I was reading an article on the UTU's website about several shippers and state governments complaining about the lack of rail competition in their states. The biggest complainers Idaho, Montana, and The Dakota's. Now doesn't that just beat all. They sure did not do much complaining in 1980 when the Milwaukee Road abandon Lines West and left BN Large and in charge. Funny how things come around. Any thoughts guys?
Matt
FutureModal - Is that you?
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
Who is FutureModal? Never heard of that name before.
What they don't like is that the railroads are doing pricing like the airlines. You can fly from Atlanta to Washington DC for $228 round trip, but a flight to Asheville NC is $618 round trip. A shorter flight costs the airlines less in fuel and equipment ownership, yet they are "allowed" to charge more.
Montana et. al. are complaining that the RRs are moving grain to the Pacific ports from farther east for less than they charge for Montana grain.
The RRs have a responsibility to their owners to maximize the net revenue on an ongoing basis and this pricing scheme does that.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
tree68 FutureModal - Is that you?
futuremodal is the name of a former forum poster who liked to discuss, at length, the issue you've asked about.
In a nutshell, for the mostpart, the states in question do not have enough population or traffic to support more than one railroad. Because of that, the railroads in those states have found it easier (or neccessary, depending on your viewpoint), to charge higher rates, than in areas with rail competition.
Some, like the shippers, for instance feel, that the railroads should be limited in how much they are able to charge. My recolection, is, that there were provisions in the Staggers Act that did that to some extent. Proving that a railroad is charging too much appears to be difficult and expensive. Others, like the railroads and their stockholders, feel the railroads should be able to charge rates competitive with the competition-trucks.
I live in S.D. Here, there is not much talk of this issue. Montana has lots of talk of the issue, partly due to some politicians up that way making it their issue.
Thanks to Chris / CopCarSS for my avatar.
Taking bets Tree?
What are your odds...
I'am saying 5 replies before he starts....
23 17 46 11
Reading Lines 1 Who is FutureModal? Never heard of that name before.
You should be so Lucky?
Ed, No Bets here!
(come on, you've got to have better odds than that.)
This is Halloween, not April Fools?
Being Crazy,keeps you from going "INSANE" !! "The light at the end of the tunnel,has been turned off due to budget cuts" NOT AFRAID A Vet., and PROUD OF IT!!
Easy fellas! The more new posters on the forum, the better. No need to scare off a new poster-just because it's Halloween.
Welcome Reading Lines1!. We're really not that bad of a bunch. Your question brought some old issues up from the dead-so to speak.
Reading Lines 1 , welcome to the forums. Didn't intend to scare you off - but your question was so dead-on to some of the rather heated discussions we've had here on exactly that question, as has been pointed out, that I couldn't help the dig.
We are a friendly bunch here, although we do have a few who don't pull any punches - and that's usually a good thing. It's a great place to share and learn!
Or that other "defender" of his.
Do I dare? Well, here goes. Many are crying foul about rail conglamorated mergers which have elmininated the choice of railroad to be used for shipping. Now it is either the railroad in town or truck. Idaho, Montana, North Dakota, et al., have one railroad but several lines. And even the shortlines and regionals are bracketed by BN lines, Thus, shippers have to rely on BN for traffic slots, car supply, and rates. And there are other regions and states in similar situations. This is the reason why some Congressmen are seriously looking at reregulation. Some feel they were betrayed by the railroads because when they supported deregulation they did so with the promise of more competition, not less.
RIDEWITHMEHENRY is the name for our almost monthly day of riding trains and transit in either the NYCity or Philadelphia areas including all commuter lines, Amtrak, subways, light rail and trolleys, bus and ferries when warranted. No fees, just let us know you want to join the ride and pay your fares. Ask to be on our email list or find us on FB as RIDEWITHMEHENRY (all caps) to get descriptions of each outing.
Reading Lines 1 I was reading an article on the UTU's website about several shippers and state governments complaining about the lack of rail competition in their states. The biggest complainers Idaho, Montana, and The Dakota's. Now doesn't that just beat all. They sure did not do much complaining in 1980 when the Milwaukee Road abandon Lines West and left BN Large and in charge. Funny how things come around. Any thoughts guys? Matt
Well, here's my opinion.
Montana and North Dakota are a long way from anywhere. They represent a huge expanse of land with very little population. People actually try to farm in Montana, although I'm not sure why.
Due to the Montana climate and soil, they basically are limited to growing spring planted wheat. The US produces about twice as much wheat as it uses. There is virtually no domestic demand for Montana wheat, it must be exported through Pacific Coast ports such as Portland/Seattle/Tacoma. The difference between what a Montana farmer gets for his wheat and what it sells for at the export terminal is largely the railroad freight rate.
This only means one thing to a Montana farmer; the railroad charges too much. Whatever they charge, it's too much. Period. An interesting thing happened after railroad economic deregulation. Montana wheat shifted to rail movement. In the years preceeding deregulation up to 39% of Montana export wheat moved truck/barge over the Snake-Columbia Rivers. Now if the railroad was "gouging" why would the wheat have shifted from barge to rail? It's nonsense. But this does not matter to a Montana farmer, in his/her mind the railroad charges too much.
This dispute has been going on since before deregulation. Some Montana farmers actually tried to file a class action suit against the BN in 1980 over the rates. The case wound on for years and hit Federal Appeals Courts twice. The railroad won.
But that doesn't matter to a Montana farmer (or a Montana politician looking for farmer's votes). The railroad charges too much in their minds and that's the end of it to their thinking.
I think Montana is a poor place to farm. I was at a high school reunion over Labor Day and talked to my old friends who are now seasoned farmers in central Illinois. They can do "winter wheat" as opposed to the "spring wheat" of Montana. (The Illinois wheat is planted in the fall and develops a root system before the winter sets in. It then goes dormat like your grass in the winter. In the spring it grows quickly since it already has established itself.) The Illinois farmers can then harvest the wheat and replant the fields with soybeans, getting two cash crops out of their ground in a year. Can't do that in Montana.
And the Illinois farmers are a lot closer to markets (including domestic) than the Montana farmers.
All in all, it just comes down to people in Montana and North Dakota blaming other people (in this case the railroad) for their problems and wanting politicians to transfer money from the railroad to themselves. Hopefully, that won't happen.
You've got some fast growing beans in IL. Here in IN, they leave the field fallow after harvesting winter wheat in July/Aug.
rrnut282 You've got some fast growing beans in IL. Here in IN, they leave the field fallow after harvesting winter wheat in July/Aug.
I don't think it's the beans, I think it's the wheat.
IIRC the winter wheat in central Illinois is harvested earlier than July/August. I'll check for sure next time I'm down there. I know I was talking to the farmer who was best man at my wedding (Why didn't he stop me?) and he flat out told me "Our best beans are behind our wheat."
Edit with more information:
Here's a link that discusses double cropping wheat and soybeans in Illinois.
http://www.illinoiswheat.org/about_il_wheat.html
The area I'm from is about 40-50 miles north of Springfield, but they're aparently able to do the double crop thing that far north. I don't recall it from my long gone youth, but then the farmers didn't brief me on their business plans. Things change.
All I remember is the summer jobs pulling the straw bales out of the balers and stacking them on the racks for $1.00/hour.
Further Edit:
The farm field about 1/4 mile north of me has rotated corn/soybeans since I moved here. This fall the farmer has wheat in it. I now live about 3 miles south of Wisconsin and it will be interesting to see if they try to double crop this far north in Illinois.
I am not this futuremodal that you all accuse me of, I don't even know the chap. I was just trying to get a little talk about Milwaukee Road's Line West going. I guess this forum is no different than the Eastern Ohio & Regionals message board and others that people ruined. I think I will be leaving now.
Matt Fisher
Ease up there Matt...
No one was accusing you of anything...simply the original post sounded a lot like FMs leading postings, where he would ask an innocnet question, then pick an argiument, simply to argue.
And no, this forum is not like any other...it is quite diverse, has people from all over, not only the US, but everywhere on all continents.
But the Montana and SD grain gripe is a pretty sore question here...it has been cussed and discussed to death in more threads than I can count.
Stick around a little, read some of the other posts, ask a few more questions before you get out of town...
Reading Lines 1 I am not this futuremodal that you all accuse me of, I don't even know the chap. I was just trying to get a little talk about Milwaukee Road's Line West going. I guess this forum is no different than the Eastern Ohio & Regionals message board and others that people ruined. I think I will be leaving now. Matt Fisher
ok
.
One interesting thing in that regard happened here in South Dakota AND there was a small article in Trains about it a couple of months back.
South Dakota bought up all of the Milwaukee Road track that was left in 1980, and BNSF leased what they wanted and the rest went to shortline operators. The largest shortline, Dakota Southern, leased the Mitchell to Kadoka line to service the elevators on the route. The only connection to the outside world DS has is with BNSF at Mitchell. A few years ago BNSF jacked up the freight rates to the point where it was cheaper for the elevators along DS to TRUCK their grain north to the DM&E.
Then BNSF wanted to BUY the tracks they'd been leasing for over 25 years. One of the provisions of the sale stipulated by the state of South Dakota was that Dakota Southern would get trackage rights on the BNSF from Mitchell to Sioux City. In Sioux City there are THREE railroads to compete for DS's business (I believe UP and CP or CN). Now that DS can get better shipping rates, grain trains will resume on DS in 2009.
Reality TV is to reality, what Professional Wrestling is to Professional Brain Surgery.
Actually those shippers and states did complain bitterly about the abandonment of the Milwaukee Road in 1980, and the loss of competitive rail service they thought would result.effect
Today, shippers such as North Dakota and Montana grain producers argue they should pay mileage-based transportation rates that are proportional to the transportation rates paid by Minnesota and grain producers. In other words, if you took the rate paid by a Minnesota farmer and divided it by the mileage to the market, rate/mileage = x, the per-mile rate paid by a Montana farmer to the same market is not x but something like 1.2x. The counterargument by the railroad is (1) that it is discounting its rate to the Minnesota farmer in order to compete with truck-barge combinations, increase its volume overall, and achieve economies of scale that benefit all shippers, and (2) the farmer in Minnesota is more advantageously located and thus its land rental is commensurately higher, too.
If the rates were regulated to require the railroad to make all rates proportional mileage-based and we then all agreed to be scrupulously hands-off on the system to see what happened (an interesting experiment the public has never had the stomach to take to a conclusion, for obvious reasons), the net result would be an end in railroad service to all farmers. In the specific case, the railroad would have to choose to make either the Montana farm the basis, or the Minnesota farm the basis. If the Minnesota farm's rates became the basis the the railroad's volume would still be the same but not its income. The rates would fall to the Montana farmer, the railroad's net return would decrease, the railroad would be able to invest less in its physical plant and equipment, and eventually railroad service would end to all shippers. Because the Montana farmer would still be farthest away from market their service would suffer first (lack of equipment, longer cycle times on equipment, longer transit times) and they would be the first negatively affected, forcing them to either truck (at high cost) or only be able to sell into market at times when the price was poor and more-advantageously located producers were not shipping. Moreover the decline in rates to the Montana farmer might encourage them to increase production, driving up demand for rail service at the same time the ability of the railroad to provide service was declining!
If the Montana farm became the basis then the Minnesota farmer would get lower-cost service from the trucker and cease using rail. The railroad's volume would fall, reinvestment would decline, and the Montana farmer would still suffer because his railroad service would end when the railroad ran out of equipment and track at the end of our experiment.
The railroad is not interested in declining freight that contributes to the overall system profit. The railroad is seeking to move the maximum possible amount of freight (in order to reduce unit costs) and achieve the maximum possible return on investment.
Montana farmers think they are subsidizing the Minnesota farmer but it's actually the other way around. If not for the Minnesota farmers the Montana farmers might have no rail service at all. The Minnesota farmers are from the railroad's perspective a marginal producer who gets rail service only if it can increase volume and lower unit costs for all shippers, whereas the Montana farmer is a baseline shipper whose costs decline every time the railroad can attract a marginal shipper like the Minnesota farmer.
This is why the STB and Congress have resisted calls for railroad regulation in cases such as the Montana grain producer.
RWM
For about half of my career, I had the job of buying transportation services and one of my biggest parts of the job was to get the best deal for the service we needed. There isn't a buyer of goods or services anywhere who wants to get stuck having to deal with the sole provider of any item. But such conditions do exist, and while other strategies are often employed to better deal with the problem, there is always going to be some who will "whine" to anyone who will listen who might be able to help make some kind of law that will provide relief from the price issue.
Few holding the job at the level I was at give much thought to the longer term consequences such as described above. Performance reviews get pay increases, bonuses and "atta boy's" based on meeting goals of cutting costs. If that means doing business with a trucker who will be gone in a couple of years because his rates didn't cover his costs, so be it.
Fortunately, as one looks higher in the management chain a more enlightened view may be found on the longer term result of buying cheap. To illustrate, when the top executives of the auto industry and other major companies came to realize that the potential for the total collapse of the Northeast rail system in the 1970's could bring down their own companies, they didn't hesitate to support the changes in laws that could, and did in fact, increase their cost of doing business.
By the way, for most of my time on the shipper side, the people I worked for and with would offer to make operating changes and investments that would let our carriers operate more efficiently-provided that the rates they offered would reflect some part of their improved financial condition. This approach often worked very well and certainly much better than trying to accomplish business goals with the cheapest service money could buy.
"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics
Railway Man Actually those shippers and states did complain bitterly about the abandonment of the Milwaukee Road in 1980, and the loss of competitive rail service they thought would result.effect... snip ... Montana farmers think they are subsidizing the Minnesota farmer but it's actually the other way around. If not for the Minnesota farmers the Montana farmers might have no rail service at all. The Minnesota farmers are from the railroad's perspective a marginal producer who gets rail service only if it can increase volume and lower unit costs for all shippers, whereas the Montana farmer is a baseline shipper whose costs decline every time the railroad can attract a marginal shipper like the Minnesota farmer.
... snip ...
If I'm reading your post correctly, having a second railroad in Montana would make the Montana farmers marginal as well, since there would be competition for the farmers' business. As for what could have kept the Milwaukee in eastern Montana, I would contend a much lower rate on the coal severance tax would have encouraged earlier development of the coal mines near Roundup and thus provided enough traffic to keep the Milwaukee running east of Roundup. This would have been the most help for the farmers south of the Missouri River.
As far as your point about marginal producers lowering costs for the baseline producers, that's only true if there are resources common to both the baseline and marginal producers. This also implies if there is a capacity shortage, the baseline producers get first dibs on that capacity. An analogy with the electric power industry is that an interruptible customer costs less than a non-interruptible customer.
Our community is FREE to join. To participate you must either login or register for an account.