major players.”

“More work needs to be done to address the lack of competition in grain transportation,” KAP’s Mazier said Feb. 26. “The report doesn’t address this at all, and this is the fundamental thing those in the grain industry believe lies at the heart of all of our problems.”

Hall said he is now talking to various commodity groups about their next steps.

Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Includes files from Network staff.


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