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2/26/2008
Rail News: Rail Industry Trends
Canadian Transportation Agency lowers Class Is' western grain revenue caps
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The Canadian Transportation Agency (CTA) recently decreased Canadian National Railway Co.'s and Canadian Pacific Railway's revenue caps for moving western grain in crop year 2007-08.
The agency set a final adjusted volume-related composite price index of 1.06 for railway revenue caps, representing an estimated $72.2 million (or 8 percent) reduction to annual caps. The reduction translates to $2.59 per ton based on forecasted tonnage of 27.9 million metric tons, the CTA said.
The volume-related composite price index is an inflation factor that covers CN's and CPR's price changes for labor, fuel, material and capital inputs. The revenue cap enables the railroads to set their own rates, provided their total revenue remains below CTA-set ceilings. Caps are adjusted at the end of the crop year to reflect actual grain volume and the average length of haul.
The reduction is a once-only process, but the cap adjustment will carry forward into future crop years, the CTA said.
"I am pleased with the agency's decision as it should result in lower freight rates for western farmers shipping their grain to export markets, and therefore, more competitive prices," said Canadian Minister of Transport, Infrastructure and Communities Lawrence Cannon in a prepared statement.
The agency set a final adjusted volume-related composite price index of 1.06 for railway revenue caps, representing an estimated $72.2 million (or 8 percent) reduction to annual caps. The reduction translates to $2.59 per ton based on forecasted tonnage of 27.9 million metric tons, the CTA said.
The volume-related composite price index is an inflation factor that covers CN's and CPR's price changes for labor, fuel, material and capital inputs. The revenue cap enables the railroads to set their own rates, provided their total revenue remains below CTA-set ceilings. Caps are adjusted at the end of the crop year to reflect actual grain volume and the average length of haul.
The reduction is a once-only process, but the cap adjustment will carry forward into future crop years, the CTA said.
"I am pleased with the agency's decision as it should result in lower freight rates for western farmers shipping their grain to export markets, and therefore, more competitive prices," said Canadian Minister of Transport, Infrastructure and Communities Lawrence Cannon in a prepared statement.
