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Keystone Agricultural Producers
February 4, 2008
Mr. Michel Maisonneuve, Senior Investigations Officer
Canadian Transportation Agency
Jules Léger 15 Eddy Street
Gatineau, PQ K1A 0N9
Dear Mr. Maisonneuve:
Thank you for providing the opportunity to respond to the Canadian Transportation Agency’s review of the Railway Interswitching Regulations, as outlined in your correspondence sent in January, 2008. Keystone Agricultural Producers (KAP) is Manitoba’s largest general farm policy organization and we take a great interest in rail and transportation issues in our role defending and promoting the interests of the province’s farm families.
We believe that interswitching plays a very important role in creating competition between the two national railways in our existing duopoly. As there is no other competition other than that offered by trucking rates, any legislated competition like interswitching is crucial to help keep Canadian grain and oilseed producers competitive in a world marketplace. As the number of grain elevators has decreased and mileage between elevators has increased, KAP believes that there is a need for additional zones or distances to be added for interswitching. If interswitching is to be an effective tool to force competition, we must increase the distance allowed for interswitching as the rail system contracts.
Quite simply, the railways are enjoying record profits while the service to farmers deteriorates. These competitive provisions, like interswitching, are essential for producers to retain some minimal level of service.
As a farmer-directed organization, we have no method to determine if the costs associated with interswitching are accurate. We do know that the Agency has extensive data, and we accept the impartial role the Agency takes in determining rate structures. KAP accepts that inflation would be a factor in restating rates, but we also expect that any productivity gains are also accounted for in the structure that the Agency has proposed. We also have no way of knowing if the proposed contribution of 7.5% over variable costs for railway fixed costs is accurate.
We note that some rates are increasing and others are decreasing under the proposed changes. KAP does not support any increased rates for any of the zones under the 60 car rate, because this decreases the competitiveness of small car spots and serves only to make smaller elevators less competitive than they are at present.
Many of the minor grain commodities, like flax for example, would be at a shipping disadvantage as they are shipped in smaller blocks of cars. Again, we wish to draw the Agency’s attention to the fact that grain and oilseed producers ultimately pay any increased rates, as these costs are passed on by railways and elevator companies. KAP reiterates its recommendation that a full rail costing review be undertaken to factor all productivity gains into any costs associated with freight rates.