Farmers prepare for higher costs as federal program ends

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This article was published 17/01/2025 (244 days ago), so information in it may no longer be current.

The impending expiry of a federal program in March that allows farmers across the Prairies access to competitive transportation costs for their produce is causing alarm across the agriculture sector.

As a result, farmers are bracing for higher transportation costs and limited rail options once the federally funded and managed Extended Interswitching pilot program lapses.

However, the federal government is expected to make the program permanent because it is a vital tool for increasing railway competition and reducing costs for producers, Keystone Agricultural Producers (KAP) president Jill Verwey said.

“The expiry of the program is concerning for Manitoba farmers,” Verwey told the Sun on Thursday. “Our members support the extended program and continue to call on the federal government to make this measure permanent. The policy incentivizes railways to offer competitive pricing, ultimately benefiting farmers and ensuring better service.”

Compounding the uncertainty is the looming threat of U.S. tariffs on the nation’s agricultural sector, which could further squeeze profit margins and make access to efficient and affordable rail services even more critical.

Industry leaders, including KAP, warned that without the program, Canadian grain will face diminished global competitiveness, exacerbating challenges already posed by volatile market conditions.

With Parliament prorogued until March 24, there is no viable path to renew or make the program permanent before its expiration. This development leaves grain farmers vulnerable to the non-competitive practices of rail monopolies, heightening concerns over increased transportation costs and reduced market access.

The extended pilot — a critical policy tool — has enabled grain elevators to access services from multiple railways, fostering competition and driving down shipping costs. Its expiry threatens to disrupt these gains, particularly for grain farmers in Manitoba and across the Prairies.

Verwey explained the program “incentivizes” railways to offer competitive pricing to producers, reducing risks associated with relying on a single rail provider.

“It reduces the risk of their competitor hauling the load and this is something supported broadly by producers across Canada,” she said. “KAP has long promoted the benefits of this policy for Manitoba farmers and will continue to advocate on their behalf by doing so.”

Most Prairie grain elevators (where farmers store their grain) are captive shippers, meaning they are only serviced by one rail company, Grain Growers of Canada (GGC) executive director Kyle Larkin said.

“Without competition, they are subject to the rates and service provided by that single railway,” Larkin said. “With extended interswitching, grain elevators can access services from a second railway, therefore introducing competition.”

This competition, he explained, has allowed grain elevators to negotiate cheaper freight costs and better service standards, translating into reduced costs for producers and higher revenues for farmers. The extension also means that in the case of a strike or lockout like we saw last year, the flow of grain can continue using an alternate railway, he said.

Larkin added the program’s expiry is expected to have both immediate and long-term ramifications for Canada’s grain sector. In the short term, he said, limited rail options could lead to logistical bottlenecks during peak seasons, delaying grain shipments and causing financial losses for farmers.

“Increased transportation costs will erode profit margins and reduce the competitiveness of Canadian grain in global markets, he said. “Over the long term, these challenges may weaken Canada’s reputation as a reliable grain supplier. International buyers could turn to competitors like the United States, Australia or the Black Sea region, diminishing Canada’s market share and export revenues. Reduced transportation efficiency could have lasting repercussions for Canada’s export-oriented grain sector.”

Despite the looming expiry, industry stakeholders are advocating for a solution.

He added that GGC had called for an extension of the pilot project with a pathway to permanency, adding the advocacy group also proposed increasing the radius of interswitching from 160 kilometres to 500 kilometres and to include regions such as British Columbia’s Peace River to ensure broader access.

However, with Parliament’s prorogation delaying any legislative action, the future of the program remains uncertain. “Grain farmers are once again left without true competitive rail service options,” Larkin said.

Without swift intervention, he added, the expiry of the pilot program not only threatens farmers, but also the broader supply chain. As grain farmers face higher costs and reduced market access, the ripple effects could impact food security, export revenues and Canada’s global agricultural standing.

Without swift intervention, he warned, the progress made under the program could be undone, leaving Canada’s grain sector struggling to compete in an increasingly competitive global market.

A new interswitching zone was established in 2023 as part of an 18‑month pilot project and it applies to movements within 160 kilometres of an interchange in Alberta, Saskatchewan or Manitoba, but outside the existing 30-kilometre radius.

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