(The following article by Adrian Ewins was published in the Saskatoon Western Producer.)
ALBUQUERQUE, N.M. — Canadian grain farmers aren’t alone in looking to their federal government to do something about railway competition.
Their counterparts south of the border are just as anxious to see Washington bring in new rules that will give captive grain shippers better rates and service.
It’s a particularly big issue for farmers in the northern wheat states, most of whom are served by just one railroad, the Burlington Northern Santa Fe.
“What we’re charged to move grain is considered by many to be above and beyond a reasonable return on investment for the railways,” said Lochiel Edwards, a wheat grower from Big Sandy, Montana, who attended the recent U.S. wheat industry conference.
In Canada, the federal government is expected to release its transportation blueprint this month and many farm groups are hoping it will contain measures to promote competition.
In the United States, wheat growers are guardedly optimistic that a bill bringing in such things as final offer arbitration and competitive access provisions will make its way through Washington’s crowded legislative agenda.
“It appears legislation might be doable this calendar year,” said Edwards, vice-president of the Montana Grain Growers Association.
Any relief at all, he said, will be welcomed by wheat farmers in his state, who pay around $1 bushel to ship grain to the West Coast.
“Grain’s only worth $2.50 or $3 US, so it has taken a lot out of the economy,” Edwards said.
“I suspect BN uses those excess profits to subsidize rates in more competitive areas. That’s what I would do if I were them.”
The wheat growers say that by working together with captive shippers in other industries, including minerals, forestry and paper, chemicals, plastics, automotives and utilities, they have a good chance of passing legislation over the opposition of the railways.
And a lobbyist representing those shippers says railways shouldn’t be afraid of more competition.
“Competition makes sense for the railroads, they just don’t believe it,” said Terry Whiteside, chair of the Washington-based Alliance for Railway Competition.
Whenever railways are forced to compete, he said, they respond by cutting their costs.
And the record shows that the savings generated by those cost reductions are greater than any lost revenue from lower freight rates.
“Shippers get better rates and better service and the railroads make more money,” said Whiteside, who reported on the alliance’s activities to the National Association of Wheat Growers.
NAWG’s policy on rail transportation includes support for:
–A 60-day notice for rate increases.
–Competitive access for all rail shippers.
–Reciprocal switching rights at reasonable costs.
–An equitable distribution of rail cars among regions and shippers.
–Federal funding to preserve rail service on low-traffic lines.
There were 40 major railways when the U.S. rail industry was deregulated in 1980. Now, four railways account for 95 percent of the nation’s rail business. More than 31 percent of total rail revenue is estimated to be generated by captive shippers who are served by just one railroad.
Whiteside said the railways routinely charge captive shippers rates of 200 to 300 percent of their variable costs, compared with around 140 percent to those in competitive environments.
While the railroads have to be economically strong, it’s clear the system needs to be made more efficient and competitive.
“We’re not trying to take money away from anyone,” he said. “We are trying to create a fairer system where everyone can make more money.”
Edwards said Montana farmers experience every day the monopoly pricing power of BNSF.
Last year, for example, the railway’s rates for hauling grain from western Minnesota and eastern North Dakota to the West Coast were lower than the rates from central Montana to the West Coast.
“Basically they were moving it free from Minnesota to Montana, because they were competing for that Minnesota traffic.”
Edwards said northern U.S. wheat growers would also like to gain access to the Canadian rail system, not only as a way to move grain to export position, but also as a competitive threat against BNSF.
He said the Montana association met with Canadian Pacific Railway officials last fall to discuss the issue and will continue to pursue it.
The U.S. government’s latest trade complaint against Canada says American grain farmers are being unfairly denied access to Canadian rail transportation.