The Canadian Transportation Agency (CTA) has announced its determination of the Volume-Related Composite Price Index (VRCPI) for the Canadian National Railway Company (CN) at 1.6319 and the Canadian Pacific Railway Company (CP) at 1.6709 for the 2022-2023 crop year beginning August 1st. This is an increase in the VRCPI over the last crop year of 11.99 percent for CN and of 12.70 percent for CP.
These indices will be used in determining CN's and CP's Maximum Revenue Entitlement for the movement of western grain in the 2022-2023 crop year. The Maximum Revenue Entitlement is a limit on the overall revenue earned by CN and CP for shipping regulated grain.
Over half of this year's increases are attributable to replacing previous Agency forecasted price changes for 2021 with actual price changes and incorporating revised forecasts for 2022. Much of these price changes are linked to recent world events. For example, crude oil costs have increased steadily over the course of 2021 and have experienced even sharper increases following the start of the conflict in Ukraine. As well, global supply chain challenges and supply/demand imbalances in 2021 have contributed in part to higher than expected price changes for railway material inputs such as steel, fabricated metals, and petroleum-related products.
What is the VRCPI?
The VRCPI is an inflation factor. It reflects a composite of the forecasted prices for railway labour, fuel, material and capital purchases. As part of the process of determining the annual VRCPI, the CTA examines and verifies detailed railway submissions.
The VRCPI will be applied when the CTA makes its Maximum Revenue Entitlement determinations by December 31, 2023, for the 2022-2023 crop year.
