Good morning.
It's interesting to hear the talk about the rail service review. As industry, we're all waiting to see where it is going to come out at the end of January. We're waiting to see what it comes to. I'm sure you will hear a reply from us at that time.
Good morning. Thank you for your time.
My name is Humphrey Banack. I'm the president of Wild Rose Agricultural Producers, Alberta's largest producer-funded general farm organization. I met with several of you in October to discuss the rail service review process.
At that time, I was in the process of putting $225,000 worth of canola on the ground because rail service was inadequate to meet contracts that were in place. To date, I have moved half this canola, and I hope to move the rest by the end of the year. The inland terminals we deal with are 40% behind in shippings due to poor rail service to date.
That's just a little update. Although this is an important issue, our objective here today is to speak to you about rail freight rates in western Canada.
Thank you in particular for the opportunity to speak to you on behalf of the Canadian Federation of Agriculture. With me today is Allen Oberg, chair of the Canadian Wheat Board's board of directors. We are here today on behalf of the CFA, an across-Canada federation of general farm organizations, sector-specific commodity groups, and cooperatives. I am a member of the CFA board of directors and Allen is a member of the CFA national council.
My wife and I farm with my brother and sister-in-law near Round Hill, Alberta, in the central area of Alberta. Transportation is one of the major expenses on our farm, and on all prairie farms, because our grain-growing region is located so far from export positions.
No other grain growers in the world have to move their grain so far to port. My farm is 1,100 kilometres from the port by rail from Prince Rupert and 3,500 kilometres from the St. Lawrence River. American farmers have a much shorter journey to their export position. Farmers in Australia and the Ukraine are only about 300 kilometres away from export water.
There's also something else to keep in mind. In western Canada, we have to move our grain by rail because no other competitive alternative exists. Farmers in Australia, the Ukraine, and much of the U.S. can choose from two or three modes of transportation to reach their tidewater.
As you are aware, a government-appointed panel recently released its interim report on the review of service issues and problems related to the rail-based logistics system in Canada. The CFA is pleased with the panel's extensive review and analysis of the current situation facing railway shippers, including western Canadian grain farmers.
The report portrays an accurate reflection of the problems grain farmers face when shipping their grains to export positions. As pointed out in the report, the biggest challenge farmers face is the market power exerted by railways and the lack of competition therein.
This situation has led to inadequate performance and excessive costs to western Canadian grain farmers. When the Crow rate was replaced by the current revenue cap methodology in 2000, subsequent productivity gains were to be shared with farmers. At that time, the federal government had hoped that competitive pressures and market forces would result in lower transportations costs due to productivity gains. Unfortunately, because of the near monopoly of railways, this has not happened.
The CFA recognizes that the service review panel's mandate explicitly excluded cost or price-related issues, including freight rates, the revenue cap, ancillary charges, and competitive access issues. However, the review panel outlined many problems with railway costs, and for grain farmers in western Canada, this is of paramount importance. Our message is clear: we need the Canadian government to put a rail cost review into motion right away, not a year from now, and not two years from now.
Thanks to devastating rains in the spring, farmers have just harvested an unusually poor-quality crop. Meanwhile, Minister Strahl has committed only to “thinking” about the possibility of a cost review after the current rail service review is completed. Somehow, we have to get you, our elected representatives, to understand that these are separate issues involving entirely different groups of analysts and experts, and that every year we wait is another year that goes by with farmers paying millions more than our fair share.
Freight rates need to be based on actual costs, not annual revisions from outdated formulas. We're coming up to 20 full years since the last full review of railway costs. Farming has changed a lot in that time. The railroads are proud of telling anyone who will listen that they're certainly not operating the same way they did then, and freight rates need to be based on today's reality, not the world of 20 years ago.
I'd now like to defer to my colleague Allen Oberg.