Montana fights back against BNSF

[gabe]

QUOTE: Originally posted by Limitedclear

QUOTE: Originally posted by CSSHEGEWISCH



Nothing ruins a railroad like a BEANCOUNTER.

Have you ever heard the story of Jack and the Beanstalk? Well, there are a few accountants out there with nothing on Ol' Jack...

Just ask Mr. Ebbers...or check in at ENRON...lol...

We don't need no stinking beancounters....

LC

Accountants (beancounters) are not the problem and are probably more of a necessity. The problem in the cases cited above was massive fraud by the perpetrators aided in part by a lack of due diligence by more than a few people.

Try to see how long you can last in operating a business other than a sole proprietorship without any accountants unless you like paying the IRS more than necessary.

Accountants are similar to lawyers. The client needs beware of how much rope he gives either one...

LC

[MichaelSol]

QUOTE: Originally posted by cbt141

I noticed during all of this that the Illinois wheat prices were much lower than those quoted in Montana. Makes me wonder...could there be a conspiracy against Illinois farmers?" mp173
......
this is the problem with this thread...none of us know enough about the other fellow's businesss to be telling him what to do.

Well, I didn't notice anyone telling anyone else what type of wheat to grow. However, for anyone that cared to read, there was quite a bit of information regarding the importance of the type and quality of wheat and how that related to market price, that no one should have missed the point, even if it was not the point of the thread. In my case, and several others as well, discussions of market price of wheat must always show some care in identifying the type.

3/7 MS: rates on "0113710 grain".

3/7 arbfbe: "Some of the Montana wheat is a variety of hard red winter wheat that is sought after ..."

3/7, MS: "for the grain industry, understanding of market prices, rates, and market timing are keys to profitability, as is a minimal amount of knowledge about where it goes and where you might want to ship it."

3/12, MS: "For instance, taking the Fall of 2003 as an example, and it is fairly typical. Minnnesota farmers were receiving $4.06 per bushel for hard spring wheat. Montana farmers were receiving $3.68 per bushel."

3/13: MS: For instance, at Havre, $4.49 per bushel would be the price received for 15% dark northern spring wheat this week, per the following chart of selected prices. As you can see, quality is a key determining factor of price."

US 1 Dark Northern Spring Wheat
13 pct 14 pct 15 pct
Billings Area 3.42 4.22 4.87
Golden Triangle 3.35 4.15 4.75
Great Falls Area 3.58 4.21 4.77
Havre MT 3.14 3.89 4.49
Southeast MT 3.17 3.89 4.49
Southwest Mt 3.48 4.28 5.18
Minneapolis 4.22 5.00 5.78
Portland 4.38 5.20 5.83

3/13: MS:"That St Paul wheat is a pretty good price right now considering most of it will be used locally in St. Paul and Minneapolis."

3/13, MS: "Ed, if everyone had commodity markets figured out, we could all be Cargill. "

3/14, MS: "commodity markets are complex mechanisms and there are big contracts at fixed or negotiated contract prices moving under the surface of what are, in reality, spot market prices we read in the papers. Crops are often sold in the field at a negotiated price. If you watch the oil market; the spot market for that is above, below, and at the contract market price on a regular basis. People make and lose fortunes guessing the timing of commodity markets, the differential of the spot and contract market, and then of course add in "futures." Not a market for the timid or the uninformed."

3/14, MS: "There is a quality element as well; Japanese buyers like Montana wheat for certain processes. However, most of that is purchased in the field and never shows up on the published markets showing its "market" price."

3/15, MS: "Montana farmers would be receiving as much or more at the elevator than Midwestern farmers (partly because it is generally considered a superior wheat). "

3/12, MS: "One item clear from the postings on this thread is that nobody trades wheat. "

3/19, cbt141:" this is the problem with this thread...none of us know enough about the other fellow's businesss to be telling him what to do."

I have to admit, affer a couple of weeks of careful references to wheat type, and pointing out significant differences in market price even within a wheat type, depending on protein content, I could not figure out what Ed was talking about in complaining that Montana wheat was selling higher than Illinois wheat. Not a lot of soft red or white in Montana and not a lot of hard red in Illinois. Ed's apparently sarcastic remark about "a consipiracy against Illinois farmers" did not add any illumination to his query. I was left with the same reaction as his comments about how wheat barge traffic in Spokane, Washington affected grain rail rates: "what on earth is this man talking about NOW?"

Unlike Ed , I could not locate a market quote of comparable wheat types and so I let the comment pass. But I now see that, unlike Ed, I was looking for comparable wheat types.

I now understand that, repeated specific references to type and quality notwithstanding, Ed did not know what he grew on his own farm and that this type of wheat represents a different pricing mechanism, i.e. a different "market," than what was discussed primarily on this thread.

However, reiterating, I don't think anyone on this thread, which was about railroad shipping rates and captive rail markets, had much to do with recommending what people grow in Illinois, nor for that matter, Montana, but rather what it cost to ship their product based upon captive pricing practices.

Best regards, Michael Sol

[MP173]

It's a beautiful thing.

I dont understand why my wheat prices are lower and then here comes a logical explanation. Thanks CBT.

I would never question the farmer about what he is doing. I trust him to do the right thing, since I dont do that for a living.

ed

[Anonymous]

"My farm has wheat grown as a part of the crop rotation plan....corn, wheat, then plant beans after the wheat is harvested in June and have a short growing season.

I noticed during all of this that the Illinois wheat prices were much lower than those quoted in Montana. Makes me wonder...could there be a conspiracy against Illinois farmers?" mp173

your southern illinois farm produces soft red winter wheat, a low protien wheat used in the production of cookies, crackers, cake, pretzels, while montana is a producer of hard red winter, hard red spring and some hard white wheat (bread wheats). the montana classes are higher in protien and in the pricing of the last several years have carried a premium to soft red (not always true). before calling your farm manager with instructions to switch be aware that soft red gets a higher yield than montana hard wheats due to illinois' higher rain falls....soft red is the proper choice for your farm. it fits the climate and the demand needs of local mills, and handling limitations of neighborhood elevators more closely than hard wheat would.

this is the problem with this thread...none of us know enough about the other fellow's businesss to be telling him what to do.

[MP173]

My farm has wheat grown as a part of the crop rotation plan....corn, wheat, then plant beans after the wheat is harvested in June and have a short growing season.

I noticed during all of this that the Illinois wheat prices were much lower than those quoted in Montana. Makes me wonder...could there be a conspiracy against Illinois farmers?

ed

[greyhounds]

1) Illinois can grow more wheat by the side of the road than Montana can in the entire state. Wheat is an afterthought to farmers here.

2) The BNSF wheat rates from Montana are obviously way too low.
Why, because I keep insisting they are. Heck, that's the argument of Sol and FM the other way. They don't listen to reason and logic.

3) Neither Sol nor FM has produced one shred of evidence that the wheat rates are illegal, immoral or fatening. They just keep saying it.

4) Any Montana farmer with an ounce of common sense wishes his land was in Illinois.

[Anonymous]

QUOTE: Originally posted by jeaton

ed

Per careful. The country scrap dealers might be angry about haveing to pay more per mile than those big shot operators with their fancy crushers and shreders.

Jay

Scrap dealers generally aren't tied to any particular area like agricultural producers. No scrap dealer has ever lost a multi-generation place of residence due to the financial cosntraints of being captive to a single Class I railraod.

You can locate a scrapping operation just about anywhere, and the capital costs to do so are pretty low. Secondly, shipping scrap by rail is mostly done with single carload rates, and if those rates get too high, it is alot easier to shift the transportation of scrap to truck than grain.

But of course we understand that you were attempting to make a joke.......

[jeaton]

ed

Be careful. The country scrap dealers might be angry about haveing to pay more per mile than those big shot operators with their fancy crushers and shreders.

Jay

[MP173]

Can we start a discussion on scrap metal rates?

My favorite train, NS 177 usually has 40 to 50 gons of scrap and I have always wondered where they go, what the value is (probably more than wheat per pound) and what kind of freight rate they garner.

ed

[ajmiller]

This thread now has more replies than the Milwaukee Road thread from last fall.
Wow! Who knew that there was so much to say about rates for wheat shipments!

[MP173]

Michael:

Dont have time to analyze this too much as I must go sell and MAXIMIZE PROFITS today to pay for vacation next week....but

1. I am using 326 miles to Seattle, per Official Guide.
2. Neither you nor me will get the terminal costs. Those are well placed in the BNSF pricing model and probably arent available to us.

I am pretty much spent on this. Cant do it anymore. It is consuming my life. I wake up at night thinking about wheat. My girlfriend came over last night and inquired what I was doing on the internet...I had to admit the darkest of secrets..."I am discussing wheat commodity prices and freight rates from Montana to PNW."

She said "honey lets go to Dairy Queen, you need to get out."

I couldnt help wondering as I had my Oreo Mint Blizzard, I wonder what the freight rates are on the Hi Fructose Corn Syrup.

Michael, not to make light of this, because it is very serious for those in Montana, but this is up to the lawyers to decide. I am not one, and I assume you are, so good luck on your battle.

ed

[Anonymous]

when looking at various interior cash market prices for wheat it needs to be remembered that the prices are in "ranges" between bids and offers. this complicates the interpretation of the data since heavy volume may occur at one end of the range or the other, or the bids and offers can be just plain "nominal"(read: useless). this trashes any hope of using the data without knowing the weighting of price by volume. then again, a lot of ca***rades are just not reported. it is not as much of a problem with export bids and offers.
also much of the strength in minnesota cash wheat prices versus other locations has to do with the fact that minnesota has a very large mill demand. the mills pay up for reliable access to the supply of grist. wheat prices near mills are always premium.
almost all of the discussion on this thread regarding wheat pricing and movement contains comments and conclusions which, though appearing quite sensible and logical, would not be either made or relied on by anyone in the grain trade.
the data you folks are relying on is just to simplistic to be acted upon by any professional trader. i would suggest not basing any "policy decisions" on it......
manipulating this kind of soft data is probably what allows advesaries in the regulatory and legal hassels you mention to stretch cases out for decades. it is useless for practical application and invites misinterpretation and debate.

[MichaelSol]

QUOTE: Originally posted by MP173

Ok, so the new rates put us at this mileage:

Havre $3.18 per mile
Spokana $4.16 per mile
St. Paul $2.31 per mile

Havre is still right in the middle, as the medium haul, as you would expect.

This does seem to be getting quite complex.

Spokane/Portland: 3500 bu. $1357 per carload at a 100 carload rate or next available rate. 384 miles. Rate per mile including terminal costs:$3.53.
Havre/Portland: 3500 bu. $3181 per carload at a 100 carload rate. 890 miles. Rate per mile including terminal costs$ 3.57
St Pau/Portland. 3500 bu. $4148 per carload at a 100 carload rate. 1793 miles Rate per mile including terminal costs $2.31

Both the long haul and the short haul cost less than the Montana rate for Havre, and Havre represents one of the lower Montana rates, and Spokane represents one of the higher short haul rates.

Havre is not in the "middle" where you would expect.

And this includes no adjustment for the terminal costs which represent a much higher proportion of the short haul rates which is why the ICC refused to consider the short haul tariffs, as published, in McCarty Farms.

And, if you disagree with the $300 terminal charges (I do too) please substitute your version of what you think reasonable (I would be more inclined to use $150/carload) and report the results in terms of mileage rate.

Best regards, Michael Sol

[MP173]

Ok, so the new rates put us at this mileage:

Havre $3.18 per mile
Spokana $4.16 per mile
St. Paul $2.31 per mile

Havre is still right in the middle, as the medium haul, as you would expect.

Checking the Illinois wheat prices today, I noticed Montana prices are much higher. I wonder why?

ed

[MP173]

Michael:

This is getting rather complex, seeing who can get the lower rate. I am sure we can continue this....so for practical purposes, we have the rates of $1357 for Spokane and $2830 for Havre.

No doubt even lower rates exist.


I certainly wouldnt use your previously stated terminal costs of $300 per car as a standard. That may or may not be appropriate.

On a 10 mile haul, the deadhead time (miles to and from the terminal) would be minimal.

To get into the BNSF pricing software model would be interesting, but probably wont happen (at least not for me).

ed

[Anonymous]

QUOTE: Originally posted by CSSHEGEWISCH



Nothing ruins a railroad like a BEANCOUNTER.

Have you ever heard the story of Jack and the Beanstalk? Well, there are a few accountants out there with nothing on Ol' Jack...

Just ask Mr. Ebbers...or check in at ENRON...lol...

We don't need no stinking beancounters....

LC

Accountants (beancounters) are not the problem and are probably more of a necessity. The problem in the cases cited above was massive fraud by the perpetrators aided in part by a lack of due diligence by more than a few people.

Try to see how long you can last in operating a business other than a sole proprietorship without any accountants unless you like paying the IRS more than necessary.