GOVERNMENT RAIL CAR REGULATION AND THE PRICE OF CANOLA

In this paper I analyze Canadian government regulation of rail transpo rtation as it affects the domestic price of canola in both the street and futures market. The regulation gives rise to an idiosyncrasy: Vanc ouver canola futures and Vancouver spot prices do not converge, with f utures trading at a significant premium to spot prices during the deli very month. As a result, Vancouver futures prices do not reflect inter national market conditions. I offer an explanation of the futures prem ium. In addition, I find that there is evidence to support a contentio n that a change in rail car policy in 1989 improved canola throughput efficiency in Vancouver and may have led to higher street prices.