Ottawa Ontario - In 2011 Canadian Agriculture Minister Gerry Ritz dismantled the Canadian Wheat Board because open markets "attract investment, encourage innovation, and create jobs."
 
By last year, however, he'd changed his tune.
 
By February, the average wait times for trains moving through freezing Minneapolis and snowy Chicago had almost doubled.
 
While Canada turned to heavy-handed re-regulation of the railways, the U.S. rail regulator, the Surface Transportation Board, opted instead to monitor the railways, requiring them to file weekly plans outlining how they planned to keep grain shipments running.
 
Canada's new legislation, however, specifies precisely how much grain CN and CP must deliver each week, forcing rail companies to prioritize grain ahead of all other commodities.
 
And the law allows other railways to access CN and CP's track by expanding inter-switching rights.
 
This has meant, in effect, that rail competitors can access CN and CP's track at almost half the cost.
 
This not only distorts market pricing, but it also means shipments are handled twice, resulting in slow-downs and inefficiencies.
 
Importantly, this also deters railway investment.
 
Investors and railways alike have little appetite for fixing a line to benefit a competitor's entry.
 
With railways across North America poised to spend roughly $30-billion next year in infrastructure fixes and upgrades, railways and their directors will look to two critical factors when deciding whether to invest:  Can economic growth be sustained?
 
And will current rail policy allow a stable rate of return on investment?
 
When regulations interfere with railway operations, major, planned railway fixes tend to be delayed.
 
"Can you imagine a company willing to continue to invest billions in tracks, terminals, locomotives, and rail cars if regulation will make these assets available to competitors?"
 
says Michael Ward, CEO of CSX Transportation, a Florida-based railway serving most of the eastern U.S.
 
And because the new law attaches quotas on grain deliveries, grain is treated as a priority commodity meaning CN and CP face large penalties for not meeting the onerous grain shipments the law demands.
 
Merchandise, potash, coal, oats, and everything else are all delayed to ensure that grain gets priority.
 
The law has had disastrous unintended consequences on a host of industries.
 
U.S. grain buyers are also furious with Canada's new law.
 
As a result of the new law, Canadian railways weren't able to ship grain through U.S. corridors last winter, resulting in huge financial losses for U.S. elevators, grain handlers, and processors.
 
North Dakota Senator Kevin Cramer said the law was the "solid foundation for a successful trade violation complaint."
 
But in response to U.S. fury, Ritz claimed he was considering even further regulation, "If it is necessary, it will be done," Ritz told Reuters in June.
 
"I'm not going to be prescriptive yet."
 
U.S. senior rail analyst Tony Hatch has said further Canadian railroad regulation would be "crazy".
 
Despite looser U.S. regulation of railways, he notes, the U.S. market-oriented system "works pretty damn well."
 
On 28 Oct 2014, however, Ritz suggested he may be backing down saying he was considering revisiting the law's quota requirements.
 
While the government focuses all of its energy on grain shipment, other important rail policy was left unaddressed last year leaving a series of important questions:  How can Canada commercialize grain car ordering?
 
What to do with the grain cars, now at the end of their active lives?
 
How can ports improve turn-around times?
 
Should the federal government continue to cap rail revenue on grain shipment?
 
CN's Mongeau has pleaded with government to "Stop beating your workhorse," and interfering with rail operations.
 
Ritz, rather than championing a free market one day, and looking over the shoulder of railways the next, should allow the supply chain to function efficiently, and to the benefit of all players along the line, not just grain growers.

Mary-Jane Bennett.