Farmers should be careful what they wish for when they demand direct repayment of almost $59.8 million in rail freight charges, Saskatchewan’s canola growers suggest.
The Saskatchewan Canola Growers Association on Wednesday issued a statement supporting the current regulations governing the repayment of excess revenues paid to railways CN and CPR for movement of Prairie grain.
Currently, the amount, if any, by which both or either of the major railways exceed the Canadian Transportation Agency’s (CTA) annually-imposed Prairie grain revenue cap is forfeited to the Western Grains Research Foundation’s (WGRF) endowment fund.
But those overages, usually in the low millions, shot up to $59.8 million for 2007-08 after the CTA recalculated the revenue caps based on new data for what the railways pay to maintain the grain hopper car fleet. The CTA, in announcing the two railways’ overage, also imposed a 15 per cent penalty on CN and CPR worth a combined $8.97 million.
“The SCGA supports the current regulation that stipulates the overpayment plus penalty be turned over to the Western Grains Research Foundation,” the canola growers said Wednesday.
“The SCGA also acknowledges that the appeal process is available to the railway companies will take several months to resolve and may reduce the amount of the excess over the revenue cap and penalty.”
A few of the CTA’s penalties have in previous years been successfully challenged by the railways on appeal, leaving the WGRF, rather than farmers, to repay hundreds of thousands of dollars back to the railways.
This year, due to the unprecedented size of the forfeit, organizations such as the Western Grain Elevator Association and the Canadian Wheat Board have urged Ottawa to find a feasible way to return the overage directly to Prairie farmers and leave just the 15 per cent penalty to the WGRF.
The SCGA, in its statement, “acknowledges this situation involves a significant amount of producers’ money, but the current regulations preclude a direct payment back to producers and the appeal process may significantly reduce the final amount paid by the railway companies.”
The canola growers’ group said it “supports the work and research which is carried out under the Western Grains Research Foundation and using the excess railway revenue from grain transportation benefits all grain producers.”
That said, the SCGA also said it would encourage a review of the regulations regarding the automatic payment of excess rail revenue for grain transportation, and that the regulations “possibly be rewritten” to consider repaying freight rate overages directly to farmers in specific situations when the excess funds rise above a certain amount.
The canola growers’ comments came the day after the Western Canadian Wheat Growers Association (WCWGA) backed the calls from the WGEA and CWB.
The wheat growers’ group said Tuesday it has asked the federal ministers involved to ensure the $59.8 million “plus interest” is returned to farmers and to “review options with farmers and shippers as to how this might best be achieved.”
The WCWGA also agreed that the WGRF should receive the funds from the 15 per cent penalty. That $8.97 million penalty alone would be twice what the WGRF gets from farmer checkoff payments in a year, the wheat growers said.
Furthermore, the WCWGA said it will ask the federal government to consider raising that penalty above 15 per cent in future years, “given that the existing level does not appear to be a deterrent to excess freight charges.”
CPR, the wheat growers said, has exceeded its revenue cap in four of the past five years and CN has gone over its cap in three of the past five years.
Both the SCGA and WCWGA said they support other farm groups’ calls for a costing review of the grain transportation system.