The National Grain and Feed Association (NGFA) and 11 other major agricultural producer and agribusiness trade organizations this week united to urge the federal Surface Transportation Board (STB) to improve its regulatory structure to foster a more competitive rail environment.
Enhancing both regulatory access to the agency and problem-solving in rail markets between carriers and their customers could spur growth in both U.S. agriculture and the rail sector, which in turn would support an “improved overall U.S. economy and provide for more vibrant job growth in many sectors served by rail,” the NGFA and other organizations said in a joint statement submitted to the STB.
In their joint statement, the diverse array of national agricultural organizations focused on such important rail competition issues as rates and switching charges; unreasonable business practices imposed unilaterally by carriers; contractual barriers that preclude competition; and improvements to the agency’s arbitration procedures to foster fair, objective and expeditious dispute-resolution between railroads and shippers. The statement was submitted in response to a proceeding launched by the STB to explore the current state of rail competition and potential policy initiatives to promote additional rail-to-rail competition.
The groups noted that railroads have become “very profitable” based upon any reasonable business yardstick, and there are “few risks to general rail profitability if the STB chose to make some reasonable adjustments in moving toward a more competitive (rail) environment.” In fact, carriers in the long term likely would benefit by reasonable increases in competition, the NGFA and the other agricultural organizations said.
There are approximately 15,000 agricultural-related shipping points in the United States, with rail comprising about 35 percent of the physical volume of agricultural movements compared to about 50 percent for trucks and 15 percent for barges. The organizations said many agricultural facilities, particularly those involved in longer-haul shipments where trucks do not provide a competitive alternative, have “less-than-adequate” competition to discipline railroad market behavior.
The agricultural industry supplies more than 50 percent of the railcars utilized to ship grain and grain products, the groups noted, but shipper/owners of those cars currently “have little say in new regulations and associated costs imposed on such equipment” by carriers.
Other national agricultural producer and agribusiness associations joining the NGFA in the statement were the: Agricultural Retailers Association; National Association of Wheat Growers; National Barley Growers Association; National Chicken Council; National Corn Growers Association; National Cotton Council; National Council of Farmer Cooperatives; National Oilseed Processors Association; Renewable Fuels Association; The Fertilizer Institute; and USA Rice Federation.
Concerning freight rates, the agricultural organizations noted that agricultural rail rates increased by 30 percent from 2006 to 2010, compared to 24 percent across all other product lines (such as coal, chemicals and intermodal shipments). “While many rail rates are not an issue, some are and it appears to be a growing problem in some areas of the country” where competition with other transportation modes is lacking, the groups said.
The organizations said even the STB’s most simplified rate-challenge process generally does not provide a viable avenue for agricultural shippers to pursue, given the cost of bringing a case (estimated at approximately $250,000), the likelihood of prevailing and the total $5 million maximum benefit over five years that would result if the shipper prevailed. “Given the risk of losing, plus the likelihood that even if a case is won, the benefit might be less than the maximum allowed, we see few, if any, situations where agricultural shippers will find the (so-called three-benchmark simplified small rail) rate case approach appealing as it now stands,” the groups said.