Rio Grande Commodities

[MP173]

I found the August 04 issue fascinating, as others have stated. Perhaps for me the most fascinating article written in a long time, was the Rio Grande Commodities article.

One day prior to receiving the magazine, I was sitting at a crossing with a friend and I commented to her the what I found most fascinating about trains was what we know least about them...where did it come from, where is it going, what is inside the cars, what is the value of the lading, what are the freight charges for shipping it.

The train was a WCSX 102 car unit train with BNSF locomotives on the CN thru Valparaiso, In. (old GTW). I didnt recognize the reporting marks so I had no clue as to where it was going.

I guessed the value of the coal to be between $500,000 to $1million. Boy, was I way off! Based on $9.50 ton it is about $100,000.

Based on the 1.4 cents per ton mile, the freight rate based on 1250 miles would be around $175,000.

So, the freight is more than the commodity. I find that just amazing.

Does anyone know...does that rate include the return of the empty hoppers to Wyoming, or whereever it was loaded?

Mark Hemphill took Trains to a higher level. I wish him well in the future, but sadly realize we lost an incredible resource.

Railroading seems to be a very closed society in which it is difficult to gather information. Mark seemed to be able to not only gather that information, but also write about it in a concise and entertaining manner.

Operations of railroads (and airlines, trucklines, etc) fascinate me. I hope Trains continues in this direction.

Ed

[PNWRMNM]

Ed,

The rate includes return of empty cars.

Mac

[Anonymous]

QUOTE:
So, the freight is more than the commodity. I find that just amazing.

That was the biggest shocker to me when I read the article....

WHAT they are paying more to have it transported than what it is even worth??!?!?!!?

But I suppose when it comes to a commodity like coal, it is needed regardless.

[Anonymous]

I thought the article was great- I learned something! I'd been wondering why there were so many cars going by with Kaolin in them (heavy stencils on the side marked "Kaolin" was the clue.) Turns out they are headed to MeadeWestVaCo for use in their coated boards division.

Mark asked a good question about Trains losing "steam". I love watching steam locomotives run- they are fascinating machines with lots of moving parts doing something- but I wonder what skills and trades disappeared with the dieselization of the railroads. Everyone knows about Dale McCormick and the SP Daylight out in Seattle... but who is his fireman? How does UP qualify someone to run their Challenger? Outside of some shipyards and power plants, who really knows how to be a boilermaker? Who can still "decorate the tops" of a freight train with something other than bunting? There's a lot of technology from steam locomotives still in use today- stuff like roller bearings, air brakes, electrically powered headlights to name a couple of examples. Does a modern day wheelwright in a shop have any notion of how to balance a locomotive driver wheel? Mark's column made me ask myself what else got lost in the way of technology when diesels took over. More to the point, what mistakes did the railroads make in the past that should be avoided today? How often does some whiz kid "reinvent the wheel" that an "old head" would know from common sense?

Erik

[locomutt]

QUOTE: Originally posted by M.W. Hemphill

Macguy:

The worth of a commodity is the price a buyer will pay for it delivered to the place where he needs it -- it is not, repeat, not, the cost of the material itself at the place where it is made. That's why I discriminated in the article between delivered price and FOB price (FOB is "Free on Board," the price you pay for something at its origin, loaded into your railcar or truck or barge or what have you).

Everything you buy includes a cost of transportation. Some items are so cheap to make (or manufacture) that transportation becomes the greatest contributor to cost. Consider a can of soda you buy at a vending machine in Fairbanks, Alaska, for $1.00.: the water, the corn sweetener, the flavor, and the can cost maybe three cents, the marketing and the refrigeration a few more -- but most of the cost is in the transportation.

Coal is not unusual at all in having its worth greatly influenced by its transportation costs.

On average, logistics (the total distribution cost including shipping, warehousing, tracking, handling) accounts for about 11 cents of every dollar of a purchased item. That number has been falling consistently for many years -- just a few years ago it was 15 cents of every dollar. Considering that automobiles, electronics, and pharmaceuticals are very expensive to manufacture, are sold in large quanitities, and are a huge proportion of the global economy, one quickly realizes that for MOST goods the cost of transportation exceeds the cost of manufacture.

[#offtopic] Mark ,this may be slightly off topic,but I ENJOYED reading
this very interesting,informative article.

[SALfan]

QUOTE: Originally posted by erikthered

I thought the article was great- I learned something! I'd been wondering why there were so many cars going by with Kaolin in them (heavy stencils on the side marked "Kaolin" was the clue.) Turns out they are headed to MeadeWestVaCo for use in their coated boards division.

Mark asked a good question about Trains losing "steam". I love watching steam locomotives run- they are fascinating machines with lots of moving parts doing something- but I wonder what skills and trades disappeared with the dieselization of the railroads. Everyone knows about Dale McCormick and the SP Daylight out in Seattle... but who is his fireman? How does UP qualify someone to run their Challenger? Outside of some shipyards and power plants, who really knows how to be a boilermaker? Who can still "decorate the tops" of a freight train with something other than bunting? There's a lot of technology from steam locomotives still in use today- stuff like roller bearings, air brakes, electrically powered headlights to name a couple of examples. Does a modern day wheelwright in a shop have any notion of how to balance a locomotive driver wheel? Mark's column made me ask myself what else got lost in the way of technology when diesels took over. More to the point, what mistakes did the railroads make in the past that should be avoided today? How often does some whiz kid "reinvent the wheel" that an "old head" would know from common sense?

Erik

If you are in Columbus, GA, the kaolin was probably mined near Sandersville, GA. Guess it's mined in other places too, but that's the only place I'm aware of. Unless there is some overwhelming technical reason (chemical characteristics, etc.) I'd think the final user would buy from the closest spot where the stuff is mined.

[Anonymous]

QUOTE: Originally posted by M.W. Hemphill

Macguy:

The worth of a commodity is the price a buyer will pay for it delivered to the place where he needs it -- it is not, repeat, not, the cost of the material itself at the place where it is made. That's why I discriminated in the article between delivered price and FOB price (FOB is "Free on Board," the price you pay for something at its origin, loaded into your railcar or truck or barge or what have you).

Everything you buy includes a cost of transportation. Some items are so cheap to make (or manufacture) that transportation becomes the greatest contributor to cost. Consider a can of soda you buy at a vending machine in Fairbanks, Alaska, for $1.00.: the water, the corn sweetener, the flavor, and the can cost maybe three cents, the marketing and the refrigeration a few more -- but most of the cost is in the transportation.

Coal is not unusual at all in having its worth greatly influenced by its transportation costs.

On average, logistics (the total distribution cost including shipping, warehousing, tracking, handling) accounts for about 11 cents of every dollar of a purchased item. That number has been falling consistently for many years -- just a few years ago it was 15 cents of every dollar. Considering that automobiles, electronics, and pharmaceuticals are very expensive to manufacture, are sold in large quanitities, and are a huge proportion of the global economy, one quickly realizes that for MOST goods the cost of transportation exceeds the cost of manufacture.

I gotcha' Mark, to tell you the honest truth I have never thought about it, but now that you do explain it, wow it sure makes me look at everything in a different way.

[8D]

[MP173]

Mark:

Thanks for the article, the great work, and replying to this thread.

As I mentioned in the original post, I am very fascinated by the movement of products. My first career was in LTL trucking and that is a fascinating industry. Currently I am a salesman, supplying a specialized product to both trucking and the rails. I find both industries interesting.

Back in the 70's, I took hundreds, if not thousands of pictures of trains, mostly locomotives...later with scenery included, such as depots, towers, etc. During the late 70's I was very lucky to photograph many of the towers around where I lived. I really found towers and the movements of trains to be far more interesting than the actual passing of a train going by.

Today, the towers are gone and to me, 99% of the locomotives appear to be the same. Even the old GP9's are few and far between. So, for me, the cars and lading are of interest.

I find carload trains to be the equivilant to the LTL industry I was in. Same concept...gather the freight, consolidate it, move it to terminals and distribute it.

The carload trains are becoming fewer and fewer. What do we have on the rails today...mainly coal or commodity trains, intermodal, or auto trains. Take a look at the schedules in the Horseshow Curve ... very few are carload or boxcar trains.

The big article a year ago on yards was great. What would really be interesting would be exploring the carload movements on a railroad, similar to what you did for the commodities.

Mark, best of luck to you in the future and I certainly hope you remain a contributor to Trains.

Oh, what about a detailed article on dispatching.

ed

[Anonymous]

Thank You TRAINS!!

These are the kind of articles I enjoy reading. Maybe not to most, but too me, this is a great read. 2 thumbs up. I have yet to read any of the magazine except for this section, just got the magazine today. Im sure the rest will be just as good. This is by far one of the top articles I have read sence subscribing to Trains a few months back.

See I've always had a fascination of how goods are shipped, who ships them and where do they go, how often, how much and so on. And than to see how all the materials are put together in to a product. I just find it neat how things are made and its all very exciting to me.

One question. I was gonna email this question but seeing that someone had posted about this article, I might as well say what I gotta say.

At the very end of the article it says, "there are many other commodities moving on the former Rio Grande: barley for beer, hard red winter wheat for bread, and oriented strand board, gypsum wallboard and brick for building construction. Their story is interesting too" So in saying this, does this mean we will see an article about them in the not so distant future? If so yipeee!!!![:D]

Does Trains have anyother articles like this one in the works?

[cstaats]

Mark great article. This is why I subscribe.

[Anonymous]

Mr. Hemphill,
Thank you very much for taking the incredible amount of time to research and compile this kind of article. I truly apriciate your efforts. I find that I also enjoy reading about what is being transported, and from where to where. I especialy enjoy the maps of the month like the one that showed where Wyoming coal goes, and the one that showed the locations of the various auto/truck assembly plants.
I hope that you will continue to be a contributor to the magazine. Best of luck to you in all your endevors.

[Anonymous]

QUOTE: Originally posted by macguy

QUOTE:
So, the freight is more than the commodity. I find that just amazing.

That was the biggest shocker to me when I read the article....

WHAT they are paying more to have it transported than what it is even worth??!?!?!!?

But I suppose when it comes to a commodity like coal, it is needed regardless.

Mac, Want to talk about shock, Take three to four 80 to 95 car trains delivering coal to a plant from a distance of 1950 miles. Put all that together and you have an idea about the costs of heavy electric power production. But don't shed to many tears for the electric utilities that burn the coal, they gross over $1million a day on the big units of 818MW each (4 unit plant). By the way Hemphill will definatly be missed to this reader. Good writer and not a half bad observer of human nature[tup]