Rio Grande Valley, CFI,CFII
PJS1 If a grain silo ships 25 carloads of corn from South Dakota to Galveston, I presume the price (rate) includes the cost to get the cars to Houston. How is the cost of returning the cars covered? Is it included in the shipping price? What is the basis of the rate, i.e. miles, weight, etc.? If the rate is a function of the miles, who determines the route to retrun the car to its point of origin?
Freight rates are more of an art than a science. And, of course, the agricultural interests will always be complaing to the government that the railroad(s) charge too much. And that does have an effect. There is no good way for a government tribunal to determine what a rail rate should be. But they will stick their nose in.
The rates are not so much based on miles, etc., but on market forces. I'll guess your SD grain is for export through Galveston. Where is it going? A ship loaded in Galveston can go to any port in the world. It's the total through cost that determines the routing. A railroad has to be aware of that when setting its own charges.
Farmers in SD have a lot of competitive choices. Their grain for export can be loaded on a ship at Duluth, be loaded on a barge to New Orleans, go to a Pacific port for movement to Asia, etc. So the rail charges to Galveston will be determined by these competitive options.
Of course the rail charge will have to cover all costs, including the return of the empty equipment. That's the floor. But, determining the cost of moving those 25 cars to Galveston and back is a can of worms. And remember, that cost is a floor, not the rate charged.
PJS1who determines the route to retrun the car to its point of origin?
The railroad at the unloading point determines disposition of cars after unloading. Given the scope of both BNSF and UP networks, cars generally stay on their home road. If cars unload on a switching carrier, they will reverse route cars back to whichever line gave them the loads at whatever place, absent instructions to the contrary. Unless a car is in a true shuttle operation, cars will move to fill demand, expressed in terms of car orders prioritized by want date.
Mac
In the world of 21st Century PSR, the shipper of a piddling 25 car block is going to be discouraged from shipping via rail at all. The carriers want Unit Train Loads or nothing, featuring the switching required to handle less than a Unit Train generates too much cost to be profitable to the extent the carrier desires. That being said, all the market forces others have stated come into play when establishing the Unit Train rates - a further force involved in setting the rate is whether this will be a one time Unit Train or will it be part of a continuing movement of X millions of tons of product over time.
Shipping elevators, for the most part, are owned by conglomerate corporations that have multiple locations in many locales all over the country. The haulage contract between the congolomerate and the carrier(s) will nominally be designed to cover shipments from all the shippers locations to all the shippers destinations.
Never too old to have a happy childhood!
So, lets say that a huge agribusiness company such as ADM or Cargill sends the 25 cars to Galveston (they probably wouldnt, but lets just say they did) and they used their own cars.
Now, what occurs to those 25 cars when unloaded in Galveston? Does ADM direct the cars to a location, or does the railroad? Is ADM charged for the return movement? If so, how much (I know this is all contractually covered, but generally speaking is there a charge or is it built into the base rate?).
Is that return empty movement, if charged to ADM then considered a "load"?
Same with intermodal containers...lots of international containers move to distribution centers in the east. Are the empties charged coming back?Ed
Ed:
Private cars may be directed anywhere the car owner/lessee desires. If the cars are reverse routed to origin there is no additional charge. If the cars are directed to another station located on any of the carriers involved in the loaded head haul; there would be no additional charge.
If the cars are directed to a station on a carrier who didn't participate in the head haul; that carrier may either charge for an empty car move or the cars would incur excess empty mileage which would be billed the following year.
Curt
MP173So, lets say that a huge agribusiness company such as ADM or Cargill sends the 25 cars to Galveston (they probably wouldnt, but lets just say they did) and they used their own cars. Now, what occurs to those 25 cars when unloaded in Galveston? Does ADM direct the cars to a location, or does the railroad? Is ADM charged for the return movement? If so, how much (I know this is all contractually covered, but generally speaking is there a charge or is it built into the base rate?). Is that return empty movement, if charged to ADM then considered a "load"?
The original question had to do with grain. By long standing Car Service rules, non railroad car owners must have the permission of at least one railroad to operate its cars on the national network. Many years, 20-25 or so, ago there were a fair number of private grain cars in the fleet. The BN in particular figured out it cost them extra money to send blue cars here, yellow cars there, pink ones somewhere else. They bought these private cars up, doubtless after applying both pressure and sweet reason, making them all green cars that could go anywhere at any time. I am 99% sure the UP did the same thing shortly after, since one big fleet is easier to manage than a bunch of small ones. The above question is thus unrealistic.
Change the product to DDG, the solids left over from making ethanol and used as cattle feed, and you may well have private hopper cars. DDG is less dense than grain so they need more cube to weigh out. In that case Curt's answer is correct. Private can owners can send their cars where ever they want but they need to worry about excess empty miles. The return move is built into the rate, but hauling private empty cars all around the country is not and railroads do not like to work for free.
You asked about intermodal containers. I understand that there is a modest charge for moving empty containers. Actually this works out OK since the steamship company figures it should pay only for loads and they get a low rate on the head haul in part because empty return is not included in the railroad's cost. If the steamship company can find a return load, someone else pays for the return to port and the steamship company gets its container back where they want it at only the cost of a few more days time.
Thanks for the great answers.
I am an old "rate man" from the 1980s in the LTL trucking industry and still frequent the on line tariffs for railroads when bored (which might be soon if we are all confined).
Ed
Mac:
One major change sweeping the Class 1's at the point I retired last year was an insistence that private cars must now have OT5 (private car loading authority for lack of a better term) on the railroads serving ALL loading points. This differs from the traditional approach you note in your post where having OT5 on a car from at least one Class 1 granted you the right to load and ship the car on any Class 1.
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