Abstract
The grain handling and transportation system in Canada (GHTS) is currently going through a major transition, both with respect to handling and transportation. Historically, the system has pitted farmers against the railways with respect to securing individual “fair” shares of grain revenues. But with the removal of the single desk marketing and logistics function of the Canadian Wheat Board (CWB) in late 2012, a very interesting and potentially game-changing outcome is emerging with respect to the new functionality of the grain companies in the Canadian system. While historical awareness of rail’s natural monopoly position in the grain handling system has kept that sector regulated (in several ways) for close to a century, we are now starting to see the effects of a less than competitive Canadian grain handling sector on revenue sharing, along with renewed movement in the industry with respect to buyouts and potential mergers.
This overview will highlight some of the changes now occurring and how they are potentially going to interact or evolve as the system moves forward. For example, the on-going regulatory instrument used to regulate grain transportation rates in Canada (called the “maximum revenue entitlement” (MRE) or revenue cap) is under current debate because of the introduction a few months ago of a modification to an old regulatory instrument known as extended (or reciprocal) interswitching. As opposed to the revenue cap which is a direct intervention on monopoly behavior, extended interswitching is designed to encourage the major Canadian grain carriers to compete with one another and potentially seek out new traffic (Nolan and Skotheim, 2008). But the most intriguing aspect of extended interswitching is how it might allow a major rail carrier from the U.S. to solicit grain traffic in some areas of the Canadian grain transportation system.
