The impact of changes in statutory grain rates and rail branch line configuration on farm size in Manitoba

Abstract

Western Canadian grain producers have benefitted from low rail rates established originally by the Crowsnest Pass Agreement of 1897. These rates have reduced one element of their production costs and increased farm income. However, it has been argued that this effect has been offset by reduced railway service; the railways have been reluctant to make large-scale improvements in their grain handling systems due to the high revenue losses associated with export grain movement... A possible solution to counter this very serious situation is replacement of the current statutory freight rates with compensatory rates which reflect the actual costs involved in transporting export grain by rail. The general objective of this study was to determine the impacts of replacement of statutory freight rates on export grain with compensatory raes and branch line rationalization on the structure of farm size in Manitoba, with special reference to small farms... Several components were incorporated into the study framework to formulate the data base for the linear programming model used to conduct the final analysis... The specific findings of this study are outlined as follows: 1. The greatest impact on the value of production of small farms was the removal of the minimum production requirements for small farms. .. On this basis,a large proportion of the total production of each commodity was allocated to large farm sizes. 2. Replacement of statutory freight rates with compensatory rates and branch line rationalization decreased the gross value of production and net farm income levels on all farm sizes. The burden of increased transportation costs enhanced the trend towards increased farm size. 3. There was a large potential for increased production of oilseeds, special crops, and livestock to offset a large proportion of the value of production and income losses generated by the increased transportation costs. Shadow prices for these commodities indicated strong profit potentials for expanded production. 4. Expanded interregional trade of intermediate commodities such as feed grains, stocker cattle, and weanling pigs, between crop districts had the potential to increase production levels by permitting districts to make fuller use of their comparative advantage. ...