CP over, CN under revenue cap from Prairie grain

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Canadian Pacific Railway will have to roll back its 2012-13 revenue from Prairie grain, worth over half a billion dollars, by about 0.03 per cent to get under its federally mandated limit.

The Canadian Transportation Agency on Monday announced Calgary-based CP has come in just $177,961 over its “maximum revenue entitlement” of $544,044,916 for Prairie grain for the crop year.

CP’s Montreal-based rival, Canadian National Railway (CN), came in with 1.13 per cent to spare beneath its $562,935,396 cap for 2012-13, at $556,589,140 in grain handling revenue.

Just over 32.4 million tonnes of Prairie grain were moved in 2012-13, down two per cent from the volume moved during 2011-12, the CTA said.

The two railways’ average length of grain haul for the crop year was 1,519 km, down 0.8 per cent from the year-earlier period, the agency added.

CP now has 30 days to hand in its $177,961 overage, plus a five per cent penalty of $8,898, the CTA said Monday.

Thus, under federal legislation, $186,859 in all will go to the Western Grains Research Foundation, a farmer-financed and -directed research funding organization investing mainly in Prairie wheat and barley variety development.

The payout is relatively small for the WGRF compared to the previous crop year, when CP and CN overshot their caps by $400,132 and $240,185 respectively.

The CTA calculates CN and CP revenue ceilings each year using a formula containing “numerous elements” including the volume-related composite price index (VRCPI), which the CTA sets each April. Other elements involved in the revenue cap include each railway’s actual tonnage of grain hauled and its average length of haul during the crop year.

The CTA’s VRCPI is an inflation index reflecting forecast price changes for railway labour, fuel, material and capital purchases by CN and CP.

The agency in April 2012 announced a 9.5 per cent hike in the VRCPI would apply for 2012-13, following hikes of 3.5 per cent in 2011 and seven per cent in 2010. For 2013-14, the CTA in April this year trimmed the VRCPI back 1.8 per cent, based mainly on lower-than-expected diesel fuel costs.

The revenue caps on CN and CP apply to the movement of grain from Prairie elevators or from U.S. origins to terminals at Vancouver, Prince Rupert, B.C. and Thunder Bay, Ont.

They also apply to CN’s and CP’s movements of grain bound for Eastern Canada or for export, up to either Thunder Bay or the CN station about 250 km north of the city at Armstrong, Ont. – AGCanada.com Network

Related stories:
CN, CP slightly over limits on Prairie grain revenue, Dec. 20, 2012
Lower diesel prices trim grain freight rate index, May 3, 2013