ATB's Todd Hirsch Article on rail issue in Globe and Mail!!

[northfarmer]

Todd Hirsch’s opinion in the March 14 Globe and
Mail on the ‘grain revenue entitlement’ that
railways have when hauling grain contains many
factual errors. Hirsch refers to a maximum
revenue cap, this is misleading and inaccurate. In
reality, there is no cap on the revenue that
railways can generate hauling grain. The policy
that is in place uses a formula to determine the
maximum rate per tonne that can be charged in a
crop year. Haul more grain and make more
money. The annual methodology to determine
the changes to the volume related composite
price index, includes a calculation of changes in
cost of capital as well as changes in prices for
labour, fuel and materials. Perhaps Mr. Hirsch
should provide his estimate on the rate of return
that the railways are already earning under this
formula before he judges it to be inadequate to
meet the needs of railway investors.

When we finally have a chance for meaningful
regulatory change coming out of the crisis of grain
movement this winter we do not need our
provincial bankers economist being a mouthpiece
for the railways.

[sawfly]

if there ever was a miss named program .
this is it.
just shows the ignorance of folks that should
know better
this illousion that other industries will not victim
to this nightmare. their next
what is to stop it

[ProFarmer]

Read tues globe and mail and there is an article saying we farmers are a bunch of winers on page fp9. GRRRR

[northfarmer]

Make no mistake the railway attack dogs are out
and in full force. There will be huge fight back on
the legislative amendments that will be tabled
when the house returns to sit. Service level
agreements with penalties for non performance
are critical to making the railway duopoly work
better.

The revenue cap is a red herring argument to
deflect and distract.

ATB customers need to raise hell and have Todd
called out.

This is rich coming from the bank in Alberta who
brags about its strong support for producers.
Looks like they got fed a bone from railways!

[mcfarms]

And he worked for the CPR pretty obvious where he got his "information" from.





Todd Hirsch is ATB Financial's Chief Economist. He holds a BA Honours in Economics from the University of Alberta and an MA in Economics from the University of Calgary. For over 20 years he’s worked as an economist at several different companies including Canadian Pacific Railway, the Canada West Foundation and the Bank of Canada. For almost a decade, Todd taught economics at the University of Calgary.

[sumdumguy]

Does he have vested interest or has he had to
deal with railways once, ever in order to generate
economic benefit? Easy to shoot your mouth off
about economic theory when the reality is
something quite different.

[ColevilleH2S]

I assume <a href="http://www.toddhirsch.com/1/post/2014/03/the-sacredness-of-canadian-agriculture.html">THIS</a> is what he wrote in the Globe.

My favourite quote,"Canadian agriculture manages to command a degree of sacredness that even the Pope would envy."

[Hopalong]

After reading 'this',have a completely different
view than presented in earlier comments.

[farming101]

Another similar inaccuracy in the latest AgAdvance magazine.

"The Canadian Transportation Agency reported that the railways earned $1.1 billion moving Western Canadian grain in 2012/2013, a level very close to the allowable limits under the rail cap."

This implies that the total amount the railways can earn is a little more than 1.1 billion moving grain.
WRONG! It is a per tonne rate. Move more tonnes, earn more revenue.

I wish these articles were accurate. This isn't helpful.

[Hopalong]

Just reread the Agadvance story. Agree with
farming 101 that rail revenue entitlement is not a
total revenue cap but is based on amount and
distance moved.
Problems come when railways can make more
moving other traffic. There does not seem to be a
way for grain shippers to pay more to get railways
to haul sooner to meet shipper commitments even
though both parties might profit from that.
Changes to so called revenue cap are necessary.

[northfarmer]

I have been told te implied rates of return in our
capped rates are 15 to 20% range. How about
someone present these facts I would like to know
what they make for return. It is a duopoly not a
proper competitive functioning market.

[farming101]

CPR Facts: Here is what I get out of the CPR annual report. If someone wants to study these reports and show me what I interpreted incorrectly go to it.

Table 1: CPR had a good year. Revenue up significantly.
Operating income excluding significant items was 30% of gross revenues. 1.844 Billion.
<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/CPR2013Financialhighlights_zpsa66cc03d.png" border="0" alt=" photo CPR2013Financialhighlights_zpsa66cc03d.png"/></a>

Table 2: Revenues broken down into various kinds of freight.
Note increases in revenue from grain were 7% and 11% 2011-2013.
The only segment to out do increase in grain revenues was industrial and consumer products(this includes oil)
<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/CPR2013revenues_zpscaa0e324.png" border="0" alt=" photo CPR2013revenues_zpscaa0e324.png"/></a>

Table 3:Annual performance indicators. Note increase in train length.
<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/CPR2013Performanceindicators_zpsf1b95c34.png" border="0" alt=" photo CPR2013Performanceindicators_zpsf1b95c34.png"/></a>

Table 4:Total carloads and Revenue ton-miles. Revenue ton-miles is the number of times the railroad hauled one ton one mile. Note grain cars hauled in 2011 was 450,000. Compare that to 438,000 in 2013.
This doesn't mean they didn't haul more grain in Canada as these figures include business they did hauling grain for US customers as well. It is interesting though. Note the increase in industrial and consumer products (which includes oil) made the largest volume gains.
<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/CPR2013Volumes_zps181a3038.png" border="0" alt=" photo CPR2013Volumes_zps181a3038.png"/></a>

Table 5: This is very interesting. It reveals the revenue from hauling one ton one mile. Average is 4.15 cents per mile. Grain at 3.82 cents is under the average. Industrial(including oil) is making them less per ton mile than it did last year and in turn the year before. This is gross revenue and does not show the expense incurred to earn the revenue.
<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/CPR2013Revenuepertonmile_zps06421d9f.png" border="0" alt=" photo CPR2013Revenuepertonmile_zps06421d9f.png"/></a>

Table 6: Another interesting table. Revenue per carload. Average increase has been 7% in both 2012 and 2013.The cost to ship a car of grain has increased 21.2% in 2 years. Industrial(including oil)up 23.4%. Fertilizer includes potash.
<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/CPR2013revenuepercarload_zps281f00d5.png" border="0" alt=" photo CPR2013revenuepercarload_zps281f00d5.png"/></a>

Table 7: This is the 4th quarter results for 2013. Note that grain revenue was up 30 million even though the railroad says in December 2013 they couldn't do as much as they wanted. Too cold. Expenses directly related to the actual work of hauling the loads were not up much.
<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/CPR2013FourthQuarterSummary_zps26585a00.png" border="0" alt=" photo CPR2013FourthQuarterSummary_zps26585a00.png"/></a>

Table 8: Performance indicators for the last quarter of 2013.
Note that the average car length INCREASED 470 feet compared to the 4th quarter of 2012.
<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/CPR2013FourthQuarterPerformanceindicators_zps75860 683.png" border="0" alt=" photo CPR2013FourthQuarterPerformanceindicators_zps75860 683.png"/></a>

Table 9: This is from the CTA Website. It shows the amount the railways earned from hauling grain subject to the revenue cap.
It is by crop year so it cannot be directly compared to the railway statements which are Jan-Dec. Interesting that the CPR exceeded the cap 7 years out of 13. CN exceeded 5 years out of 13. 2007-08 was the year adjustments were made to car repair costs. CN must be disgusted with their rates they charged in 2012-13. They were under by 6.3 million. Chump change I guess.
<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/CTA2012-13_zpse9da1ecf.png" border="0" alt=" photo CTA2012-13_zpse9da1ecf.png"/></a>

[SASKFARMER3]

Did I read right that CP or CN use ATB to bank. Hm this guy is a idiot.