The Producer Car Shippers of Canada recently commissioned Travacon Research to determine some specific railway cost savings. The table below shows the actual cost savings realized by the railways when they ship grain in larger hopper car block sizes. The table also shows the actual incentives that the grain companies are receiving. Travacon Research is well respected throughout North America for their expertise in railway costing.
25 Car Blocks 50 Car Blocks 100 Car Blocks
The Producer Car Shippers of Canada is voluntarily funded by producers who load producer cars.
$0.00/mt paid $2.00/mt saved
$4.00/mt paid $3.00/mt saved
As you can see from the tables above the railways are only paying multi-car incentives to the very large grain companies and the amounts paid far exceed the savings generated. The Producer Car Shippers of Canada has also learned that as railway costs go down from increased use of 50 and 100 car blocks, the freight rate automatically goes up. This problem is caused by a flawed revenue cap formula. The end result is that producers not the railways pay for theses incentives. The railways who pocket the savings pay for nothing. These inflated incentives have been nothing more than a subsidy from farmers to grain companies for the last decade. This flawed revenue cap formula has enabled the railways to overcharge producers by nearly one hundred million dollars each year.
The following problems are created by these hidden subsidies:
The multicar incentive structure tied to the revenue cap formula lacks transparency.
The producers are unknowingly paying a subsidy to the large grain companies.
These subsidies have been steadily increasing without farmer knowledge or approval.
Producers who receive trucking incentives are simply being paid back their own money.
The railways gain all the efficiencies of the multiple car blocks and pay for nothing.
Grain companies are able to use these farmer paid subsidies to disadvantage short lines.
These subsidies distort the viability of branch lines including high volume lines.
These subsidies cause unnaturally long truck hauls and excessive road costs and taxes.
This unnecessary and unnatural increase in truck traffic is leading to road safety issues.
These subsidies increase our carbon footprint by forcing grain off rail on to trucks.