Supreme Court rules in favour of shippers

but farmers still captive

(July 22, 2014) On the face of it the recent Supreme Court of Canada ruling that shippers have the right to appeal to the Canadian Transportation Agency (CTA) on things like fuel surcharges imposed by railways on existing contracts might seem like good news for farmers.

An Ottawa based transportation lawyer is quoted as saying the decision upholds the 2008 Canada Transportation Act which was intended “to rebalance the legislative framework in favour of shippers”

While Vancouver lawyer Forrest Hume, the legal advisor for the Canadian Freight Management Association (FMA) the industry group which supported the case launched by Peace River Coal, is quoted in an FMA news release saying “From this point forward, all shippers that have a complaint about the growing list of incidental and supplementary charges imposed by the railways will know that they have recourse to complain to the regulator whether or not there is a confidential contract in effect.”

In its decision the Supreme Court observed “…rail services were and are not provided in a perfectly competitive marketplace.  In certain circumstances, the railways were seen to have superior market power to shippers.”

So it was a good ruling for coal companies, grain handling companies, and other shippers dependent on rail service.  However, this does not change the fact that farmers are not shippers under the Act or the fact few farmers or their organizations have the deep pockets necessary to undertake such an appeal on the off-chance they are a shipper.

Those few farmers who are still besotted with the private grain trade and their Astroturf organizations, from which many of them enjoy off-farm income, will no doubt argue this ruling will create more of the magical competition which is supposed to make everyone better off.

In the real world of farming, most grain farmers are captive to one or two of the handful of grain handling companies and those companies’ facilities are largely captive to one or the other of the railways.  In the event members of the Western Grain Elevators Association actually manage to lower their rail costs, it is a safe bet they will not be passing those savings on to farmers in the form of higher grain prices.

In 1996/97 the single-desk CWB successfully fought to establish they were a shipper of grain under the Transportation Act and used that ruling to win a level of service complaint against the railways and later civil judgements which put tens of millions of dollars back into farmers’ pockets.  Thanks to Minister Ritz killing the single-desk, farmers no longer have the market power or the legal right the single-desk Canadian Wheat Board gave them to play in that elevated league.

It is also worth remembering that rail costs are now a smaller part of the overall cost farmers pay to move their grain to market.  Thanks to the end of the single-desk farmer-controlled Canadian Wheat Board the private grain trade now has superior market power to farmers.  This allows it to make greater profits, easily making grain handling the biggest cost to farmers. 

Before the end of the CWB, the grain handlers were regulated service providers like the railways still are, and were restricted by law as to how much money they could charge the farmer-controlled CWB.  Effectively farmers owned grain marketed by the CWB from their farm to the end use customer.  Now it is the grain handlers that own the grain from the time the farmer dumps it at the elevator, and the handlers are free to make as much money as they want from that grain and pay the farmers however little they can get away with.

The Supreme Court decision benefiting shippers does not change the fact western farmers are now captive suppliers with no market power and are receiving less than half of the world price they got with the CWB.