IMPACTS OF GRAIN HANDLING AND TRANSPORTATION SYSTEM DEREGULATION ON FARM PROFITABILITY IN MANITOBA PROVINCE OF CANADA

There is evidence from the literature that deregulating and restructuring measures in Canadian railways have impacted both Western Canadian grain farmers and the broader grain handling and transportation system (GHTS). However, these effects have not yet been fully explored. This paper considers one of the major deregulations: elimination of the Western Grain Transportation Act (WGTA) in 1995, through which the Canadian government eliminated a transportation subsidy for grains from farm to export points. In this study, the statistical significance was studied in differences of freight rate participation to farmer prices during the WGTA period and then after its elimination. Results of paired comparisons show that the removal of WGTA significantly reduced the farmer’s profitability for wheat, durum and designated (malting) barley for export during the transition period. The elimination of the WGTA continued to have a negative impact on farmers’ profitability even 15 years after its elimination. Besides increasing freight rate participation, price fluctuations in international markets also have a direct effect on farmers’ profitability for the three crops selected for this study. The WGTA was designed to compensate farmers for losses due to price fluctuations during its existence. However, the irregular pattern of grain prices, coupled with subsidy removal, leaves the farmers in Manitoba in a worse position with respect to profitability.