University of Saskatchewan

August 01, 2014   

Estey Report Ultimately Unworkable Say U of S Ag Economists

March 08, 1999 For Immediate Release
January 25, 1999

Estey Report "Ultimately Unworkable" Say U of S Ag Economists

Saskatoon, SK. Some recommendations of the recent Estey report on grain handling and transportation are unworkable as proposed, say the University of Saskatchewan agricultural economists in a commentary released today.

While praising the comprehensiveness of the federally commissioned report prepared by former Supreme Court Justice Willard Estey, the authors say much more analysis and work is required to develop a grain handling and transportation system that is competitive and responsive to the needs of all groups in the industry.

"The recommendation that the Canadian Wheat Board control all farm-to-elevator deliveries would require an army of staff and would provide farmers with no choice as to where they would deliver their grain. These problems would make the system ultimately unworkable," the authors state.

"System performance would deteriorate substantially and competition would be greatly reduced."

This commentary was prepared by professors Richard Gray, Murray Fulton, James Nolan, and other members of the Agricultural Economics Department.

The authors also commented on a number of other recommendations in Estey's report. They support the recommendation that there be open access to the rail network. With open access, existing and new train operators would be allowed access to the existing rail network for a set access fee.

But while Estey says the rail network should be opened up to all competent rail operators, the professors argue the onus for showing competency should not be on new firms trying to access the railway. Instead, there should be a "reverse onus test" whereby the onus would be on the existing firms to prove that new train operators are not competent.

Under current grain transportation legislation, there is a cap on the annual freight rate charged by the railways. If this rate cap is to be repealed and farmers are to benefit, the rail companies should have to show that real productivity changes have been achieved (greater output per unit input resulting from network consolidation) and that cost savings have been passed on to farmers, the professors stress.

They have concerns about the Canadian Pacific proposal under which CP would guarantee a drop in freight revenue for a fixed period of time if the freight rate cap is repealed. They point out CP's promised reduction in freight revenues could be achieved almost exclusively through service reductions, an outcome which could adversely affect Prairie farmers. They say specifics of the CP proposal are unclear and that an analysis must be undertaken of all potential outcomes.

They also stress that repeal of the freight rate cap and adoption of the CP proposal must be contingent upon introducing an open access system.

While Estey declined in his report to make any recommendations concerning management information systems for grain handling and transportation, the authors say attention must be paid to the issue.

A copy of this commentary is available at:
http://www.usask.ca/agriculture/agec/publications.htm

For more information, contact:
Richard Gray
Director, Centre for Studies in Agriculture, Law and the Environment
Associate Professor, Agricultural Economics, University of Saskatchewan
Ph: (306) 966-4026       E-mail: grayr@sask.usask.ca

Murray Fulton
Director, Centre for the Study of Co-operatives
Professor, Agricultural Economics, University of Saskatchewan
Ph: (306) 966-8507       E-mail: Murray.Fulton@usask.ca

James Nolan
Assistant Professor, Agricultural Economics, University of Saskatchewan
Ph: (306) 966-8412       E-mail: james.nolan@usask.ca

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