Canadian farmers complain rail profits excessive

Tue Mar 25, 2008 6:49pm EDT
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By Roberta Rampton

LILYFIELD, Manitoba (Reuters) - Canadian railways are reaping unreasonable profits, farm groups said on Tuesday, releasing a study they said should nudge the federal government to investigate what it costs rail carriers to ship grain.

Canadian National Railway (CNR.TO: Quote) and Canadian Pacific Railway (CP.TO: Quote) get a 50 percent return on their variable costs, according to estimates by rail analyst John Edsforth.

That's more than double what they were allowed to earn before rail laws were overhauled in 2000, and twice what they would earn if there was more competition, Edsforth said in a study commissioned by the Canadian Wheat Board.

Farm groups said railways make at least C$100 million ($98 million) a year in excessive profits, or about C$9,000 from an average farmer's annual C$50,000 freight bill.

"We're paying an extra $9,000 (per farm) that currently has been going toward CN and CP shareholders," Manitoba farmer Ian Wishart told reporters at an elevator northwest of Winnipeg where tractor-trailers unloaded wheat and canola.

"We see that as unfair," Wishart said, adding that rail service has declined as freight rates have climbed.

A spokesman for Canadian National, the country's largest railway, which has complained it was being hurt financially by "creeping re-regulation" of its grain transportation business, dismissed the complaints.

"The wheat board is trying to turn back the clock and turn back the clock to something that didn't work," CN spokesman Jim Feeny said.   Continued...

<p>Rail cars sit in the CN MacMillan Yard in Toronto February 10, 2007. REUTERS/J.P. Moczulski</p>