TRANSPORTATION RE-EVALUATION NEEDED
BY KYLE LARKIN
Because more than 90 per cent of Canadian wheat is destined for international markets, this country’s transportation system must step up to ensure reliable, responsible delivery of our grain to markets that rely on it. While concerns about the system are not new, persistent service delays last year highlighted the need for improvement. The final report of the national Supply Chain Task Force renewed discussions about the fairness and effectiveness of Canadian grain transportation and its impact on shippers and the broader market.
The year following the report’s release brought intensified calls for a balanced system. Omar Alghabra, former federal minister of transport, said the system was in crisis. Prime Minister Justin Trudeau said dysfunction in the supply chain damaged Canada’s trade reputation and cautioned its unreliability could drive away market access opportunities.
The government introduced extended rail interswitching measures in Budget 2023 to boost competition. However, a solution that goes beyond the 18-month pilot will be crucial. It does not provide sufficient data and dissuades grain company participation due to potential impacts on their long-term relationships with rail carriers. Such relationships are vital to maintain affordability and accessibility. Moreover, farmers in northern Alberta, Saskatchewan and parts of British Columbia remain excluded. A permanent, nationwide increase in extended interswitching to 500 kilometres will benefit all grain farmers and ensure fair competition.
Grain Growers of Canada (GGC) is proposing this change to interswitching as well as additional improvements to the system. Maximum revenue entitlement (MRE), contracting practices, fuel surcharges and mandated grain plans must also be addressed. Issues in these areas hinder fairness for shippers and grain farmers. To create a robust, sustainable system that serves the best interests of all involved, it is essential to align proposed changes with stakeholders’ needs.
Central to this re-evaluation is the need to recognize the critical role of the MRE within the non-competitive carrier landscape. Of particular benefit to western farmers, the MRE serves as a vital safeguard to provide price stability for shippers. Its adaptable framework ensures fair compensation for carriers and allows flexibility in rate adjustments based on services rendered. However, surplus funds exceeding the MRE cap should be used for initiatives that directly benefit grain farmers through the Western Grains Research Foundation (WGRF).
Aligning WGRF resources with transportation initiatives such as railway performance monitoring will enhance efficiency. This strategic reallocation of surplus funds would provide real-time data on grain shipments by rail to enable shipping accountability and an improved mechanism to plan for future increases in grain volume.
We must also address contracting practices governed by the Canada Transportation Act. The current allowance for confidential negotiations significantly favours rail companies at the expense of farmers. The provision must be done away with to restore equilibrium, ensure fairness and uphold legislative principles.
Fuel surcharges intended to manage cost fluctuation within long-term contracts have evolved into a stream of advantages for rail companies. The absence of mechanisms to balance such fuel cost variation creates an unfair playing field that disproportionately affects shippers. It is necessary to implement a fair compensation system that accounts for such fluctuation.
Mandated grain plans were designed to publicly outline rail strategy to best handle the year’s expected crop volume. These have likewise strayed from their original intent. They have become platforms on which rail companies advocate for specific positions and must be realigned to suit their original intent.
We commit to advocate for a more balanced system. Engagement with policymakers and legislators helps drive necessary changes to ensure fairness, transparency and efficiency in our transportation network. This engagement is important for the industry and for Canada’s agricultural competitiveness and global market access.
Kyle Larkin is the executive director of GGC.
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