Equitable, Timely Rail Shipments

The crop production industry continues to undergo significant transformation and challenge associated with increasing demands imposed by changing markets, rising energy and manufacturing costs, foreign competition, consolidation, and ever increasing regulatory requirements. One of the most important issues facing the industry has to do with the lack of equitable and timely rail transport of inputs such as chemicals and fertilizers and outputs including grain and feed. The exorbitant cost and shipment delays associated with rail transport have brought this issue to the forefront of industry outrage and political debate.

Deregulation of the railroad industry including exemption from antitrust regulations, connected to passage of the Staggers Act of 1980, has led to a variety of continuing negative economic impacts on agribusiness and agriculture in general. The Act resulted in deregulation of competitive railroad activities and directed the organization now referred to as the Surface Transportation Board (STB) to “ensure rail customer access to rail competition and to maintain reasonable rates where there is an absence of effective competition.” Many critics of the STB have described the organization as failing its legislative directives miserably. Some of the most concerning issues that have resulted from the Staggers Act include the railroads’ continuing consolidation and monopoly of rail transport markets, the decline in rail service standards, and, most significantly, the rate increases that continue to negatively impact our businesses, our customers, and the economic health of the entire country.

A Class 1 Problem

Consolidations have led to a decline in the number of Class 1 railroad companies, which accounts for the fact that only four companies are now responsible for servicing the lion’s share of freight (averaging approximately 90% of rail shipment). In most cases, customers are held captive by dictates on delays and high cost since their transport needs are monopolized by one of the four Class 1 railroads. The prevailing attitudes of the railroad companies are best described as a “take it or leave it” provision of service. In cases where there are multiple carriers, customers find that railroad companies refuse to compete for their business.

It is also widely believed that lease agreements between short line railroad companies and Class 1 companies are designed to prevent movement of freight between competing Class 1 railroads. The STB allows railroad companies to take advantage of junctions, where cars can be transferred to another rail system, as a means of preventing rail customer access to competing companies.

Lack of healthy competition is known to drive prices higher. Railroad companies are also more likely to favor higher profit cargo from foreign sources than less favorable farm supply markets. Finally, even though Class 1 railroad companies continue to report record profits, maintenance and repairs of the railroad infrastructure are in decline.

The Need For Rail

Our country needs a financially viable and efficient railroad system that is accountable to rail customers and the nation for reliable service and reasonable rates. The monopoly that railroads have achieved does not accomplish either of these important and legislatively mandated objectives. As a recent example of the railroads’ abuse of market power, excessive fuel surcharges had been included in transport cost that did not coincide with the actual cost for specific rail shipments. Although a ruling by the STB did prohibit the railroads’ excessive fuel surcharge practice, it did not call for the reimbursement of lost revenues to the unfair profiteering.

The STB rate challenge process is also known to be so cumbersome and expensive that it provides essentially no protection to customers who depend on cost effective rail shipping service. In fact, the STB has actually made rulings that permit railroad companies to block customer access to competitors, which flies in the face of the legislative intent of the Staggers Act and documented objectives of the STB.

A coalition composed of hundreds of businesses and trade associations referred to as C.U.R.E. (Customers United for Rail Equity) is gaining valuable ground in urging Congress to repeal the freight rail industry’s antitrust exemptions, to revitalize the STB so that rail competition and reliable service at reasonable rates can once again be achieved, and to ensure that railroads reinvest in their infrastructure to meet the needs of their customers and the crop production industry as a whole.

Some of the champions pushing ahead with this include Rep. James Oberstar (D-MN), senior Democrat on the House Transportation and Infrastructure Committee, and Sen. John Rocke­feller (D-WV) and Sen. Byron Dor­gan (D-ND). There are also other senators that are supportive of this issue.

However, this is a very tough issue since the railroad lobby effort is very strong and the railroad companies have strong opinions as to what is and is not needed. To state the case clearly, C.U.R.E. has declared that “railroads have an obligation to serve ALL rail customers, the nation, and the nation’s taxpayers that have nurtured and protected them for more than 150 years.” 

Leave a Reply

Management Stories

Roy Blunt
LegislationARA Recognizes Blunt, Heitkamp For Legislative Efforts Supporting Agriculture
February 17, 2017
Agricultural industry continues to face federal regulatory challenges. Thankfully, agriculture’s allies in the U.S. Senate stepped forward. The Agricultural Retailers Read More
LegislationThe Fertilizer Institute Commends Senate On Confirmation Of New EPA Administrator
February 17, 2017
The Fertilizer Institute (TFI) President Chris Jahn issued the following statement on the Senate confirmation of Oklahoma Attorney General Scott Read More
Trump, Senate, Cabinet
LegislationBREAKING: Trump EPA Nominee Scott Pruitt Confirmed by Senate
February 17, 2017
Scott Pruitt, who as Oklahoma’s attorney general spent years suing the Environmental Protection Agency over its efforts to regulate various Read More
ManagementFebruary Road Trip Edition
February 17, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent visits to Indiana and Kentucky. Read More
Trending Articles
Farmer and aptop
Matt Hopkins10 Warning Signs Your Website Is Grossly Outdated
February 8, 2017
Your Website is often a visitor’s first impression of your ag retail business. A positive first impression can set the Read More
AgriSync
Matt Hopkins17 Agriculture Apps That Will Help You Farm Smarter In 2017
December 9, 2016
Ag professionals are working smarter, not harder, than ever before. Smart farming technologies have enabled them to reduce costs, maximize Read More
R4023 Sprayer, John Deere
CropLife 100Ag Retail Equipment Report: The Green Party Continues
December 7, 2016
In the annual race for sales in the ag retail equipment marketplace, the color schemes for participants are a little Read More
Mike Stern
Precision AgClimate Corp. CEO Talks Retailer Support For Digital Ag
December 1, 2016
CropLife Magazine’s sister publication, AgriBusiness Global, recently sat down with Mike Stern, CEO of The Climate Corp., following the Monsanto subsidiary’s Read More
Precision AgTrimble Debuts End-to-End FMIS Platform
November 28, 2016
October’s inaugural PrecisionAg Vision Conference left this author with many thoughts and things to ponder in the coming months. Probably Read More
CHS Primeland
CropLife 100The 2016 CropLife 100 Report: Reviewing The Many Bulls And Bears Impacting This Year’s Marketplace
November 28, 2016
For virtually all of 2016, the nation was wholly focused on the big Presidential election. Some folks aligned themselves with Read More
Latest News
Roy Blunt
LegislationARA Recognizes Blunt, Heitkamp For Legislative Efforts …
February 17, 2017
Agricultural industry continues to face federal regulatory challenges. Thankfully, agriculture’s allies in the U.S. Senate stepped forward. The Agricultural Retailers Read More
LegislationThe Fertilizer Institute Commends Senate On Confirmatio…
February 17, 2017
The Fertilizer Institute (TFI) President Chris Jahn issued the following statement on the Senate confirmation of Oklahoma Attorney General Scott Read More
Trump, Senate, Cabinet
LegislationBREAKING: Trump EPA Nominee Scott Pruitt Confirmed by S…
February 17, 2017
Scott Pruitt, who as Oklahoma’s attorney general spent years suing the Environmental Protection Agency over its efforts to regulate various Read More
ManagementFebruary Road Trip Edition
February 17, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent visits to Indiana and Kentucky. Read More
Heritage Cooperative Finished Building Aerial
ManagementHeritage Cooperative, Agland Co-op Approve Merger
February 17, 2017
Agland Co-op and Heritage Cooperative stockholders have both approved the merger agreement between Agland Co-op and Heritage Cooperative. Now begins Read More
LegislationARA Fly-In: Ag Retail Descends on Capitol Hill, Lawmake…
February 15, 2017
More than 100 agricultural retailers, distributors and suppliers headed to Capitol Hill Tuesday morning for the Agribusiness Congressional Fly-in, according to a Read More
Untreated soybean seed Heartland Coop
Seed/BiotechMarrone Bio Innovations, Groundwork BioAg Bio-stacked M…
February 13, 2017
Marrone Bio Innovations, Inc. and Groundwork BioAg, Ltd have announced successful seed treatment field trials of the world’s first all-biological Read More
NL5000 With G5 Technology
SpreadersNew Leader Introduces NL5000 Dry Nutrient Applicator Wi…
February 13, 2017
New Leader, a division of Highway Equipment Company (HECO), has announced the next generation of spreading technology with the NL5000 Read More
Fertilizer Storage
Crop InputsThe State Of The Fertilizer Industry
February 9, 2017
He’s all hat, no horse.” It’s a humorous way of describing a person who tells a good story, but is Read More
CropLife 100Pinnacle Agriculture Agrees To Credit Agreement Amendme…
February 9, 2017
Pinnacle Operating Corp. has entered into an amendment (the “Amendment”) to its First Lien Credit Agreement that will provide for, Read More
ManagementUpdates on Upcoming Trips, Dow-DuPont, and the Des Moin…
February 9, 2017
Editors Paul Schrimpf and Eric Sfiligoj review a few future travels, along with the latest on big company mergers and Read More
Championship Tractor Pull
EquipmentNational Farm Machinery Show Highlighted By Championshi…
February 9, 2017
The scream of monster engines, the stench of burning rubber and the ground-pounding vibrations of the country’s largest, loudest and Read More
Farmer and aptop
Matt Hopkins10 Warning Signs Your Website Is Grossly Outdated
February 8, 2017
Your Website is often a visitor’s first impression of your ag retail business. A positive first impression can set the Read More
Corn Field
InsecticidesArysta LifeScience, DuPont Collaborate On Rynaxpyr Prem…
February 8, 2017
Arysta LifeScience recently announced that it has entered into a global collaboration with DuPont Crop Protection for the development of Read More
Industry NewsThe Fertilizer Institute Board Elects New Chairman, Vic…
February 8, 2017
The Fertilizer Institute’s (TFI) Board of Directors has elected Chuck Magro, President and CEO of Agrium, and Tony Will, President Read More
Sonny Perdue
ManagementARA Joins More Than 600 Organizations In Support Of Per…
February 8, 2017
The Agricultural Retailers Association (ARA) recently joined with more than 600 agricultural groups on a letter of support for Governor Read More
World Agri-Tech Innovation Summit Panel 2016
Crop InputsWorld Agri-Tech Innovation Summit To Be Held In San Fra…
February 8, 2017
“Breakthrough Applications and Business Models for Sustainable Farming” is the theme of the World Agri-Tech Innovation Summit to be held Read More
Cedar Country Cooperative
Eric SfiligojConsolidation In Agriculture: More Middle Movement
February 7, 2017
If you’ve regularly followed my column, you know I’m something of a movie junkie. Like many, one of my favorite Read More