Canadian farmers are overpaying the country's two major railways by as much as C$275 million ($270 million) a year to transport their crops, the Canadian Wheat Board and five other farm groups said.

The groups released a report by rail analyst John Edsforth that concluded farmers paid C$8.81 a ton more, or C$275 million overall, in 2008-09, than what is considered fair under a federal grain transportation law. In the previous year, they paid C$4.61 a ton, or C$123 million too much, the report said.

"We're paying more than our fair share," said Greg Marshall, president of the Agricultural Producers Association of Saskatchewan. "It quickly adds up to thousands of dollars on each and every farm."

The cost of rail transportation -- the main way Canadian grains and oilseeds get to port or domestic buyers -- is one of farmers' biggest expenses, along with fertilizer.

Western Canadian farmers generally have to move their crops longer distances to reach port than U.S. and Australian growers, and don't have a river transportation system to compete with rail.

Canada is the world's top exporter of spring wheat, durum and canola, with the bulk of the crops produced in the Prairie provinces.

The federal government caps the revenue that Canadian National Railway and Canadian Pacific Railway can earn by hauling crops. For the 2010-11 crop year, which begins Aug. 1, the index used to calculate the revenue cap rises 7 percent, mainly due to higher fuel prices.

Railways aren't overcharging farmers and in fact charge some of the lowest rates for grain transportation in the world, said Canadian National spokeswoman Kelli Svendsen.

CN is trying to improve the efficiency and reliability of grain rail transportation by setting certain days to deliver cars to grain elevators for pick-up later, she said.

Canadian Pacific spokeswoman Breanne Feigel said the company is still reviewing the report and could not yet comment on whether railways have overcharged farmers.

She noted that CP has demonstrated the importance it places on grain shipments by upgrading 50 grain-handling facilities in the past decade.

Grain shipments may be lower this year as record rain are expected to result in the largest unplanted acreage in Western Canada in 39 years. But smaller crop volumes are unlikely to fire up competition between the two big railways and generate lower rates for farmers, Edsforth said.

Smaller volumes could actually make the transport system less efficient, he said.

The farm groups urged the federal government to review rail costs, saying that carriers have not passed along savings to farmers after a sharp reduction in the number of grain elevators during the past 20 years made the system more efficient.

A federal review of rail service already under way. (Reuters)