Canadian Regulator Announces VRCPIs for Crop Year 2023-24
Written by Marybeth Luczak, Executive Editor
For the 2023-24 crop year beginning Aug. 1, the Volume-Related Composite Price Index (VRCPI) for CN and Canadian Pacific Kansas City (CPKC) will be 1.8295 and 1.7616, respectively—both up from the current crop year, according to the Canadian Transportation Agency (CTA), Canada’s equivalent of the U.S. Surface Transportation Board.
Grain is a heavily regulated commodity in Canada, with caps or “entitlements” set by the CTA to limit the overall revenue earned by the two Canadian Class I railroads for shipping it. The indices reported on April 27 will be used by CTA to determine CN’s and CPKC’s Maximum Revenue Entitlement for the movement of western grain in the 2023-24 crop year. Those determinations will be made by Dec. 31, 2024.
According to CTA, VRCPIs are inflation factors reflecting a composite of the forecasted prices for railway labor, fuel, material and capital purchases. As part of the process of determining the annual VRCPIs, the agency said it examines and verifies detailed railroad submissions.
The new VRCPIs are up 12.11% for CN and 5.43% for CPKC over the last crop year, according to CTA.
“Much of this year’s price differential (the difference between the forecasted and actual price increases) is directly linked to unexpectedly high fuel and related material costs in 2022,” CTA reported. “Last year, the agency’s fuel model projected just over 30% increases in railway fuel costs using third-party forecasts available at that time. However, railway fuel costs in 2022 rose by more than 63% in the wake of a notable shortage in the supply of diesel fuel in North America and increased global demand. The net difference of 63% (actual) versus 30% (forecast) has been incorporated into this year’s calculations and contributes to the overall net increase. Adjustments were also made for other components, including the material component for CN and CP[KC].”
