OTTAWA, Ontario — Canadian Pacific Kansas City exceeded the allowed revenue for western grain movements by almost Ca$2 million during the 2023-24 crop year, and must pay the overage and a 5% penalty, the Canadian Transportation Agency has determined.
In a Dec. 24 decision, the CTA determined that CPKC exceeded the Maximum Revenue Entitlement of $869.9 million by $1,824,083. It must pay that amount, plus a penalty of $91,204, to the Western Grains Research Foundation within 30 days, the agency said. The MRE is based on a formula including the amount of grain hauled, the length of haul, and a volume-related composite price index set by the CTA.
CPKC hauled 18.6 million metric tons of grain during the Aug. 1, 2023-July 31, 2024 crop year. Canadian National, which hauled 25.1 million metric tons, was found to be more than $34 million below its Maximum Revenue Entitlement. The two-railroad total of 43.7 million metric tons was a 3.5% decrease from the 2022-23 crop year, the agency said.
It sounds like to me someone in the Canadian Government didn’t get a piece of the pie so their getting it the old fashion way by charging a penalty for the piece. They should investigate that body of the Government and see who has the STICKY FINGERS or should I say who didn’t have the sticky on them.
Starting in 1972, the Government of Canada, the provinces of Alberta and Saskatchewan, and the Canadian Wheat Board acquired 19,000 covered hoppers for grain service. Beginning in 2007, these cars were transferred to the private sector (CN, CP, short lines, car lessors) and are now being retired as they age out or are damaged (replaced by new cars of greater capacity). See attached link for a good summary:
https://tracksidetreasure.blogspot.com/2020/04/canadas-grain-fleet-covered-hoppers.html
That was a detailed, but long, article about the origins of these hoppers, but it doesn’t asnswer the question as to why CPKC is being charged this stupid penalty for basically making to much money on a cargo that they’re probably required to haul. If CN hauled more metric tons than CPKC, how did they make less money on grain than CPKC? This is just the Canadian government putting thier fingers into someone else’s pie that they should not be messing with and charging companies for being succesful.
This reminds me of the USDA having subsidized farmers NOT to grow certain crops, and become penalized if they do.
Maybe some of the Canadian readers could help us understand how this system works?
The formulas by which the MRE works is in the report.
https://otc-cta.gc.ca/eng/ruling/r-2024-190
After reading through it, I would guess that the MRE was setup so that the 2 default national railroads could not gouge grain shippers or conspire to monopolize the rates.
Seems the shippers had more grain to ship in the CPKC served areas, than the CN areas, so CPKC took it all (which they are probably required to) and therefore made more money than expected. So the formula forces an over revenue payback to essentially reward the grain shippers/growers instead of the railroads.
Since the Canada Grain Growers Board owns the railcars (I think), this ensures they get a return on the fact they have to provide & maintain said cars.
Are you kidding me???
That’ll encourage them to try harder next year!
So CN underserved and CPKC overserved, so they punish CPKC. Sounds a little too regulated to me.
Canada has price controls on grain movements??????????? Why???????????????