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Last week, the Canadian Transportation Agency (CTA) announced a 3.5 percent increase in the Volume-Related Composite Price Index (VRCPI) used to establish CN’s and Canadian Pacific’s western grain revenue caps during the 2011-12 crop year, which begins Aug. 1.

The VRCPI primarily is an inflation factor that reflects forecasted price changes for the two Class Is’ fuel, materials, labor and capital purchases, according to the CTA. The 3.5 percent increase is largely attributable to fuel prices, which have caused significant fluctuations in the index in recent years, CTA officials said in a prepared statement.
 
For the 2011-12 crop year, the VRCPI includes forecast price increases of 10.7 percent for fuel, 2.8 percent for railway materials and 2.3 percent for labor, and a forecast price decrease of 0.6 percent for other factors, such as hopper car maintenance and capital investments.

The revenue caps — which are calculated via a formula containing numerous factors, including the VRCPI — apply to grain movements from Prairie Region elevators or U.S. origins to terminals in Vancouver and Prince Rupert, British Columbia, and Thunder Bay, Ontario. The caps also apply to movements to Thunder Bay or Armstrong, Ontario, destined to eastern Canada or for export.