Cedar Rapids, Iowa

[Backshop]

So it's less than 250 miles from Cedar Rapids to Chicago with I-80 the direct route.  With an intermodal ramp in Cedar Rapids, you'd have a short haul to Chicago, where the train would have to be busted up for multiple destinations.  I'd say it's cheaper and faster just to truck it to Chicago and rail it from there.

[greyhounds]

MP173

Greyhound: Backshop brings up a very valid point.  The meat going to food service companies such as Sysco, Gordon, and others who serve the restaurants (and particularly the big chains...McDonalds is delivered by Martin Brower) will take a much different path than that going to Wegmans, Walmart, Kroger, etc.  Much different paths. We dont know how that moves, my guess it is a bit more complex.   Ed

I'll agree.  You'll have to sit down with each potential customer and see how any system fits their needs.  Changes will certainly be required.

My Ex Wife used to work in distribution for McDonalds.  They streamline it as much as they can.  It is a cost to them and they don't want any additional loading/unloading or delays that add costs.  Same thing with grocers.  Groceries are low margin and any extra handling will cut that margin.

But you're right.  There's a need to sit down with each customer and try to fit your service to their needs.  The railroads would probably cede this task to a third party intermodal trucker.   

[BaltACD]

Shadow the Cats owner

I would call my marginal costs to the customer lower when it costs my boss 500 bucks to have each car switched out of our SIT yard by the BNSF when they get dropped or picked up.  That is a grand a car or half a cent a pound we have to charge our customers that buy the resins out of those cars.  If I know I am getting an extra grand in drop and delivery fees on a load I can deadhead my drivers about 300 miles we do still make a profit.  Also when your picking up a multi stop load most of the time your grabbing them in the same area.  It is rare that you have to go hundreds of miles to get the next pickup made.  Normally your going 5-10 miles to another cooling house or less to get that pickup done.  

 

They can beat us on the longhaul yes but for short and medium haul and also for cost of service well the OTR industy has them beat in spades.  For what the Class 1 railroads charge just in switching fees to service a local customer anymore a good OTR carrier can haul for that same customer a load up to 500 miles away for them at 2 bucks a mile and get it there before the railroad even gets the next train on the way for that city.  Yes the customer will have more trucks going there normally about 4 for every 1 railcar but the service level is worth it in the eyes of their CEO and their logistics departments.  Until the railroads start thinking that service to their customers is more important than lowering their Operating Ratios they are still going to be losing market share to the OTR industry regardless of costs.  Why you can propose all the service you want but until you deliver it on time and then get the empties that the customer needs back to them every single time so they can keep their production running they will not trust you at all.  

You are entitled to one placement and one pull of a car for FREE - it is a part of the freight rate and charges.

All moves between the original placement and the final pull are chargable, every time you move a car around in your SIT yard you are increasing your overhead..

[greyhounds]

Shadow the Cats owner

would call my marginal costs to the customer lower when it costs my boss 500 bucks to have each car switched out of our SIT yard by the BNSF when they get dropped or picked up.  That is a grand a car or half a cent a pound we have to charge our customers that buy the resins out of those cars. 

  

She goes on.

The BNSF is getting $500 per switch?  Their pricing folks are doing a good job.

The Cat's owner's post has nothing to do with what I've proposed.  I would never try to move meat in traditional railroad carload service.

[Shadow the Cats owner]

I would call my marginal costs to the customer lower when it costs my boss 500 bucks to have each car switched out of our SIT yard by the BNSF when they get dropped or picked up.  That is a grand a car or half a cent a pound we have to charge our customers that buy the resins out of those cars.  If I know I am getting an extra grand in drop and delivery fees on a load I can deadhead my drivers about 300 miles we do still make a profit.  Also when your picking up a multi stop load most of the time your grabbing them in the same area.  It is rare that you have to go hundreds of miles to get the next pickup made.  Normally your going 5-10 miles to another cooling house or less to get that pickup done.  

 

They can beat us on the longhaul yes but for short and medium haul and also for cost of service well the OTR industy has them beat in spades.  For what the Class 1 railroads charge just in switching fees to service a local customer anymore a good OTR carrier can haul for that same customer a load up to 500 miles away for them at 2 bucks a mile and get it there before the railroad even gets the next train on the way for that city.  Yes the customer will have more trucks going there normally about 4 for every 1 railcar but the service level is worth it in the eyes of their CEO and their logistics departments.  Until the railroads start thinking that service to their customers is more important than lowering their Operating Ratios they are still going to be losing market share to the OTR industry regardless of costs.  Why you can propose all the service you want but until you deliver it on time and then get the empties that the customer needs back to them every single time so they can keep their production running they will not trust you at all.  

[greyhounds]

The backhaul?  This is often a “Stopper”.  Someone points out that we’re going to have to move empty equipment back to Cedar Rapids and that’s the end of that. 

 

Well, the truckers also need to move empty equipment back.  You cannot balance the freight movements into and out of Cedar Rapids.  There’s more going out than coming in and we’ve got to deal with that reality. 

 

People in Iowa do consume imported Heineken Beer, French wine and orange juice, along with the other things that need to be brought into Iowa.  But there just aren’t enough Hawkeyes to consume enough of everything to balance the outbound freight volume produced by their tremendous output of food.

 

It’s a problem to be solved.  It’s not something to cause a “Give Up.”  I’m not going to give up until a doctor says I’m dead.  And I plan on arguing with the doctor about that.

 

There isn’t a freight transportation company in the world that doesn’t incur empty, non-revenue miles.  You can try to minimize them, but you cannot eliminate them.  Such miles are literally unsold production.  The transportation company has incurred the expense of producing the movement but gets no revenue for doing so.

 

The truckers do have one advantage regarding minimizing empty, non-revenue miles.  The truckers have much greater route flexibility than a railroad.  So, for example, after delivering a load of meat to a location near Boston a trucker can easily drive down (empty) to the Port of New York and New Jersey and get a westbound load of French wine destined to the Twin Cities.   He/she takes the wine to destination and then returns (empty) to Iowa for another meat load.  Try that with a railroad.

 

The railroads’ offsetting advantage is that they have much lower marginal costs than a trucker.  A trucker’s marginal costs incur by the truckload.  A railroad’s marginal cost largely incur by the trainload.  And that’s a big advantage for rail if the volume is available.   (Marginal cost are the added cost of adding one more unit of production.)  Think about it.  What are the added costs of putting an extra container of meat on an exiting schedule from Chicago to Boston?  I’ll say, not much.  There are some, but not much. 

 

What are the marginal costs of adding the empty westbound container to an existing Boston-Chicago schedule?  Again, I’ll say “Not Much.”  In this case what goes for one extra container on the existing trains can also go for 10-20 containers on those trains.

 

While the trucker has the advantage in reducing empty miles such miles are much less costly to a railroad.

 

Remember how I’ve proposed setting this up.  I have proposed establishing two new round trips per day between Cedar Rapids and Chicago.  Along with a new intermodal terminal in Cedar Rapids.  We have to do this because there is currently no such service in Cedar Rapids.  Those are real costs, and those costs must be covered with a required return on invested capital.  But currently the rail line has excess capacity and locomotives are in storage.  So. the cash start up cost are somewhat minimized.  Chicago and east just uses existing trains and terminals.  No new train miles, no new crew starts.  Money in the bank.

 

Railroads have a bad inherited practice of cost accounting using an individual load as the production unit.  It doesn’t work that way.  The railroad’s unit of production, and cost, is per train, not per container.  Get as much revenue on that train as possible if the load covers its marginal cost.

 

Obviously, we want to get every westbound load we can.  Work those ports hard and never, ever loose to a trucker on price.

 

 

 

 

 

 

[MP173]

Greyhound:

Backshop brings up a very valid point.  The meat going to food service companies such as Sysco, Gordon, and others who serve the restaurants (and particularly the big chains...McDonalds is delivered by Martin Brower) will take a much different path than that going to Wegmans, Walmart, Kroger, etc.  Much different paths.

We dont know how that moves, my guess it is a bit more complex.

 

Ed

[Backshop]

greyhounds

 

 

Backshop

We seem to be thinking that most meat that people consume goes straight from processing to end market with no stops in between.  Knowing the shape most Americans are in, I suspect that a lot of the meat is consumed when eating fast food, which may have one or two processing or storage locations enroute.

 

 

I don't think that at all.  But one thing is for certain, meat produced in Iowa and consumed in Boston needs to be transported to Boston.  Very, very little of the meat goes directly from a slaughter facility to a retail store.  

Why would this matter?

 

Because it all might be shorthaul.  It could go from the slaughterhouse to a processor to a fast food distribution warehouse to the retail outlet.

For example--it could get slaughtered in Iowa, turned into patties in Ohio and distributed from a warehouse in New York.

[greyhounds]

Backshop

We seem to be thinking that most meat that people consume goes straight from processing to end market with no stops in between.  Knowing the shape most Americans are in, I suspect that a lot of the meat is consumed when eating fast food, which may have one or two processing or storage locations enroute.

I don't think that at all.  But one thing is for certain, meat produced in Iowa and consumed in Boston needs to be transported to Boston.  Very, very little of the meat goes directly from a slaughter facility to a retail store.  

Why would this matter?

[Backshop]

We seem to be thinking that most meat that people consume goes straight from processing to end market with no stops in between.  Knowing the shape most Americans are in, I suspect that a lot of the meat is consumed when eating fast food, which may have one or two processing or storage locations enroute.

[MP173]

What we do not know is how does the meat flow to the customer.

I have two customers that I can think of off the top of my head which are distributors to grocery industry.  One is meat the other is a wide range.

The meat distributor receives refer trailers and then redistributes the meat to either smaller retail operators (regional groceries), restaurants, or perhaps even to the big retailers.  

The general reseller (their term) purchases product (either full or partial truckload) and then distributes...both refer and dry freight.  

My guess is that the current distribution supply chain is fairly efficient and does not incorporate full truckloads of meat from Iowa to each state.  My guess (only a guess) is there are partial truckload (volume LTL) on many of these shipments.

Perhaps we will learn more from this discussion.

Thanks Greyhound for your passion on moving meat from Iowa!

 

Ed

[blhanel]

Following with great interest (I live here!).

[greyhounds]

Just as information, how Tyson packages to its customers.  We don't buy meat/poultry from Tyson, we buy it from a grocer.  The grocer buys from Tyson.  The grocer is Tyson's customer.

Innovation - Tyson Fresh Meats

 

[greyhounds]

SALfan

Did you take into account the beef produced in Florida, which is one of the largest beef-producing states east of the Mississippi River?  I don't know how the industry is structured here, so I can't say where the cattle are "fed out", but it's easier to haul feed than live animals.  That makes me suspect the cattle go to feedlots somewhere in-state and are butchered in-state, but I don't know that to be true.

Well, below is what I'm going from.  The USDA data show Florida producing 36.1 million pounds of red meat in 2019.  I've got the Florida population at 21,477,737.  So that means Florida produced 1.68 pounds of red meat per resident.  The US per capita annual consumption of red meat was 111.2 pounds in 2019.  So I'll stick with the concept that Florida has to bring in a whole lot of red meat.

You're more than welcome to check and question my numbers.  I can make a mistake.  But in this case I got it right.  

Publication | Livestock Slaughter Annual Summary | ID: r207tp32d | USDA Economics, Statistics and Market Information System (cornell.edu)

 

Livestock Slaughter 2019 Summary: Released April 22, 2020, by the National Agricultural Statistics Service (NASS), Agricultural Statistics Board, United States Department of Agriculture (USDA).
Commercial Red Meat Production by Month – States and United States: 2019 and 2018 Total (continued)
[Includes total beef, veal, pork, and lamb and mutton. Data may not add to totals due to rounding]
State	2019 Total	2018 Total
	(million pounds)	(million pounds)
Alabama	9.4	13.8
Alaska	0.7	0.9
Arizona	464.9	468.1
Arkansas	4.2	4.2
California	1592.5	1448.3
Colorado	2189.9	2235.7
Delaware-Maryland	35.9	37.2
Florida	36.1	31.4
Georgia	167.5	158.9
Hawaii	9.2	8.1

[SALfan]

greyhounds

Florida itself needs to bring in 145 loads per day, 365 days per year to meet its meat demand.   

  

Did you take into account the beef produced in Florida, which is one of the largest beef-producing states east of the Mississippi River?  I don't know how the industry is structured here, so I can't say where the cattle are "fed out", but it's easier to haul feed than live animals.  That makes me suspect the cattle go to feedlots somewhere in-state and are butchered in-state, but I don't know that to be true.

[SD60MAC9500]

 

This is one of the reasons I back, and look forward to when East meets West. The Mississippi is an old barrier that needs to fall. I imagine inefficiencies in interline movement hinders markets from being developed to their full potential. Iowa would benefit from such a final round of mergers. Some significant freight lanes lie in the Midwest corridor. When it comes to backhaul it wouldn't be much a problem to fill the Westbound boxes with import traffic. Especially now that the East Coast has become a major player in ocean trade. 

 

greyhounds

The Chicago Hub exists.  We’ve got to use it to an advantage, not as a barrier or a problem.  The food from Iowa is going to various east coast population centers from Maine to Florida.  Some of it even goes to Canada.  The containers need to be sorted for destination somewhere.  Chicago is the perfect place to do the sorting.   Chicago currently originates expedited intermodal trains to several east coast destinations.  Adding Iowa food containers to those existing trains will result in low marginal costs.  But it will result in high marginal revenue.  Go for it.   (If I were doing this for any reason other than fun, I could buy information as to the current truck freight rates.  Last time I looked they were damn high.)   To get to those east coast trains we’re going to

To this day I still believe CSX's North Baltimore ICTF was built in the wrong location.

 

 

 

 

 

[MP173]

This is an educational discussion.

Ed

[jeffhergert]

Before I hired out on the railroad, I worked for 3 1/2 years for IBP at Perry, IA.  It was a two shift operation.  First shift did Nippon export.  They bought the hogs, directed how the cuts would be made.  This went out in ocean boxes.

Second shift did IBP hogs.  At the time, IBP did not have a line of case ready meats.  You couldn't buy an IBP labeled product in a grocery store at that time.  It all went out for further processing.  IBP did have some processing for commercial use, like pizza toppings, etc, but that was done at IBP plants set up to do that.  I left before Tyson took over, but IBP was trying to develope a line of meats to be sold in stores with the IBP name.

The Perry plant shipped out via railroad reefers frozen meat.  This was done through a subsidiary company in a wing of the plant, called the "freezer" by workers.

Truck load IBP product went out in full truck loads to customers.  There were some partial truck loads that would pick up at another IBP plant, or Perry might be the second or possibly third pick up stop.  The loads might also at times go to multiple stops for a receiving company.  Loads could be either boxes of various sized depending on cut or the big "combo" boxes.  I recall pork bellies, among other cuts, usually were in those large combo boxes.  (I remember Nestles being a receiver.  All I could think of was that they'ld be coming out with a line of chocolate covered port.) 

I worked the kill floor for the first six months, then went over to load out doing inventory.  I was also trained to load trucks and bill them out.  I worked 3rd shift, which usually started shortly before 2nd was done.  The rest of 3rd was like greyhounds said, the plant got a thorough cleaning.

One time once everyone else in loadout had left, a truck (actually a container of export meat) came back.  It had been picked up out of the drop yard, not directly out of the dock.  So when the driver went and weighed it at a local scale, he was overweight on his back axles.  He had done all the axle adjustments possible, but still needed about 1500 lbs moved forward.  So I moved it forward in increments of 5 and 10 lbs boxes.  Once we thought enough had been moved, he went to the scale.  He came back twice, needing more moved.  Finally, the third time was it, he didn't come back. 

I'd heard Nippon was a stickler for neat and tidy placement of the boxes.  I can tell you that by that last time, those boxes weren't in a neat and tidy arrangement.  Someone probably had a heart attack when they opened those container doors.

Jeff 

[Shadow the Cats owner]

My husband used to haul processed meat like bacon from OH to CA southern produce like peanuts Florida produce frozen foods from plants out east back towards the Midwest.  Cool Whip is made in upstate NY along with Yoplait plus whatever they can find to get back to the midwest.  Imported produce and dairy goods from overseas is a huge market that OTR drivers haul back from airports to the Midwest.  That and Specialty brewed beers are huge backhauls.  

[jeffhergert]

The Tyson plant in Denison no longer slaughters or processes meat.  They still do rendering for other Tyson operations.  The old operations office building across the street is now a church.

Jeff

[Gramp]

What would be loaded west from east coast cities on the road reefers today?  The reefers and tractors are getting back to Iowa at some cost now somehow. 

[caldreamer]

Just double checked my self.  The Google maps picture of the IBP (Tyson Foods) plant in Dennison, Iowa shows automobiles accross Lincoln Way, rail cars and trucks on different sides of the plant.  It looks like it is still an active plant.

[tree68]

While containers and covered hoppers are hard to judge, I find that many of the symbol pairs seen through Deshler are loaded in one direction and empty in the other.  That includes steel, taconite, coal, coke, autos, oil, ethanol, potash, and grain.

[MP173]

I like this discussion, but I see backhaul as being a huge issue.  It would be interesting to know the backhaul situation on CSX and NS...how many of these JBH, Schneider, EMP, and other domestic containers are moving empty from the east coast?  About the only thing the east coast is producing these days in quantity is trash.

Take a look at the daily Selkirk Columbus train Q635 someday and count the loaded gons of trash.  Usually about 70 - 90 per day.  Could trash be handled in these containers and then sanitized for food grade?  I doubt it.

Ed

[Overmod]

greyhounds

Those Cedar Rapids – Chicago trains, they operate with a one-person crew.

Makes me immediately think of the C&NW Falcons.  Any similarity in how the trains or blocks can be made up to facilitate the appropriate 'comparable' union understanding?

How do the special 53' containers with slimlines make it back to Chicago (to be shuttled back to Cedar Rapids) expeditiously to hold the overall cost of containers and service to a minimum?  Are there alternate lanes for backhaul that would serve to get them back 'more profitably' with the necessary assurance?

What is the point where 'full loading' of the 53' length goes into on-road overload with reefer container plus underframe, vs. TOFC on properly constructed (heavier) van trailers (for the anticipated initial traffic)?  Is there a point where there is actual loadout before cubeout for the 53' containers (unless we're assuming they will often or always be bulk-broken/cross-docked at the end-terminal "intermodal" facilities rather than promptly sent outbound from there as 'loaded' -- a case could be made for that)?

[greyhounds]

OK, let’s start with some basics.

 

With the distances and volumes involved the economics of double stack, effectively used, will beat any other method of transportation.  The relatively recent development by Thermo King of a slim refrigeration unit for containers allows a 53’ rail reefer container to hold 15 rows of pallets vs. the previous 14 rows.   This is a critical development because a 53’ highway reefer can hold 15 rows.  Rail containers were at previously at a volume disadvantage.  That’s no longer the case.

 

The Chicago Hub exists.  We’ve got to use it to an advantage, not as a barrier or a problem.  The food from Iowa is going to various east coast population centers from Maine to Florida.  Some of it even goes to Canada.  The containers need to be sorted for destination somewhere.  Chicago is the perfect place to do the sorting.   Chicago currently originates expedited intermodal trains to several east coast destinations.  Adding Iowa food containers to those existing trains will result in low marginal costs.  But it will result in high marginal revenue.  Go for it.   (If I were doing this for any reason other than fun, I could buy information as to the current truck freight rates.  Last time I looked they were damn high.)

 

To get to those east coast trains we’re going to originate trains at a Cedar Rapids intermodal terminal and run them to a CSX or NS terminal in Chicago.  The eastern railroad is going to have to unload the containers from the railcars and then reload such containers on to an outbound train to the desired destination.  That’s part of their marginal cost.  If the UP can originate a decent block for a particular destination, maybe the unloading/loading thing can be skipped on those loads.

 

Meat production generally runs two shifts per day.  The 3^rd shift in the plant is given over to cleaning and sanitation.  So, ideally, we’d like two eastbound departures per day running into Chicago.  Keep it moving. 

 

Cedar Rapids itself doesn’t produce much meat.  We’re going to draw in by drayage meat produced nearby in places such as Waterloo (Tyson pork), Tama (Iowa Premium Beef), and Marshalltown (JBS Swift pork).  Cedar Rapids does produce great gobs of breakfast cereal.  (It’s that Iowa food thing again.)  Quaker claims to have the “World’s Largest Cereal Factory” in Cedar Rapids.  Their factory kicks out 100 truckloads per day.  Nothing moves out by rail.  That needs to be fixed.  General Mills also has a major cereal plant in Cedar Rapids.  Get the freight on the railroad.  You don’t make money by not hauling freight.

 

One more thing.  And this will get me in trouble.  Those Cedar Rapids – Chicago trains, they operate with a one-person crew.  I fully support workers getting good pay, decent and safe working conditions, good benefits, a good retirement plan, etc.  But I strongly object to paying two of ‘em to do a job that can be done by one.

 

I'll add that this is a great time for the UP to try something such as this.  They've got locomotives in storage and people on layoff.  Their own marginal cost is going to be quite low.  Take a shot.

 

[MP173]

Thanks Cats.

So, the issue is not where the beef is consumed per se, it is where the next step is in the supply chain.  We know that if the meat is going to a big retailer it is going to a distribution center for final mile delivery, probably on the retailer's own trailer to the store.  Thus, the keys are...where is the beef process, and where is it shipped to for final mile.

My guess is that there is considerable LTL movements on the meat, probably more than anticipated....just a guess.  I have a customer who is a refer LTL carrier in Chicago.   Next time I am in front of them (who knows when that will be) I will engage in topic.

 

ed

[Shadow the Cats owner]

Most meat nowadays is shipped in either cyrovac primal cuts for further cutting at the stores or fully cut into retail cuts for sale on the direct sale to consumers.  On the production of deli meats it is shipped in 1 ton combo bins of whatever cut that manufactor requires.   So if you buy a pork butt from the store that is in a cryovac pack that is how it left the packing plant.  Same with any beef cuts like that.  Ground meats in those tubes are packaged at the plants.  

[Overmod]

greyhounds

Got to use 3PL.  Otherwise we'll spend a decade or more developing backhauls.

But then we have to sit through another round of hearing about why not using full vertical integration leaves money on the table.

[Overmod]

greyhounds

I don't know of any meat that still shipped on the hook.

I think there is a considerable aggregate demand for 'larger' cuts of meat that are then finished or dressed in both specialty and supermarket meat markets.  Every Whole Foods I've been to (and it's a big number; I have 'that kind of wife') cuts many of its case meats; a number of stores have taken to providing large hanging cuts -- small demand individually, but I suspect aggregate demand might be significant, and might increase dramatically if reliable and inexpensive service were to be guaranteed or promised.

I may not see this correctly -- but I think all the different options are equally 'grist for this mill' -- they can all be packed/encapsulated to ride together, and dunned, and even the packaged items would benefit from reasonable CA and temperature control, so in theory all the long-distance units could be common, or different types of unit 'blocked' for efficient handling.  And they all fill up a train faster together than 'separately routed'...