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 1.8295 and the Canadian Pacific Railway Company (CP) at 1.7616 for the 2023-2024 crop year beginning August 1st. This is an increase in the VRCPI over the last crop year of 12.11% for CN and 5.43% 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 2023-2024 crop year. The Maximum Revenue Entitlement limits the overall revenue earned by CN and CP for shipping regulated grain.
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. 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.
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, 2024, for the 2023-2024 crop year.
