Winnipeg Manitoba - It took 85 years to get rid of the Crow Rate.
 
Now comes Ottawa with a new version.
 
Grain transportation is a classic example of the peak load problem.
 
A peak load occurs when a surge in demand reaches or exceeds average capacity.
 
Surges can be either expected or unexpected.
 
An expected surge occurs on a predictable basis that allows for some preparation.
 
In the case of grain, the demand for rail cars is expected to increase sharply after harvest and to peak in the late fall each year.
 
In most years, the system accommodates the peak, with the knowledge that during the off-peak times some equipment will stand idle.
 
Unexpected surges are caused by some abnormality in the supply chain.
 
In the 2013-2014 crop year, Western Canada harvested 30 percent more grain than the five-year average.
 
When this unexpected surge of production began to reach the grain transportation system, the peak load problem became a peak load crisis.
 
Rather than accept reality, many grain shippers demanded that the government do something about the lack of railway capacity to deal with this unexpected peak load demand.
 
The Government of Canada has chosen to listen.
 
Their proposed action will be discussed momentarily, but let's consider first the logic of blaming the railways for not supplying enough rail cars, locomotives, and crews to move this unexpected demand for service.
 
Often it is easier to see a situation through an analogy.
 
This severe winter has created another unexpected peak load problem that everyone understands.
 
In Winnipeg, thousands of people have suffered this winter because of frozen water pipes.
 
The City of Winnipeg has three crews with trucks available to thaw water pipes, and in most years one crew is sufficient to handle the demand.
 
In this brutally cold winter, the city would need more than 15 crews and trucks to keep up with the cries for help.
 
As this is written over 1,000 houses are still without water.
 
Although everyone sympathizes with the sufferers, we also accept that the cost of having 15 crews and trucks available for an unusual winter is ridiculous.
 
In the case of grain transportation, too many people seem to think that the railways should be carrying the cost of this additional "insurance" in case farmers have a larger than normal demand for service.
 
Shame on the other grain supply chain members for remaining mute, or worse, piling on the railways when they know better.
 
Unless the whole supply chain maintains 30 percent excess capacity, the extra rail cars, locomotives, and crews (if magically supplied) would immediately run into bottlenecks at the country elevators and port terminals.
 
Miles of empty and full rail cars would be lined up at the loading and unloading points.
 
Transport Minister Lisa Raitt and Agriculture Minister Gerry Ritz have proposed the introduction of legislation that would impose severe penalties on the railways, if they failed to move 5,500 cars per week.
 
Unless our modern King Canutes can hold back the winter, what they are proposing is bad management of transportation policy.
 
Air brakes lose efficiency at colder temperatures and train lengths must be shortened to ensure safety.
 
Consequently, to move the same volume of grain during the winter months, the railroads would have to supply about 30 percent more locomotives and crews.
 
Where does the extra capacity to move guaranteed volumes of grain come from?
 
Only two possibilities exist.
 
The Government of Canada could increase the Revenue Cap and allow the railways to charge higher grain freight rates to pay for the extra resources.
 
The other alternative is to force the railways to find these resources internally.
 
As much as farmers and grain handling companies cry for a resolution to the logistical problem to move the crop this year, it does not mean they are willing to pay more to do it.
 
Before any legislation goes too far, Ministers Raitt and Ritz should consult with other members of the supply chain to determine whether or not they will accept higher freight rates.
 
Plan B, to force the railways to bear the extra costs of providing reserve capacity, has other consequences.
 
Although it may not be obvious, the impact of demanding a level of service while capping the railway revenues would be the same impact as the Statutory Freight Rates for grain.
 
This is commonly known as the "Crow Rate."
 
As the railways had to cope with rising costs and fixed revenue from grain, they were forced to raise freight rates for other shippers, and reduce their investments in infrastructure.
 
In this case, shippers of containers, potash, oil, forest products, and minerals could find delays and rising freight rates as equipment was transferred to move grain.
 
George Santayana said "Those who cannot remember the past are condemned to repeat it."
 
It took about 85 years for the damage of the "Crow Rate" to be ended.
 
Surely it is not in anyone's interest to replace that with a new "Crow Raitt."
 
Barry Prentice - Professor University of Manitoba.

Editor's Note:  Right on Dude !