Grain Shippers Seek Relief From STB on Rail Rates
This story appears in the June 15 print edition of Transport Topics.
Grain shippers and freight railroads last week clashed over rates and regulatory review procedures before the Surface Transportation Board, which is searching for new methods for handling agricultural products cases.
The message from National Grain and Feed Association and the Alliance for Rail Competition, representing shippers, was that the agency should lower prices and adopt new approaches to calculating rates. The railroads defended the status quo, saying that the grain shipping market is competitive and working properly.
STB, in a decision announcing the June 10 hearing, said the review was sparked by the fact that there have been no rail grain regulatory cases considered in more than three decades despite complaints that rates were excessive. The last case, which took more than 15 years to resolve, was started at the Interstate Commerce Commission in 1981. That agency was dissolved and replaced by STB before the case finally was decided.
Issues surrounding grain, which comprises 5% of rail shipments and 16% of rail revenue, affect truckers since intermodal moves that comprise half of rail shipments share the same tracks. In addition, changing rail grain shipping patterns can stimulate shifts of freight to trucks, said Bruce Sutherland, vice president of Michigan Agricultural Commodities, a grain elevator operator.
“The key reason that we don’t have rate cases is that our rates are reasonable,” said John Miller, group vice president for agricultural products at BNSF Railway.
On the other hand, Kevin Thompson, assistant vice president for Cargill Inc. and chairman of NGFA’s rail committee, told the agency cases aren’t being brought because its current procedures are “unworkable.”
Among the changes that shippers are seeking are allowing farmers to launch rate cases.
“Producers often bear the pass-through costs from rate increases,” NGFA attorney Thomas Wilcox said.
The groups also want to change the way STB evaluates rates to include multiple railroads that ship grain over similar distances. Grain rate review procedures now are based only on the defendant’s freight.
Association of American Railroads Senior Vice President John Gray characterized shippers’ proposals as “crude” and “primitive” because they further simplified an approach created by STB that was based on flimsy economic principles.
He said using multiple rails in a case was not appropriate because each railroad’s shipment characteristics are unique.
“Grain shippers can’t justify why they are entitled to special rules,” said Louise Rinn, an attorney for Union Pacific Railroad, referring to the new rate proposals.
She argued that grain shippers weren’t being saddled with higher rates because the reality of grain markets gave them options.
Rinn said that Iowa farmers have hundreds of elevators and processors to choose from when they want to sell their grain and that most farmers there and in surrounding states have access to two railroads.
She also said that rail rates have been trending down over the past decade when compared with farm family incomes. Typically, rail shipments account for only 5 cents per dollar of farms’ expenses, she said.
Sutherland said a recent CSX rail rate increase of up to 70% in the Midwest will put Michigan farmers “at a significant disadvantage” because the move will raise their costs. At the same time, he said, his company’s $35 million investment in elevator improvements could be at risk.
Arbitration and mediation, both on a voluntary and mandatory basis, received some qualified support.
Arbitration procedures are in place in Montana, through the Grain Growers Association and Farm Bureau Federation in conjunction with BNSF Railway. NGFA also has an arbitration process.
Shippers and railroads alike identified some barriers. For example, AAR, which includes BNSF, is opposed to arbitration as a group, Gray said, unless it is voluntary.
On the shipper side, Benjamin Tiller, an attorney for Montana’s Department of Agriculture, told STB that farmers appear to mistrust the arbitration process in his state.
STB will further study the arguments and eventually decide whether to change its policies.
