Canadian Manufacturing

Grain revenue entitlements for crop year 2020-2021 update

In the 2020 through 2021 crop year, 52,334,795 tonnes of Western grain were moved – 9 per cent more than the volume moved during the previous crop year

December 22, 2021  by CM Staff

OTTAWA — The Canadian Transportation Agency ruled that revenues of the Canadian National Railway Company were above and the Canadian Pacific Railway Company were below their maximum grain revenue entitlements for the crop year 2020–2021.

According to a statement from the Canadian Transportation Agency, CN’s grain revenue of $1,044,909,345 was $2,399,676 above its entitlement of $1,042,509,669.

The Agency also stated that CP’s grain revenue of $1,014,927,140 was $20,248,072 below its entitlement of $1,035,175,212.

CN now has 30 days to pay the amount by which it exceeded its 2020 to 2021 revenue entitlement and a five per cent penalty of $119,984. The CTA also stated that regulations require these payments to go to the Western Grains Research Foundation. This foundation is a farmer-financed and directed organization to fund research that benefits Prairie farmers.

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According to the CTA, the CN and CP moved record amounts of grain this crop year. In the 2020 through 2021 crop year, 52,334,795 tonnes of Western grain were moved – 9 per cent more than the volume moved during the previous crop year and the highest volume ever on the record.

The Canada Transportation Act requires the CTA to determine each railway company’s annual maximum revenue entitlement and whether each entitlement has been exceeded. The revenue entitlement is a form of economic regulation that enables CN and CP to set their rates for services, provided the total amount of revenue collected from their shipments of Western grain remains below the ceiling set by the CTA.

The CTA also stated that entitlements are calculated using a formula containing numerous elements established by the Act. The Volume–related Composite Price Index  is one of these elements and is determined by the CTA for each of CN and CP no later than April 30 every year. The VRCPI is an inflation index reflecting forecasted price changes for railway labour, fuel, material and capital purchases by CN and CP. The index—along with the actual tonnage of grain that was hauled and the average length of haul during the crop year for each railway—is used to determine the annual entitlements.

The entitlement varies with the tonnage moved. A railway company can remain under its entitlement so long as it does not charge more, overall, than the average rate per tonne as set by the first part of the MRE formula.