PRODUCER OWNERSHIP OF HOPPER CARS WOULD SAVE $3.5 BILLION OVER 20 YEARS

Released on April 23, 1996

Highways and Transportation Minister Andy Renaud today released a
report that estimates prairie farmer ownership of the federal hopper
car fleet could save producers more than $3.5 billion in rail
transportation costs over 20 years.

"This report clearly shows that rail car ownership can provide
significant market power to producers and that producers could see
billions of dollars in savings as a result," Renaud said.

The report, titled A Discussion of the Relationship Between Ownership
of Railcars used for Grain Transportation and Railway Freight Rates for
Grain Transportation, was done by Travacon Research of Seattle. The
study was commissioned by Saskatchewan Highways and Transportation.

According to the report, as long as each railway has an assured supply
of government hopper cars and the market for covered hopper cars
remains tight, the railways have little incentive to compete for grain
traffic. If producers acquire the federal government hopper car fleet,
they could use them to extract significant rate concessions from the
railways.

"With the federal government's recent moves to deregulate rail
transportation in Canada, it is critical that producers be given enough
market power to prevent excessive prices by railways," Renaud said.
"Producer ownership of hopper cars could be important in getting other
participants to act competitively."

In November 1995, Senior Executive Officers (SEO) of railways, grain
companies, the Canadian Wheat Board and Canadian Grain Commission
reviewed car allocation and ownership arrangements, and proposed that
the federal hopper car fleet be sold to the railways for $100 million,
and freight rates be increased by $1 per tonne for five years to
finance this purchase.

Since the SEO report, a producer coalition has been formed to encourage
the sale of the hopper cars to producers. The Saskatchewan government
supports this initiative. The coalition composed of SARM, Canadian
Wheat Board Advisory Committee, Western Canadian Wheat Growers,
National Farmers Union, Keystone Agricultural Producers, Saskatchewan
Canola Growers, Western Producer Car Group, Wild Rose Agricultural
Producers, Family Farm Foundation and the Southern Rails Co-operative,
has submitted a proposal to the federal government to purchase the
federal hopper car fleet.

"For many years potash and chemical producers have used the ownership
of their own railcars to promote real competition and reduce their
freight costs," Renaud said. "I believe the same can be done for our
agricultural producers."

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For more information, contact:

Bill Cooke
Rail Specialist
Highways and Transportation
Regina
Phone: (306) 787-5527