Are grain farmers losing to oil for rail service?

[Anonymous]

http://www.cnbc.com/id/102021264?__source=yahoonews&par=yahoonews#.

[Redore]

The Bakken oil boom is centered around Williston ND. You have to see it to believe it. Everything between Williston and Minot comes down a single track mainline on BNSF, oil, intermodal, grain, general freight, frac sand, pipe, Amtrak, everything. Five years ago they were even considering abandoning between Minot and Grand Forks, for lack of traffic. Now that's all changing. The two lines between Minot and Fargo are being operated single direction and sidings and signals are being added all over the place. West of Minot the line is being double tracked. All this work is being done around unprecedented traffic. Add in severe winters (last winter was the worst in a long time) and all kinds of roadbed problems in the spring. I don't think anyone out there is getting all the rail service they would like. BNSF seems to be doing everything they can to improve things. Give them a year or two. The last time there were changes like this was the build out of the Powder River Basin coal lines.

[erikem]

Something else to keep in mind. Oil is a year round business while grain is seasonal. This means that the cost of increasing track capacity is spread across more oil trains than grain trains.

[mudchicken]

Some of the noise is the Pollianna Principal

[MP173]

Farmers are seldom happy.  There is always something....low prices, weather, embargo on exporting, high fertilizer prices, etc.

Full disclosure...I grew up in a farming community and still own farmland.

Ed

[BaltACD]

MP173

Farmers are seldom happy.  There is always something....low prices, weather, embargo on exporting, high fertilizer prices, etc.

Full disclosure...I grew up in a farming community and still own farmland.

Ed

There will be one of two stories coming out of Florida this Winter about the citrus harvest.

1.  There is a bumper crop and the farmers are not able to get enough migrant labor to pick the crop so it will drive up consumer prices.

2.  There has been a freeze that has damaged a portion of the crop and it will drive up consumer price.

3.  If there is some other story, it will also drive up consumer prices.

[dehusman]

Real headline is: "Farmers having to share capacity with oil traffic"

[SALfan]

Balt - And the amazing thing is, the morning after the story comes out, the stores have employees marking up the stuff that is already bought, paid for and on the shelf.

[Euclid]

SALfan

Balt - And the amazing thing is, the morning after the story comes out, the stores have employees marking up the stuff that is already bought, paid for and on the shelf.

Stores don't have to hold the price on inventory just because stores have bought and paid for the inventory.   They are free to raise prices on their inventory if they expect higher prices in the future.

[Euclid]

“Are grain farmers losing to oil for rail service?” 

I don’t think the answer will ever be known.  The railroads’ answer is, “No.”  Yet they are running at full capacity in the face of rising demand.  So somebody must be losing out.   Are the oil producers losing out to grain for rail services?

But, the larger question that follows “Are grain farmers losing to oil for rail service?” is this: “What if they are?”  What should be done about it?  What is the answer to that question?

Is there some type of regulation that requires railroads to distribute limited service fairly to shippers?  

If not, should there be such a law?

[BaltACD]

Euclid

“Are grain farmers losing to oil for rail service?” 

I don’t think the answer will ever be known.  The railroads’ answer is, “No.”  Yet they are running at full capacity in the face of rising demand.  So somebody must be losing out.   Are the oil producers losing out to grain for rail services?

But, the larger question that follows “Are grain farmers losing to oil for rail service?” is this: “What if they are?”  What should be done about it?  What is the answer to that question?

 

When you have a limited resource to sell (line capacity) shouldn't the laws of supply and demand apply to who gets the resource and what they have to pay for it?

[Euclid]

BaltACD

Euclid

“Are grain farmers losing to oil for rail service?” 

I don’t think the answer will ever be known.  The railroads’ answer is, “No.”  Yet they are running at full capacity in the face of rising demand.  So somebody must be losing out.   Are the oil producers losing out to grain for rail services?

But, the larger question that follows “Are grain farmers losing to oil for rail service?” is this: “What if they are?”  What should be done about it?  What is the answer to that question?

 

When you have a limited resource to sell (line capacity) shouldn't the laws of supply and demand apply to who gets the resource and what they have to pay for it?

I would say yes.  However, if that were the answer, there would be no need for the quesion: “Are grain farmers losing to oil for rail service?” 

That question is dancing around something, and I would like to know what it is. 

[petitnj]

Dear Mr. Farmer, buy a truck and use the heavily subsidized highway from ND and MN to your market. Even with the heavy subsidy, trucking is far more expensive than the rails. Our highways are deteriorating because Congress does not have the guts to charge the rural areas enough gas tax. Now they want the railroads to give them priority in spite of the fact that highways put the rails out of business.

The government interdiction cannot create more capacity on the rails. They will only hurt the railroads by having them justify their incredibly efficient system. The politicians are stomping about pretending that they can do something, but luckily they are just telling the Surface Transportation Board to keep studying things. 

[tree68]

Euclid

SALfan

Balt - And the amazing thing is, the morning after the story comes out, the stores have employees marking up the stuff that is already bought, paid for and on the shelf.

Stores don't have to hold the price on inventory just because stores have bought and paid for the inventory.   They are free to raise prices on their inventory if they expect higher prices in the future.

While in HS, I worked part-time in a liquor store (hey - it was income!).

The shelf price of the booze was set by the state.  Occasionally said price was adjusted per market forces - some went up, some went down.

The state also controlled the wholesale side of things, and those prices would rise or fall at the same time.  The owner of the store would set off for the wholesale store every week or two to restock.  Since the new prices were announced ahead of time, he would load up on items that would be going up, and let stock dwindle on whatever was going down.

If "Riley's Rotgut" was going to see a price increase, he'd buy at the lower price, and enjoy the windfall when the official price went up a few days later.

Gas station operators are usually charging a price to cover their next delivery, not their previous one.

[Jim200]

 

 

 

BaltACD

 

 

Euclid

“Are grain farmers losing to oil for rail service?” 

I don’t think the answer will ever be known.  The railroads’ answer is, “No.”  Yet they are running at full capacity in the face of rising demand.  So somebody must be losing out.   Are the oil producers losing out to grain for rail services?

But, the larger question that follows “Are grain farmers losing to oil for rail service?” is this: “What if they are?”  What should be done about it?  What is the answer to that question?

 

When you have a limited resource to sell (line capacity) shouldn't the laws of supply and demand apply to who gets the resource and what they have to pay for it?

Apparently not in this case, possibly to prevent volitility in food prices and account for risk in transport. In checking shipcsx.com , I found that it cost 5 times as much to ship a tank car of lube oil, (the closest category that was listed), the same distance as a carload of seeds. Petroleum crude may have less price differential. However, petroleum crude tends to go longer distances in large units, which is a plus for the railroad. 

 

[Euclid]

Euclid

 

 

BaltACD

 

 

Euclid

“Are grain farmers losing to oil for rail service?” 

I don’t think the answer will ever be known.  The railroads’ answer is, “No.”  Yet they are running at full capacity in the face of rising demand.  So somebody must be losing out.   Are the oil producers losing out to grain for rail services?

But, the larger question that follows “Are grain farmers losing to oil for rail service?” is this: “What if they are?”  What should be done about it?  What is the answer to that question?

 

 

 

 

 

When you have a limited resource to sell (line capacity) shouldn't the laws of supply and demand apply to who gets the resource and what they have to pay for it?

 

 

I would say yes.  However, if that were the answer, there would be no need for the quesion: “Are grain farmers losing to oil for rail service?” 

That question is dancing around something, and I would like to know what it is. 

 

Actually, to answer my own question above, the question about farmers losing to oil is dancing around the question in the other thread about capitalism being the cause of bad service to the grain farmers.  If you study the complaints of the farmers, there is only one remedy, and that is to force the railroads by regulation to distribute their service "fairly."  It will do no good to complain to the railroads because they will just say there is no inequity.  

Capitalism lets the free market decide which shipment goes first.  And this is the heart of the complaint by farmers that oil is getting priority over grain.  

[dehusman]

As a side note, remember that there are government requirements and popular support to prioritize oil trains over other trains.  The government has chosen to make oil more critical to move than grain.

How many thousands of lines of comments on this forum have been devoted to the "dangers" of oil trains and all the precautions that should be taken if one stops. One unintended consequence is if you only have capacity to run ten trains and you have eleven, and holding the oil train has been made very complicated  and onerous, you will be less likely to park the oil train and something else will be the low man.

[Euclid]

I think the railroads should be allowed to prioritize traffic at their own discretion.  But the farmers will tell the lawmakers that farmers are being discriminated against, and this should be remedied by lawmakers forcing the railroads to distribute service equally.  Farmers will use every argument including the one that says food is more important that fossil fuel, so food should be given priority shipping over oil.  I am sure this will resonate with many lawmakers. 

[blue streak 1]

Is it a matter that grain is seasonal and oil is year around ?

[BaltACD]

Relatively little of the grain harvest goes directly to US (or for that matter North American) human food. The biggest percentage of grain goes to export.  A sizeable percentage goes to animal feed and then there is the percentage that is used for various forms of industrial production.  As has been said - grain is seasonal and oil is year round.