Montana fights back against BNSF

[tatans]

We here in Canada have some bizarre shipping methods "the Crow Rate" (a preferential system of shipping grain) and we solve our problems by letting the Provinces and Federal Government build a pile of grain cars---aahhhh socialism eh?

[csxengineer98]

with all this talk of prices per car load...... the 2 main activests have yet to tell me where the blackmail money (increesed proporty taxs) gained from BNSF is going to go....you 2 want to keep going around and round about cost per unit movement rates..and what not..but im still wanting the awnser to my question....
csx engineer

[MichaelSol]

Well, this is absurd, what I quoted you on is exactly what I quoted you on, and not something different. This is exactly like the above: when you stated, "I refered to the average number of cars per shipment, not per state ," when in actual fact you said " In 2002 the average wheat shipment from Montana was only 14.24 cars. From Minnesota it was 50.64 cars, and from Nebraska it was 50.43 cars." which is exactly what you said.

If you only said that switch crews were part of the rate structure, there is nothing in my comments to disagree with the observation insofar as compensatory rates are concerned. However, since this whole thread has been about the discriminatory difference in rate structures, your vigorous assertion that somehow this overlooks the element of yard costs is patently absurd unless there is some reason that Montana wheat is handled differently than both long haul and short haul wheat. If not, then it is a constant across all shipping alternatives and does not -- get that -- does not explain anything about why Minneapolis [long haul] and Spokane [short haul] wheat is offered rates lower than Montana wheat by the same company usng the same equipment on the same tracks to the same destinations.

If you were offering nothing that illuminates that rate differential, and taking plenty of words to do it, what then was your point, and what is it now? If there is not an economic justification, then the alternative and probable explanation is what Futuremodal intially suggested: outright exploitation and discrimination against helpless shippers.

Best regards, Michael Sol

[Anonymous]

I've been mulling over some basic solutions (those that don't require arguing over semantics) to the problem at hand... There is the UP Montana Sub running north from Monida to Silver Bow. I've always wondered why the M&S folks at UP haven't been trying to cajole more wheat being shipped out via the Montana Sub, over Monida and making a hard right at Pocatello for Points West. There is only one loadout facility a Silver Bow (I think) as it stands...it would require some construction of loadout facilities akin to the new elevator at Pompeys Pillar adjacent to I-94. Granted Monida is still technically a helper district (although the last helpers in Monida vanished many years ago with the ore trains)...a dupe program for unit grain trains could be established...you could even leave them entrained for the trip across the Nampa Sub (eliminating the need for a shove from the Glenns Ferry Helpers).

The only way the MRL could benefit would be to establish a 'hard' connection to the UP; either at Spokane or Silver Bow. That will probably never happen in my lifetime; BNSF held onto the Garrison-Helena segment of the ex-NP mainline at the creation of the MRL to protect the UP-Montana Western Interchange. Now, with the Montana Western gone, its strictly BNSF and UP at Silver Bow; probably until the rails start growing rust. I suppose if the folks at MRL were really ambitious they or the UP could rebuild the Milwaukee down through Deer Lodge to Silver Bow...who knows; stranger things have happened. Oh well, these are just some random thoughts. My ramblings and a buck will get you a burrito at Taco Hell. :)

[greyhounds]

QUOTE: Originally posted by futuremodal

Greyhounds, what you don't seem to understand is that there is no connection between the higher rates paid by Montana shippers and the "average" carloads of grain from the various states. Since most grain shipments come in 100 car shipments,

Yes there is. The average I cited was the average cars per shipment. Now according to the Banks Study, in 2002 there were 30,111 carloads of wheat shipped from Montana in 2,114 seperate shipments - an average of 14.25 cars/per shipment. This is significantly below the average shipment sizes for wheat originating in Minnesota and Nebraska. If you ship in smaller quantities you're going to pay a higher per unit rate since economies of scale do exist in railroading. There is a relationship between average shipment size and the cost/rate per unit moved.

And if "Most" Montana wheat moves in 100 car blocks, as you claim, then the average shipment size would be much higher than 14.25 cars. Again, do the math.

QUOTE:
Therefore, if it is costing shippers more to ship a 100 car lot from Montana than it is from farther away e.g. the economies of scale are being maxed for both locales, there is no other conclusion but that rate discrimintation is taking place.

Well, if you cite some specific rates on 100 car lots we can go on with that.

If we look at Sol's numbers on 50 car lots we see that the BNSF charges $48,350 LESS to move such a shipment from Haver to Portland than it does from Minneapolis to Portland. Now charging $48,350 LESS is not charging more as you claim.

Why on Earth do you claim that $48,350 less is actually more?

[greyhounds]

Well, this is what I said:

"The terminal costs at origin and destination, all things else being equal (note well again), do not change with the length of haul. This has been a well recognized facor in railroad rates for 125 years or so. It was enshrined in the infamous "Rail Form A" costing methodology imposed by the Interstate Commerce Commssion."

I said, all things being equal, the terminal cost did not change.

Then this is what Mr. Sol falsely said I said:

QUOTE: Originally posted by MichaelSol



When you have evidence that the terminal costs are higher -- 65% higher -- for Montana wheat than Minnesota or Spokane wheat, I will be very interested to see it, and to read your explanation as to why Montana wheat is so expensive to handle in Kalama compared to Minnesota or Washington state wheat, and how this justifies in any way, shape or form the higher rate.

I would consider it a very useful contribution if you can explain to me, and perhaps the entire railroad world, how you support your contention that terminal costs are significantly different, justifying an otherwise discriminatory rate, for moving the same commodity, on the same railroad, often on the same trains.

Best regards, Michael Sol

I didn't say they were different, I said they were the same under similar circumstances. Why the distortiion?

[Anonymous]

QUOTE: Originally posted by StillGrande

Futuremodal,

You are arguing that short haul railroading is more economical than long hauls? Of course the rate per mile on long distance is cheaper than short hauls. That is why railroads work. That is why they want to get rid of branchlines. No money in the short run. It costs them the same in equipment. It become cheaper the further you take it.

Be careful how you frame the question. I did not say short haul railroading is more economical than long hauls. I said the haul from Minnesota is longer than the haul from Montana. Both are considered long hauls (1000+ miles), so both should have the similar economies of scale, and the only differences should acrue from the fact that it takes more fuel, labor and equipment wear and tear to haul 10,000 tons from Minnesota than from Montana. After a certain point, increased mileage should result in increased costs.

Note also that the long haul rates from Nebraska are less than the long haul rates from Montana, despite the fact they are relatively the same distance from the PNW ports.

[StillGrande]

Futuremodal,

You are arguing that short haul railroading is more economical than long hauls? Of course the rate per mile on long distance is cheaper than short hauls. That is why railroads work. That is why they want to get rid of branchlines. No money in the short run. It costs them the same in equipment. It become cheaper the further you take it.

[MichaelSol]

QUOTE: Originally posted by greyhounds

[But since you deny that terminal handling is an actual cost component of rail movement ( I guess switch crews work for free.), you work up some meaningless number and make a big deal that the per mile charge is higher from Montana.

Of course I think that switch crews work for free! That's the only way that Minnesota wheat could possibly get such good rates.

Well, this is why these conversations get ridiculous.

When a shipper gets a particular rate, no doubt the railroad factors in its costs. I hope so. There is however such a thing as a noncompensatory rate. However, assuming that rates in this case are rational, that is, compensatory, then the difference between a compensatory rate, and a rate significantly above that rate, imposed on only a select few shippers, not because of ability to pay, but because of inability to pay for an alternative, is a difference that does not include a cost component for terminal handling, because that cost component is already figured into the compensatory rate.

What you attempted, unfairly I think, to suggest was that terminal handling costs are ignored. No, what I am suggesting is that ithere is no basis for including those costs twice as the justification for a differential rate.

The issue, which you have wisely avoided, is that BNSF charges given rates for a very long haul that more closely resemble its rates for a relatively short haul, and charges significantly more -- 65% more -- for an intermediate haul, without any proof offered by you, whatsoever, that terminal crews spend any more time on the intermediate haul wheat than they do on the longer or shorter haul wheat.

When you have evidence that the terminal costs are higher -- 65% higher -- for Montana wheat than Minnesota or Spokane wheat, I will be very interested to see it, and to read your explanation as to why Montana wheat is so expensive to handle in Kalama compared to Minnesota or Washington state wheat, and how this justifies in any way, shape or form the higher rate.

I would consider it a very useful contribution if you can explain to me, and perhaps the entire railroad world, how you support your contention that terminal costs are significantly different, justifying an otherwise discriminatory rate, for moving the same commodity, on the same railroad, often on the same trains.

Best regards, Michael Sol

[Anonymous]

Greyhounds, what you don't seem to understand is that there is no connection between the higher rates paid by Montana shippers and the "average" carloads of grain from the various states. Since most grain shipments come in 100 car shipments, I suspect the R.L Banks study is averaging them out, e.g. it is simply a statistical anomoly. If Montana only produced 28 100 car shipments, and Minnesota produces 100 100 car shipments, the economies of the shipment are the same. It may be that the Montana grain shipments only utilize 1 carset, while the Minnesota grain shipments utilize 5 or so carsets. Either way, the equipment is being utilized without differentiated downtime, so the cost covering revenue from the capital investment is the same on a per mile basis, and it is logically higher for the longer haul. Therefore, if it is costing shippers more to ship a 100 car lot from Montana than it is from farther away e.g. the economies of scale are being maxed for both locales, there is no other conclusion but that rate discrimintation is taking place.

[greyhounds]

QUOTE: Originally posted by MichaelSol

The BNSF does not publish a rate for an "average shipment" from a particular state and neither does anyone else.

If anyone understood what you meant, they understand something that does not exist. I did not understand the concept when you wrote about it and linked the idea to "average shipments" from "different states", and if RL Banks wrote about it in that fashion, I don't understand RL Banks either. Two goofy references to uncomparable metrics doesn't add to the credibility of either source., and it doesn't get any better by three, four or five goofy references to it.

I did not rely on the RL Banks figures for anything, and so any reference to any invalidity in published BNSF rates, digging out a figure in a study that no one referred to (as a source for any specific rate), as a means of discussing the current figures (which I used) for comparable shipment sizes (which I did) is supposed to show what, about what?

Stick to the publshed figures for comparable shipments, and the discussion is useful because it makes sense.

There is no statistical support in the published rate structures that remotely suggests that "Average" shipment sizes from different states have anything whatsoever to do with published rates charged passing through a completely different state.

Best regards, Michael Sol

I know you don't understand.

The R.L. Banks study was commissioned by the Montana Senate. I specifically referred to a table in the study that purported to show that the rates from Montana were higher than the rates from other states.

I took a look at thier numbers and noticed that the average shipment size from Montana was less than one third of the average shipment size from Minnesota and Nebraska. I said that their comparison was invalid because it did not compare like to like.

I never said that the railroad was establishing rates based on average shipment sizes.

Now if you don't understand that, It's your problem.

As to your own figures, they show that it costs over $900 less to ship a carload of grain (in 50 car units) from Montana to Portland than from Minneapolis to Portland. But since you deny that terminal handling is an actual cost component of rail movement ( I guess switch crews work for free.), you work up some meaningless number and make a big deal that the per mile charge is higher from Montana.

Yes, it is. But that doesn't mean anything is wrong. All things else being equal, a shorter haul will have a higher per mile cost than a longer haul. This is because the terminal costs don't go down with length of haul.

Again, if you don't understand that, It's your problem.

[MichaelSol]

The BNSF does not publish a rate for an "average shipment" from a particular state and neither does anyone else.

If anyone understood what you meant, they understand something that does not exist. I did not understand the concept when you wrote about it and linked the idea to "average shipments" from "different states", and if RL Banks wrote about it in that fashion, I don't understand RL Banks either. Two goofy references to uncomparable metrics doesn't add to the credibility of either source., and it doesn't get any better by three, four or five goofy references to it.

I did not rely on the RL Banks figures for anything, and so any reference to any invalidity in published BNSF rates, digging out a figure in a study that no one referred to (as a source for any specific rate), as a means of discussing the current figures (which I used) for comparable shipment sizes (which I did) is supposed to show what, about what?

Stick to the publshed figures for comparable shipments, and the discussion is useful because it makes sense.

There is no statistical support in the published rate structures that remotely suggests that "Average" shipment sizes from different states have anything whatsoever to do with published rates charged passing through a completely different state.

Best regards, Michael Sol

[greyhounds]

QUOTE: Originally posted by MichaelSol

Greyhounds March 7

QUOTE: Well, yes. The average number of cars shipped by a state is absolute baloney. Is that anything like Abolute vodka? And the "state" isn't shipping anything, now is it?

But nobody talked about that, I refered to the average number of cars per shipment, not per state

But, that's being slippery. Greyhounds on March 6 had actually posted

QUOTE: In 2002 the average wheat shipment from Montana was only 14.24 cars. From Minnesota it was 50.64 cars, and from Nebraska it was 50.43 cars. Why is this important?

Whatever. It happens to be exactly what you said. Your interesting post clearly speaks of states and how many cars "from Minnesota.... from Nebraska." Absolute vodka aside, I would hardly think the specific statement is out of context in ths same way that you often take things out of context in order to unfairly attempt to prove a point.

I think most people, aside from Mr. Sol, understood my March 6 post.

The table in the R.L. Banks study purported to show that the per unit charges on wheat from Montana were higher than the per unit charges from other states. I pointed out that the average shipment from Montana was significantly smaller than the average shipment from two other states. This makes the comparision in the study invalid.

I am confident that most people well understood what I said.

[gabe]

Man,

I would love to see how much dialop would be generated by a law that would have a chance of being passed and approved by the courts.

Gabe

[daveklepper]

Questions: Don't mountains to climb and snow to remove affect the cost of running trains? Can that be part of the rate structure situation?

[csxengineer98]

grayhound...
well put... game..set....match....
csx engineer

[csxengineer98]

QUOTE: Originally posted by MichaelSol

greyhounds March 6

QUOTE: In 2002 the average wheat shipment from Montana was only 14.24 cars. From Minnesota it was 50.64 cars, and from Nebraska it was 50.43 cars. Why is this important?

greyhounds March 7

QUOTE: Well, yes. The average number of cars shipped by a state is absolute baloney. Is that anything like Abolute vodka? And the "state" isn't shipping anything, now is it?

But nobody talked about that, I refered to the average number of cars per shipment, not per state

Whatever.

Best regards, Michael Sol

what ever? page after page of bleeding heart posts.... that is the BEST you can come up with when the facts hit home? in all honesty...im a little disapointed..i would have expected something a bit more intersting to read then just WHAT EVER.....
(doing a valley girl impreshin) what ever...ahahahah.... its like...what ever man.... im sooooo out of my leage here..... so all i can say is what ever......
lol..i love this place...
csx engineer

[MichaelSol]

Greyhounds March 7

QUOTE: Well, yes. The average number of cars shipped by a state is absolute baloney. Is that anything like Abolute vodka? And the "state" isn't shipping anything, now is it?

But nobody talked about that, I refered to the average number of cars per shipment, not per state

But, that's being slippery. Greyhounds on March 6 had actually posted

QUOTE: In 2002 the average wheat shipment from Montana was only 14.24 cars. From Minnesota it was 50.64 cars, and from Nebraska it was 50.43 cars. Why is this important?

Whatever. It happens to be exactly what you said. Your interesting post clearly speaks of states and how many cars "from Minnesota.... from Nebraska." Absolute vodka aside, I would hardly think the specific statement is out of context in ths same way that you often take things out of context in order to unfairly attempt to prove a point.

QUOTE: Actually the old sharecropper portion was 1/2, not 1/3. My daddy was a sharecropper, although they didn't call it that in Illinois. He farmed another man's land and 50% went to the landlord. You could get your facts straight.

Good grief. Sharecropping generally took between 25 and 60% of the crop. The percentage depended on 1) local tradition, 2) crop type, 3) contribution by the tenant (equipment, seed etc). If the landlord provided the equipment, the share was 50% or more; in Montana, which is where we happened to be talking about, sharecroppers traditionally provide the equipment, usually the seed (depends, wheat yes, alfalfa no) and fertilizer. The crop percentage is traditionally 1/3 of the crop. When we talk about freight rates in Illinois, we can appropriately talk about sharecropper percentages there, but we are talking about Montana, the thread seems to say and so the "straight facts" regarding Montana are perhaps more appropriate to this discussion than something that happened to your family in Illinois. The "sharecropper " remark is one that has been used frequerntly in sworn testimony by Montana wheat farmers when discussing the impact of the BNSF rate structure on penalizing Montana farmers while in effect offering a shipping subsidy to famers as much as 1000 miles distant.

CSXengineer. I had postulated that you would not care to do identical work and receive pay differentials. You then argued that mileage differences result in pay differentials. It seemed apparent to me that you were talking about differences (mileage) and in that case they aren't really the same jobs, are they? And certainly not in the same place at the same time, as compared to High Line wheat and Minnesota wheat both going over the same track at the same time at significantly different rates.

Given your affinity for interesting and inexplicable comments, that if you were charged $3.45 per gallon of gas, and your competitor was always charged $2.41 per gallon by the same gas station, but the owner justified the difference by telling you "you don't travel as far, so it actually costs you LESS than the other guy, you should be HAPPY that I charge you 65% more per gallon!"' you would have some charming things to say, I am sure.

However, since my comments are obviously written in a Russian dialect you do not understand, explaining the market and pricing impact over time, and how this advantages one competitor over the other, and any other differences it might make, is pointless.

And, to the gentleman that thinks that Spokane enjoys water/barge transportation and that this "explains" the drop in rates even though a much shorter haul, you will have to show me how barges get up the Columbia much past Kennewick, let alone Grand Coulee Dam, then up the Spokane River past Long Lake dam and several others to Spokane. I haven't seen it done.

I think the Union Pacific Railroad is a better explanation as to why wheat from the Inland Empire gets a better rate than Montana wheat (strangely enough, violating the controlling mathematical impacts, alleged in an above post, of terminal handling time, haul length, etc).

Best regards, Michael Sol

[MP173]

Michael:

I know when to bow out.

I am in over my head here. I know very little about wheat movements and the economic factors involved.

Not to say I dont understand rates, transportation marketing, and economics of transportation. I simply dont know where the wheat moves and at what cost. My transporation background involved (note the past tense) general ratemaking including fixed and variable factors, and specific pricing structures that provided innovative solutions to customer specific issues.

But, all of the tariffs, cost structures, P&D studies, etc. was simply a guide. It came down to how much can we get based on market conditions.

I responded to your comment of a carload rate of $4223 from Minneapolis vs a carload rate of $3256 from Montana and your comment that the Montana rate was 65% higher. No where did I see a response to that. Instead now we discuss Duluth, New Orleans and other points....which is my point, actually two of my points 1. Market conditions 2. I am way over my head as I dont know where the stuff moves and why.

Regarding my theory of why rates exist...that is very simple. Rates are an opening offer for services to be provided. That offer obviously can either be accepted, refused, or negotiated. Factors influencing the negotiation are rather obvious to those of us who negotiate price, terms, quality, and service levels on a daily basis. The free market is a very fluid market in which factors change daily if not more frequent. Thus all of the academic studies and consultants in the world have very little influence when the bell rings.

Wheat prices (and other commodities) vary by the minute based on a number of market factors. Is it not reasonable to expect transportation prices to also face those market pressures?

Regarding the offer for me to call the BNSF....thanks for the compliment, but I think I will keep my day job.

Best wishes to those in Montana looking for lower rates and higher profits, those are noble pursuits.

ed

[greyhounds]

QUOTE: Originally posted by MichaelSol

Well, people have this just about exactly backwards, which is dangerous in war, pregnancy, and economics.

The average number of cars shipped by a state per train has absolutely nothing to do with the rate structure. That is absolute baloney.

Well, yes. The average number of cars shipped by a state is absolute baloney. Is that anything like Abolute vodka? And the "state" isn't shipping anything, now is it?

But nobody talked about that, I refered to the average number of cars per shipment, not per state. As the volume of the shipment goes up, the cost per unit shipped goes down.
Volume discounts are a valid business practice. If I buy 500 pounds of dog food, I'm going to pay less per pound than if I buy it by the can.

What I mentioned, in case your read it, was that the "study" made a false, misleading comparison between the unit costs on 14 car shipments vis a vis 50 car shipments.

QUOTE:
As of this morning, the rate for identical carloadings is as follows: On a 50 car train, covered hopper car LO designation, 0113710 grain, the rate, Minneapolis to Portland, is $4,223 per carload. The rate from Havre, MT to Portland, 50 cars, 0113710 grain, is $3256. per carload.

On a mileage basis, the Minneapolis shipper is paying $2.36 per mile; the Montana shipper is paying $3.65 per mile even though handling on both ends is identical. and the cost per mile is identical to the railroad.

Yes, you're right again. All things else being equal (please note well that last phrase), a shipment, or passenger for that matter, is going to be charged a lower per mile rate on a longer haul that a shorter haul. That's just math.

The terminal costs at origin and destination, all things else being equal (note well again), do not change with the length of haul. This has been a well recognized facor in railroad rates for 125 years or so. It was enshrined in the infamous "Rail Form A" costing methodology imposed by the Interstate Commerce Commssion.

A simple formula has rail costs is: Origin Terminal Expense + Line Haul Expense + Destination Terminal Expense = Total Cost. (Then you add in equipment ownership costs, which skyrocket with terminal handling.) Since only one of the three costs elements in this formula shrinks with reduced length of haul, the cost per mile will go up as the length of haul goes down. You do the math.

What you're doing is a very typical activist tactic, you're taking a totally natural result and demonizing it. Of course the rate per mile from Montana is higher than the rate per mile from Minnesota. The terminal costs are pretty much the same. Only the line haul costs reduce. Do the math. It's as it should be.

QUOTE:
And the rate differential is not a long haul consideration; the rate from Spokane to Portland is also cheaper, per mile, than Montana's, costing less per mile per carload to load and ship 26 cars, Spokane to Portland, as to ship 109 cars from Montana to Portland.

Neither distance nor handling is the controlling factor for rail rates for Montana wheat.

By Golly, you're right again. Niether distance nor handling is THE controlling factor. But you are misleading by wrongly using the definite article "The" instead of the indefinite article "A". Using the wrong form of the article is another typical activist tactic.

If you said: "Niether destance nor handling is A controling factor," you'd be very wrong, and you are very wrong. You just wrote you words in activist's terms.

QUOTE:
Rates are not set based on what the railroad thinks other shippers in the state might be shipping in terms of average carload numbers. That is preposterous. The fact of the matter is that Montana shippers are paying, this morning, a 65% premium for shipping the same kind of wheat, in the same size shipment., to the same destination as a Minnesota shipper.

Montana shippers are not paying premium. In your example Minnesota shippers pay $912 more to ship a car of wheat to Portland than Haver shippers do. Only an activist could misrepresent that into Montana shippers paying a "premium".

QUOTE:

What is the result of that? The same result that you would suffer if your wages were arbitrarily taxed at a rate 65% higher than your neighbor's, and there wasn't anything you could do about it and it went on for years and years. You would have less disposable income, less profit.

The BNSF takes a third of their crop (the old sharecropper portion).money to save, they have less money to invest in combines, in fertilizer, in silos, in elevators.railroad facilities.

Actually the old sharecropper portion was 1/2, not 1/3. My daddy was a sharecropper, although they didn't call it that in Illinois. He farmed another man's land and 50% went to the landlord. You could get your facts straight.

And transportation is in no way a "Tax". It adds value to the product - that wheat isn't of much value in Montana. The railroad is simply charging for the service it provides to the farmers by adding value to their grain - which would be almost worthless without the railroad.

QUOTE:
There is absolutely no merit to the argument that "handling" is built into the railroad grain rate structure. The current structure has no relevance to handling costs whatsoever. It is based entirely on the hostage concept of rail service: Montana farmers are hostages to the BNSF and Minneapolis grain dealers are not.

I was the principal author of a 1997 grain rate study, similar to the one performed more recently by R.L. Banks & Associates.

Well, if your study didn't recognize that rail costs have seperate components for terminal handling and line haul, then I'd have to strongly disagree with your study.

Ken Strawbridge

[Junctionfan]

I say it might be better to use UP or build up Montana Rail link up with some investment. Don't think Rail America would mind that-trying to make them bigger-could be wrong though.

BNSF might respond better to direct and threatening competition rather than go about things through something more Canadian in style. Better to stick with what currently works in the U.S and that is get aggressively capitalist and blow the competition out of the water. If the State of Montana is truly unhappy with BNSF and if other states aren't that please either, the states could have a referendum to see if the majority of the citizens would support the financial sponsership of shortlines like Montana Rail link and form a network through the financial alliance of both the shortlines and the states and the operational alliance between the shortlines effected. Several shortlines connected to each other to form a large network to serve your needs is much more American and constitutional friendly than going forth with a non-constitutional bill that will go nowhere other than in the courts-very anti productive I'm afraid.

[csxengineer98]

the more i read this...the more i wonder why some of you people that feel that the farmers are being treated unfair....and that BNSF is just an evil corporation... then it dawned on me... its not becouse you have a heart felt feeling for the farmes... if i where to sit down and talk to you one on one..and pick your brain... i have a feeling that its a deep down hatered of the whole econmics system.. just plain old jelousy.... or just a gross lack of knowlage of how the railroad industry works....... i have shown a few examples already that a few of you have no clue about what goes on in the industry...such as the pay....and when i tossed out the facts behind how money is earned and spent on a system...none of you seem to have a comment when the cold hard facts hit you in the face... all you can say over and over agin is that BNSF is evil one way or another....you keep througing out pointless figuers and trying to reach out for ways to justify your standing..when the facts of the real world keep showing that this is nothing more then blackmail......
also... something that i forgot to ask when this first started...if this should go down where BNSFs proporty taxes are incresed as "punshishment".... who is going to get the tax money.....the farmers? i dough it.... (just take a look at the tobbaco settelment money...you see any of that money the states got actuly going into helping the people affected by tobbaco....no...its into other pork spending projects or just used to pad the state tresherys) but even if they do get it... all that is doing is giveing them a subsidey by another from..insted of the fredreal goverment paying it would just end up being the state....thus...robbing peter to pay paul.....if you where to cut through all the smoke...im sure that what you will find out (that i said already)... that the farmers are going to be bent over the wood pile by lossing thier federail farm subsides which is one of the things that the federal buget wants to cut...
csx engineer

[MichaelSol]

Originally posted by bobwilcox[/i]

QUOTE: My experience with rail rate making comes from 37 years of making deals with customers all the way from local fertilizer dealers to ExxonMobil's asphalt from Billings into Idaho and other Western markets. Your arguments about rates for the poor abused MT farmers just don't cut the mustard. As an example you make rate comparison's between the PNW, New Orleans and Duluth. Who cares, since no one consumes grain at these locations?

Well, if the rates you offer on mustard are as good as your understanding of the grain industry, we're in trouble.

Virtually all export grain from the grain belt goes either tthrough the Great Lakes primarily Duluth, Mississippi Gulf, primarily though the New Orelans ports, or the PNW ports. How much grain they eat I do not know.

However, 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. Apparently none of that is important in the fertilizer industry, judging by your purported knowledge and experience, although I doubt that.

Best regards, Michael Sol

[arbfbe]

BobW
There is actually some grain used at these points. Some of the Montana wheat is a variety of hard red winter wheat that is sought after for some sort of flour. All foreign export wheat is quoted at the port of export so prices at Duluth, Seattle, Portland and New Orleans are the important points to consider. You would think New Orleans would have the lowest rates account of the barge competition but there is so much Texas, Oklahoma, Kansas, Nebraska, Ohio and other states' grain closer to NO I doubt Midwestern grain is really competitive. Duluth markets on the other hand are the opposite story. You can only imagine that BNSF and UP are adjusting rates to Great Lakes ports so as to encourage farmers in the upper midwest to ship to PNW ports to insure longer line hauls to the railroads. The C&NW was far more likely to quote a better rate to the Great Lakes since they could keep the entire payment to themselves. If they shipped to the PNW they had to share with the BN or the UP and if they shipped to the Gulf they had to split with the IC, MP, BN or whomever was their preferred interchange.

One thing for sure, BNSF has it's own interests in mind rather than the farmers when they set the rates. Then that is their fiduciary responsibility.

[bobwilcox]

QUOTE: Originally posted by MichaelSol
I have a feeling your observations on rate-making in general do not result from any experience in the industry, passionate or otherwise.

Best regards, Michael Sol

My experience with rail rate making comes from 37 years of making deals with customers all the way from local fertilizer dealers to ExxonMobil's asphalt from Billings into Idaho and other Western markets. Your arguments about rates for the poor abused MT farmers just don't cut the mustard. As an example you make rate comparison's between the PNW, New Orleans and Duluth. Who cares, since no one consumes grain at these locations?

[MichaelSol]

QUOTE: Originally posted by MP173

Your passionate argument further states the reason there is no infrastructure investment in Montana is due to these high rates. Yet, they are paying less per carload and per bushel than the Minneapolis farmers.

You must really wonder, then, why railroads establish "rates" at all. Please offer your theory about why "rates" exist, and what impact they have on marketing and marketing decisions, including market prices.

You might further wonder when a Minneapolis grain dealer might make a choice between Duluth or New Orleans based on the market rate of grain. You may even further wonder when such a shipper might choose a PNW destination for large amounts of grain, depressing the market for captive shippers such as Montana because the PNW rate is artificially low compared to the actual distance transited. The rate "differential" impacts the markets differentially because it is NOT tied to the cost of the service to the particular user, but rather is set artificially., creating market distortions which advantage the shippers with competitive alternatives, and disadvantage captive shippers.

You feel the arguments are "passionate," but that yours are "logical." Logical, perhaps, when unencumbered by experience or understanding.

In fact, "rates" are a code-word for a complex interaction of market forces, for which a given rate summarizes a series of transactions and effects. You might approach your conviction about how clear and logical your view of the rate situaton is by the fact that the BNSF itself does not offer the argument (as simplistically simple and self explanatory as it "seems"), either in public or in a room full of transportation professionals. You might think it is because the BNSF is so darn dumb they haven't thought about what is so transparently logical to you. If so, get on the phone, they need your help. Or, if you are a little more thoughtful and cautious about it, you might consider that BNSF understands the flaw in your reasoning better than you do, and that your view is simply naive.

QUOTE: Which leads to the next logical comment or question....if their costs for transporation are lower than Minneapolis wheat....they where is the money?

Are you assuming that Minneapolis wheat all moves to the PNW all the time? And that the market rate of grain is profitable all the time? If so, then its a good question. Unfortunately, commodity markets are not so ....

QUOTE: Regarding your single carload rate .... I have one word to comment about that - Cargill.Their ability to negotiate rates is based on very large volumes.

That's an odd observation. A substantial amount of Montana wheat is purchased and shipped by Cargill from Great Falls. Why can't Cargill get better rates for Montana wheat that it ships if your observation is true? I have a feeling your observations on rate-making in general do not result from any experience in the industry, passionate or otherwise.

Best regards, Michael Sol

[arbfbe]

Quite simply it is a 'what the market will bear' pricing situation. BNSF knows what grain sells for when delivered to the Pacific coast. They can adjust their shipping rates from their territories so that shipping charges from Minnesota plus the cost of the grain in Minnesota equals the shipping costs from Montana plus the cost of the grain in Montana when both loads reach coast ports.

In Minnesota, the river barges are at the terminals but in Montana the grain has to be trucked to Lewiston, ID for barge loading so those rates are not reall competitive though some grain is shipped from the Lewistown, MT area that way.

BNSF is not going to get ragged off and just refuse to serve customers in MT. They are steadily getting rid of all the branchlines in the state now. All they will have left in a few short years will be the x-GN mainline from border and the exGN line from Laurel to Shelby. There will still be the working relationship with MRL and possibly the line from the GN main down at Snowden to Glendive. It looks like the only two branchlines BNSF will maintain will be the coal branches to Colstrip and Kuehn. Some grain gets shipped from Ft. Benton but I have not heard of any from Big Sandy in the last couple of years. The line from Great Falls to Helena is moribund and will not likely ever see traffic again.

[MP173]

Michael:

In my opinion, your spirited and emotional argument doesnt fly.

Montana farmers are not paying a 65% premium for transportation over Minneapolis farmers. They are paying $967 per carload LESS or nearly 23% less.

Your passionate argument further states the reason there is no infrastructure investment in Montana is due to these high rates. Yet, they are paying less per carload and per bushel than the Minneapolis farmers.

Which leads to the next logical comment or question....if their costs for transporation are lower than Minneapolis wheat....they where is the money? Obviously it is not invested in Flood Elevators (I dont know what a Flood Elevator is, but assume it is a new efficient terminal). So, the money is not invested in the farm infrastructure....WHERE DID IT GO?

Could it be that Montana farmers are pocketing the $967 per carload and then complaining about the rates being too high?

Michael and others....pricing for any commodity is not a matrix. Many factors go into pricing, particularly transportation. But, one of the biggest factors has always been and will always be "what will the traffic bear?" In other words what can we possibly get for this movement? Maximizing profits are normal.

Why are rates from Montana lower ($967) than Minneapolis? A huge factor is distance.

Why are the per mile rates lower from Minneapolis and Spokane? It is so simple....a river runs thru it. Barges offer competition to the railroads. The rails must meet or beat the barge rates. Or no traffic.

Take a look at airline pricing if you want to understand how pure pricing works. There are several factors involved in how that pricing is determined, but for the most part, it comes down to competition.

I personally am not fully aware of the Montana's farmers situations. However, I would be VERY CAREFUL about complaining of transporation costs which are $967 per carload lower.

Regarding your single carload rate .... I have one word to comment about that - Cargill.

Their ability to negotiate rates is based on very large volumes.

ed

[StillGrande]

So the argument is that Montana shippers pay less per car load but are paying more per mile shipped? Do BNSF's personnel charges in Montana drop because they are closer to the end point of the grain run? Do the railroads have to pay less to get people to live there and handle the train there? There is not enough information in this article (or this discussion so far) to determine that BNSF is getting any extra advantage because they are it as far as rail goes. The rate obviously is not so high as to force the grain to be trucked to another shipper (causing the increased in cost for trucking to be added to the lower rail charge somewhere else).

If suddenly BNSF can't afford to pay its personnel and maintain infrastructure in Montana to ship Montana goods, you bet they will be gone. Pay for the mainline, and abandon everything else. See how many jobs that costs Montana.

As far as people getting paid less for the same work because they are in different locations, they do. The government calls this locality pay. They pay different rates for the same grade and step worker living in DC and Iowa even if they do the same work.

[gabe]

On a related note, I live in Indianapolis, which is a major city with heavy freight volume and is only served by one Class 1 railroad. I wonder why there is not the same complaint here as in Montana?

Gabe