GREAT FALLS, Mont. — According to the Great Falls Tribune, the Burlington Northern Sante Fe Railway will end a price discount offered on wheat shipments from eastern North Dakota to the Pacific Coast. For the past year the discount has made it cheaper to ship wheat from there than from points west, including Montana.
Farm organizations claim the practice caused lower-quality wheat from the Midwest to dump into a market traditionally served by Western regions, causing Pacific Rim customers to complain about reduced quality of the blended wheat.
“This price structure was a discriminatory at its very best and can only happen with a monopoly,” said Terry Whiteside, a Billings-based transportation consultant for the Montana Wheat and Barley Committee. “The reality is the basic problem remains.”
That problem stems from BNSF’s near monopoly on rail shipping in Montana, said Montana Grain Growers Association spokeswoman Lori Cox.
“The announcement doesn’t erase the fact that we still pay the highest rates for grain shipping in the country,” she said.
Montana Farmers Union Executive Director Brooks Dailey said the price structure was unfair in the first place and that farm groups will continue efforts to create rail competition to Montana.
Whiteside had stronger words for what BNSF officials called the North Dakota-Montana differential pricing structure.
“That’s a nice spin for something that was at best illegal and may in fact be unlawful,” Whiteside said. He contends the pricing structure distorted and manipulated the wheat market in addition to producing quality problems.
BNSF spokesman Richard Russack said his company disagrees with accusations the practice was illegal.
In a letter to Gov. Judy Martz and Sen. Max Baucus announcing the end of the pricing structure, BNSF President Matthew Rose said it was put in place to meet export demands and maintain Pacific markets for U.S. wheat. Drought-reduced wheat harvests in Montana were blamed for short supplies.
The pricing structure has drawn criticism from officials in Montana, North and South Dakota, Colorado and Nebraska.
Whiteside said Western wheat farmers were doubly hit by the practice. Traditionally when drought reduces crop yield, the price for the crops raised goes up.
But that didn’t happen last harvest since the Western wheat harvest was supplemented with grain from the Midwest.
The problem has been mainly with spring wheat. Montana’s wheat has a reputation for producing flour with a good gluten content, which makes it perform well when baked because of good elasticity. High protein content is the key.
But excess moisture in wheat crops east of Minot, N.D., has caused disease problems, said Montana Wheat and Barley Committee Executive Jim Christianson.
Fursarium fungi causes the disease, scab, which attacks wheat kernels and destroys gluten strength. Although infected wheat will test at good protein levels, it doesn’t produce good elasticity.
Pacific Rim customers, including Japan and Taiwan, are an important and long-cultivated market for Montana wheat, Christianson said.
“Those countries pay cash, and they expect quality,” he said. Between 70 and 80 percent of Montana’s wheat crop is sold to export markets each year.
Judy Vermulm, who raises spring wheat and barley on her family’s farm north of Cut Bank, said seeing her crop’s quality diluted because of a rail-pricing structure has been discouraging.
“We fight grasshoppers, we fight the drought, then to have to fight this too,” she said.
In his letter, Rose expressed concern that ending the pricing structure could cause the railway’s volume and market share in the Pacific Northwest to fall below historic levels.
“We will be benchmarking our carloads against a recent four-year average to ensure that this change in pricing practice is not harming BNSF’s volume…,” Rose wrote. “Should unforeseen and unusual market conditions lead to significant economic hardship for BNSF, we will contact you prior to responding to those market conditions.”
Christianson scoffed at the comment.
“If we have a decent sized crop, BNSF will get their share,” he said. “They are the only railroad.”