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Railroads Pressed to Improve Service

By: Jim Peterson
Posted: Jun 17 2022

Railroads Pressed to Improve Service

Local shippers and end-users in the U.S. have dealt with significant delays in the placement and delivery of ordered rail freight this past winter and spring.  In some extreme cases, flour mills and feed plants have had to shut down temporarily.  In other cases sales have had to be canceled, or deferred to later positions, which have been at lower prices in this year’s tight supply environment. 

Producers and customers pay the bulk of the cost of this under performance on freight.  At times, the cost to purchase shuttle trains in the secondary market, reached $3,000 per rail car, or more.  This is more than $.80 per bushel, on top of the already high tariff rates and fuel surcharges.  With historically high market prices for commodities, these added freight costs were muted to a large degree, but the costs to producers, shippers and end-users were significant. Conversely, railroads bear no costs in the delayed service and lack of performance.

Numerous agricultural organizations, including the North Dakota Wheat Commission, filing joint comments with U.S. Wheat Associates and other wheat states, as well as Congressional leaders have been active on drawing attention to the issue, and pressing the Surface Transportation Board to take actions that will help improve the situation.  The Surface Transportation Board held hearings on the issue and reviewed comments of the agricultural industry.  On May 5th, it issued a decision which required the four largest U.S. rail carriers to provide service recovery plans, and participate in bi-weekly conference calls to report progress.

The decline in service and increase in rail costs are threatening one of the long time strengths of U.S. origin wheat exports on the international market, and that is why U.S. Wheat Associates has become more pro-active on rail issues.  This initial action by the Surface Transportation Board is a productive step, but longer term there needs to be some additional steps taken to impart more competition into our rail system.  Some of those steps which have been advocated for by producer and grain handling organizations include competitive switching (allowing a shipper captive to one rail line to receive a tariff rate from a competing line if they are within a reasonable distance to a switch point), equal treatment on demurrage or penalties between railroads and shippers (currently only shippers and customers pay demurrage or penalties to the railroads if they do not load or unload in a specified time, railroads have no penalties if late), and improved communication and metrics from railroads on estimated time of arrival on cars.

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