Farmers complain about BNSF rates to STB

[edblysard]

Yeah, and?....

[Anonymous]

They must be engaging in a "Frame up" with all those "Framers"...FOFLMAO...

LC

[edblysard]

Farmers frame Futuremodal's forecast of future financial failure....

[mudchicken]

'scuse me, gotta go pick myself off the floor![(-D][(-D]

[greyhounds]

Farmers have been complaining about rail rates ever since there have been rail rates.

And politicians have been using the issue to get themselves elected for the same time frame.

And jounalists just love this, and any other, "controversy" to write about. It sells papers.

"A consultant said?" Consultants will generally say anything you pay them to say and "prove it" with a bunch of BS numbers - kind of like lawyers.

[JoeKoh]

well not only in the upper midwest but around here in ohio too.elevators and farmers are saying there arent enough grain cars at the elevators.the beat rolls on
stay safe
Joe

[Anonymous]

QUOTE: Originally posted by greyhounds

Consultants will generally say anything you pay them to say and "prove it" with a bunch of BS numbers - kind of like lawyers.......

......and rail industry propagandists.

[Anonymous]

Yep, just post something about railroad rate gouging, and the ilks will slither up from the cesspool of arrogant idiocy.

[Anonymous]

For the record, the same article appears in the Missoulian:

http://www.missoulian.com/articles/2005/10/30/breaker/doc436405640a4cc947450090.txt

There is one additional paragraph in the Missoulian version missing from the dfw version, next to the last paragraph above:

"I’m ***ed tired of subsidizing the railroad in Montana. Every time they shut down another elevator, more trucks run over our highways. Whenever they ship grain from Iowa, BNSF is the conduit to subsidize other farmers.”

Seems some folks think it is the railroads that are being subsidized, not necessarily the highways.

[edblysard]

Shows what you know...ilk don't slither...we shake, rattle and roll...and the plural of ilk is...ilk, not ilks.
Kinda like one deer, two deer, or a bunch of deer, but no deers.


[:D]

[Anonymous]

Why don't they ship Union Pacific?
Allan.

[CShaveRR]

The fram filter must have missed the title.

Suitable for framing.

[bobwilcox]

Its past time to give Montana to Alberta.

[jsanchez]

Sounds like BNSF needs to learn how to work with small customers better, I think this is one of the reason they are not earning cost of capital like Norfolk Southern. (which is pretty good at serving small customers)
I'll tell BNSF a business secret , small customers often grow into big customers. BNSF actually gave an award to the managers, who have been implementing these grain policies, that have done nothing but anger farmers, elevator operators, state legislatures, federal representatives, the public, and could fuel the case for reregulation. Reregulation would wind putting the rail industry back into the dark ages, so I hope BNSF somehow wisens up.

[CSSHEGEWISCH]

I don't see how small farmers, who are small customers, are ever going to grow into big customers. The amount of land in Montana that is arable is finite, and you can produce only so much wheat from that land. Crop yields will not expand ad infinitum, a farmer will have good years and bad years, but there is a limit to what will be produced in a good year.

[bobwilcox]

QUOTE: Originally posted by CSSHEGEWISCH

I don't see how small farmers, who are small customers, are ever going to grow into big customers. The amount of land in Montana that is arable is finite, and you can produce only so much wheat from that land. Crop yields will not expand ad infinitum, a farmer will have good years and bad years, but there is a limit to what will be produced in a good year.

Small farmers virtually died twenty years ago after the credit crunch in the early 1980s. They are usefull when agri-business is after a political payoff such as a subsidy from the local evil railroad.

[Anonymous]

Talked with a couple of Framers today and they were saying with winter fast approaching, they need to hurry up and get this new house sheathed and enclosed. [:D]

[jwinter]

It's not just the farmers complaining. I've seen a number of articles about loggers siting the same complaints, car shortage/higher rates. Only difference is that CN is the naughty railroad in the Upper Michigan.
http://www.miningjournal.net/news/story/1023202005_new01-n1023.asp

[MichaelSol]

QUOTE: Originally posted by jsanchez

... that have done nothing but anger farmers, elevator operators, state legislatures, federal representatives, the public, and could fuel the case for reregulation. Reregulation would wind putting the rail industry back into the dark ages, so I hope BNSF somehow wisens up.

You can see from this thread alone that the historical arrogance of the rail industry is alive and well, and if BNSF provokes re-regulation, it will be no surprise to anyone ... except the rail industry.

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by bobwilcox

Its past time to give Montana to Alberta.

At least then Montanans would have two Class I's to choose from.

It's ironic you mention this, because I have always thought we should give the entire Northeast U.S. to Canada, and in exchange we'll take everything west of Ontario (Sorry, Junctionfan, I know you'd probably rather be with us, but geography is geography!) It's almost a win-win for all, we get rid of a political cancer and gain vast natural resources, they get to regulate and malevolate each other to their small stoney hearts' content.[:p]

[greyhounds]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by bobwilcox

Its past time to give Montana to Alberta.

At least then Montanans would have two Class I's to choose from.

It's ironic you mention this, because I have always thought we should give the entire Northeast U.S. to Canada, and in exchange we'll take everything west of Ontario (Sorry, Junctionfan, I know you'd probably rather be with us, but geography is geography!) It's almost a win-win for all, we get rid of a political cancer and gain vast natural resources, they get to regulate and malevolate each other to their small stoney hearts' content.[:p]

Well, ... Oh, Well.

I wonder what it's like to not be limited by reality and reason. Things like facts. If you just don't let those things get in the way it must be fun. Not very productive, but fun.

[CSSHEGEWISCH]

I normally don't step into political frays if I can help it but as far as political cancers are concerned, there are many people who feel the same about certain inhabitants of Montana and Idaho since the states seem to attract certain bigots from the extreme right.

[jeaton]

We could also give Idaho to Canada, too. Near as I can tell, it is only good for a shortcut between Montana and Washington.

Interesting though. This forum's leading advocate of more regulations governing railroads would blast another section of our country for advocating regulations in such areas as worker health and safety, environmental protection, anti-trust laws and many other programs designed for the general welfare of out society.

The nice things about being a conservative is that it is easy to decide on a prefered course of action. "If it isn't beneficial to ME, then it is the mean spirited action of stoney hearted people who are out to regulate everything I do and rob me of my personal wealth in the process".

[MichaelSol]

QUOTE: Originally posted by CSSHEGEWISCH

I normally don't step into political frays if I can help it but as far as political cancers are concerned, there are many people who feel the same about certain inhabitants of Montana and Idaho since the states seem to attract certain bigots from the extreme right.

You refer of course to Jeanette Rankin, who voted against US entry into both world wars, and Ted Kaczynski, the refugee from UC Berkeley, who was sending package bombs from his Montana address to anyone he felt was anti-environment. Idaho boasts of course Big Bill Hayward who blew up the Governor of Idaho because Big Bill thought the Guv was too "conservative," and Tony Boyle, nee Avery, Idaho, of course tried to keep his hold on the UAW, and his ability to continue to support the hard Left, by murdering the entire family of Jock Yablonski.

Politiics is one thing, "certain bigots," someone else ....

Best regards, Michael Sol

[CSSHEGEWISCH]

I hardly refer to Jeanette Rankin, she had the courage of her convictions. Where is she when we need her the most? I do refer to such types as the Aryan Nation, survivalists, Randy Weaver, etc.

[SALfan]

Whatever his political convictions and whatever merit they might have, my understanding is that Randy Weaver went off and lived by himself, without trying to impose his views on anyone else or make life miserable for those who disagreed with him. The militant (and stupid) zealous liberals in certain Federal agencies at that time should have left him alone.

[MichaelSol]

QUOTE: Originally posted by CSSHEGEWISCH

I hardly refer to Jeanette Rankin, she had the courage of her convictions. Where is she when we need her the most? I do refer to such types as the Aryan Nation, survivalists, Randy Weaver, etc.

The moral of the story being that you can single out just about any idiocy, and by careful ignorance, proclaim just about anything about anything. If you decided to do a survey of prominent environmental writers, they too would be represented in Montana, or any liberal cause for that matter. From my window, I see the Jeanette Rankin Peace Center, the National Wildlife Federation's national legal counsel office, the National Audubon Society''s national membership office. I also see a nationally ranked School of Business, a "world trade center," "national techology development center," the world's largest fire research center, and the headquarters of Region One, USDA, Forest Service. I also see a railroad, and I see the national headquarters of the Boone & Crockett Society occupying the depot of a former railroad. There is a "presence" but its pretty heavily representive of important national concerns.

I also see a WWII Memorial, and drove past a Vietnam and Korean War Memorial on the way to work.

On their plaques, I see that Montana contributed a higher percentage of its population to fight for America and American ideals in WWI, WWII, Korea, Vietnam, and currently, than any of the states you gentlemen believe are more deserviing to belong in the "union." Bob Wilcox says he doesn't need'em, nor does he appreciate the sacrifice that farm families in Montana have endured for 80 years, so that people like Bob Wilcox can disparage their state and the many farmers who sent their sons to die. People like this disgust me, and when they do it from the safe confines of a railroad retirement that those sacrifices made possible, I am more than just revolted by these characters and their clever remarks. "Please send your sons to die, but don't you dare complain when your country permits you to be charged the highest shipping rates in the country."

There are probably more survivalists in California than there is population in the combined states of Montana and Idaho, more religious nuts in Texas and more anti-religious nuts in California, than there are farmers, or framers, east of the Rocky Mountain front, and more people in Massachusetts who still think Joseph Stalin was a pretty neat guy than in all of the Rocky Mountain states combined. We still don't have any atheists anxious to blow up federal buildings as they did in Oklahoma. We haven't had any election supervisors trying to jimmy the elections by election fraud to elect Democrats as in Milwaukee, Seattle, or St. Louis. Our staunchly liberal Governor in Montana, a Democrat, got elected the old-fashioned way, by counting real votes which apparently didn't include many survivalists et. al.. He got there, as a wheat farmer, by appealing to a broad popular sentiment in a state where the Republicans are seen as pro-railroad, and the Democrats are seen as representing the true interests of hard working people such as the wheat farmers, and rail workers who complain constantly about their "railroad."

But, a careful review of rail industry literature of the past century would show that this is a typical industry response: a demonstrable and continuing violation of federal law regarding rates by a railroad is transformed by innuendo into "something wrong" with ... the farmers, the states they're from, the shippers, the airlines, the government, the highways, the truckers, regulated rates, unregulated predatory rates, barges, government subsidies, the ICC, the STB, government tax policies and ... Randy Weaver. You name the distraction, they'lll come up with it ... or invent it.

By the way, I am aware that FBI "sharpshooters" shot and killed his unarmed wife while she was cradling a baby, his unarmed 14-year old son, and his unarmed Labrador retriever, each in the head. But I am otherwise unaware of who Randy Weaver is or what he did, or what his wife, 14 year old son, and Labrador retriever may have done to the country. Or what it has to do with railroading other than through Bob Wilcox's typical insidious remarks.

This is why railroad credibility on issues important to railroading continues to be met with derision by the broader business and political community. This industry is politcally tone deaf. I just finished Railroad Mergers by Richard Saunders and it was striking how the author chronicles in detail how the rail industry for nearly a century met each economic or regulatory challenge by petty and often even childish responses.

See the ludicrous comments on this thread for evidence that nothing has changed.

Best regards, Michael Sol

[bobwilcox]

Fellow Taxpayers-In 2003 Montana farmers collected $353,351,745 in USDA subsidies. This was an increase of 35% over 2002. See: http://www.ewg.org/farm/progdetail.php?fips=30000&progcode=total

[edblysard]

[MichaelSol]

"Montana’s low rainfall from 2000 through to July of 2004 contributed to hydrological drought conditions that have been classified from severe to exceptional (See Chart 2).1 Montana holds the third largest acreage of wheat in the nation, and ranks in the top ten in terms of hay and other forage."

"In addition to drought conditions, Montana’s direct government farm subsidies, which represented half of the state’s farm net income during 2003, may be affected by other recent developments "

"For wheat farmers, transportation costs of as much as a third of the value of their crop would be devastating if it weren't for the government subsidies. "We barely meet the costs of production. This year, with low wheat prices and BNSF raising rates by $150 or more per carload, the government is really just subsidizing the rail industry. We don't really get them [the subsidies]. We deposit one check so we can write another.""

Even with subsidies, "net farm income has remained flat for over 25 years."

"I've lost more money in the past five years than I've made in the past 35 years. I have a bumper crop, and I'm going broke doing it." Billings Gazette, 8/28/05, p. 9A.

Interesting, wheat farmers don't know anything about railroading, but railroaders sure act like they know a lot about wheat farming.

Best regards, Michael Sol

[bobwilcox]

If farmers can take our money through taxes, how about a government subsidy for every local Ace Hardware put out of business by Lowes or Home Depot? On the other hand why don't we ask farmers to face the same risks as any other business.

[Anonymous]

So the history of railroads vs. farmers continues to repeat itself. CN and CP stiff the farmers in Alberta, C&NW angers the farmers in Iowa, and UP overcharges the farming folk in Nebraska. Now it's BNSF's turn. Would it help if the railroad assigned enough sales reps to an area and actually have them live there so the rep could get to know the people and the way things are done in their assigned area? It's a throwback to the "good old days," and the railroad (in this case BNSF) may balk at the extra cost, but it's better than having to play phone tag with a railroad employee stationed a thousand miles away who has no idea what's going on, aside from some stats on a piece of paper.

[MichaelSol]

QUOTE: Originally posted by bobwilcox
... why don't we ask farmers to face the same risks as any other business.

I think "same risks" is the key phrase. That's exactly what they are asking for.

A North Dakota or Montana farmer pays pretty much the same costs for labor, fertilizer, seed, fuel, bank financing, etc. as any other farmer.

The cost that is dramatically different is the 100% or more greater cost they must pay to ship, compared to other farmers shipping the identical product the identical distance over the identical railroad to the identical markets.

Best regards, Michael Sol

[bobwilcox]

QUOTE: Originally posted by Cris Helt

So the history of railroads vs. farmers continues to repeat itself. CN and CP stiff the farmers in Alberta, C&NW angers the farmers in Iowa, and UP overcharges the farming folk in Nebraska. Now it's BNSF's turn. Would it help if the railroad assigned enough sales reps to an area and actually have them live there so the rep could get to know the people and the way things are done in their assigned area? It's a throwback to the "good old days," and the railroad (in this case BNSF) may balk at the extra cost, but it's better than having to play phone tag with a railroad employee stationed a thousand miles away who has no idea what's going on, aside from some stats on a piece of paper.

We did just that on the C&NW in Iowa for over 100 years. It did not pay off.

[MichaelSol]

QUOTE: Originally posted by bobwilcox

If farmers can take our money through taxes, how about a government subsidy for every local Ace Hardware put out of business by Lowes or Home Depot? On the other hand why don't we ask farmers to face the same risks as any other business.

Those poor corporations. Montana farmers pay the usual income tax rate on their income.

However, * According to the Oct. 24 [2003] New York Times, House Republican leaders are close to offering yet another tax cut aimed at US multinational corporations. The proposal, estimates the Times, will provide an additional $60 billion in tax cuts to US companies over the next 10 years.

House Republicans claim the beneficiaries will be US manufacturers and small businesses [including Ace Hardware]. “But,” explains the Times, “the definition of manufacturing includes movies, software, oil and gas refining and engineering services. That means the beneficiaries would also include Time Warner, Disney, Microsoft and giant engineering companies like Bechtel and Fluor.”
...
* But they’re not paying any taxes now: Recent estimates released by the Congressional Budget Office show that corporate income tax revenue to the federal government fell 36% between 2000 and 2003. In 2000, corporations paid $207 billion in income taxes; in 2003, those taxes were $132 billion.

According to the CBO, corporate taxes represented just 7.4% of all federal tax dollars in 2003. “With the exception of 1983, this represents the lowest level since 1934, the first year the data was collected,” said the non-partisan Center on Budget & Policy Priorities."

Oddly enough, farmers don't ask for income tax relief from their 24%-38% income tax bracket.

They pay their taxes and send their kids to war.

All they ask for is fairness, while Bob Wilcox not only disparages their livelihoods and their sacrifices, but he wants business to get more government help and tax breaks above what they already have which are already ridiculous.

The rail industry has enough public relations problems without spokesmen like these, who hurt this industry far more than they help it.

Best regards, Michael Sol

[edblysard]

"The moral of the story being that you can single out just about any idiocy, and by careful ignorance, proclaim just about anything about anything. "

See below....

“But,” explains the Times, “the definition of manufacturing includes movies, software, oil and gas refining and engineering services. That means the beneficiaries would also include Time Warner, Disney, Microsoft and giant engineering companies like Bechtel and Fluor.”

"Oddly enough, farmers don't ask for income tax relief from their 24%-38% income tax bracket.

They pay their taxes and send their kids to war. "

Seems you practice what you preach against, and very well, I might add...

As if Time Warner, or Disney employees, up to and including company officers don’t pay their taxes, or send their kids off to war...

Pretty cheap shot, but then, considering the source....

[Anonymous]

Aw, crap, here we go again. Why is it so hard for pro-railroad types to just admit that there are captive rail shippers, most rail captivity is foisted upon U.S. producers and exporters to the benefit of importers, and this one sided captivity hurts the U.S. position in the world trade game, not to mention causing undo hardship on their fellow Americans? Geez, you can still be a pro-rail bigot even if you make such an admission. Or are you afraid of losing your membership to the cult of ilks if you dare to be truthful?

It is a stark form of traitorism when many pro-rail bigots would rather stroke the collective egos of overseas producers (who oft times make no secret as to their anti-American attitudes) than to lend a helping hand to their fellow citizens.

BTW, all this talk of "giving away" certain states to Canada is done tounge in cheek, at least on my part. Not to sure about Bob Wilcox, but at this point I am willing to give him the benefit of the doubt that he is doing the same. Even so, it is sophomoric and insulting that his response to Montana farmers being gouged by BNSF is to suggest that the entire state be shipped north. If any states should be "shipped north", e.g. cast out from this nation, it should be those that have done the least for this nation.

Subtle traitorism, that's what it seems to suggest.......

[edblysard]

Never said there were no captive shippers, but then again, they all do have choices.
Know all about “captive” shippers, most of the PTRA customers would fall into your skewed definition of captive.

They aren’t, they could truck it out, but that would cost more.

The rub is the wheat farmers don’t like the alternatives, and the cost, regardless of what mode is used.
What they want is a break on their shipping cost, which it would appear that you have a vested interest in.
I notice you don’t carry on near as much about the poor coal mines, or the fruit growers, or the captive General Motors plants, most of which are served by only one railroad.

That and it's just easier to gripe about the railroads, which the farmers, and you, seem to heartily wish would somehow turn into a public utility.

They are not, but you guys seem to think that if you repeat the same nonsense over and over again, by simple rote and repetition the rest of the world will agree, if only to make you be quite.

Add in the fact that you need a villain to make your pseudo economics appear to make sense, and the fact that the wheat growers in Montana somehow seem to think that because they grow their crop out in the middle of nowhere, they should get a break on shipping cost....

You just willing ignore the free market place forces at play...one of which is if you build your product far away from the transportation center, then it will cost you more to ship your product, regardless of the product, or it’s supposed public value, and regardless of how many carriers serve your area...not a hard concept to grasp, but then again, you seem to think "fair" is a business concept due "the people", and profit is a dirty word....

Yup, railroads cut deals with some big shippers, almost every business in the world does so, and they cut deals with their suppliers, shippers, buyers and retailers, its part of doing business.

Get it…business, not “public utility”….

If the Montana farmers can’t make living growing crops, maybe they should change business, or move….

But this is all a waste of time; you refuse to concede any part of any concept that doesn’t fit your narrow view of the world, or your personal vendetta against railroads and railroaders…and, like most trolls, when someone doesn’t agree with you, or your view point, you insult them…

Many people here have looked very hard at your concepts, asked very clear, concise question, and those that fail to jump on your bandwagon you rant on about, almost rabid in your derogatory insults towards them…even those that tentatively agree with you get slapped, if they fail to agree 100% in short order.

Like I said, what a waste….and the really funny part of all of this is this thread started with people having fun with a posters dyslexic moment…

[edbenton]

Fine let the farmers stop growing grain and see how long our standard of living remains the same. We are the worlds breadbasket we supply over 60% of the worlds grain supply. Yet farmers have seen the prices drop and demand grow. I thought if supply was tight prices go up the oil companys think that way.

[edblysard]

The supply isn’t tight...I yarded two 125 car unit grain trains today, with two more already entering the metroplex...we called a extra to pull the empties out of Cargill just to have a place to park one of them.
All four of them were from the "evil" monopolistic BNSF.
And all four are overseas shipments; the ships are in the docks right now, waiting for us to spot the plant.

Montana farmers aren’t starving, they do make a profit, just not as much as they would like...the gripe is they don’t want to pay the cost of shipping, no one else wants to build a railroad into the area, or serve small elevators because the railroad cant make a profit, or enough of a profit, to justify running the small trains needed to do so.

BNSF isn’t refusing to serve them, if they want to pay the cost, BN will go and haul the cars...but BNSF is offering a cheaper rate if they bring the grain to the big elevators, which the fine folks of Montana don’t want to do.

And don’t buy into the myth of oil supplies being tight, they aren’t...it’s the refining capacity that’s lacking.
Shell, Mobil/Exxon, Phillips, BP and Chevron are running the Pasadena and Texas City refineries full till, 24/7, and still can’t meet the demand.
No one is going to invest in new refineries, they are tremendously expensive, and with all the EPA regs now in place, if they did, what they would have to charge for the products would price them beyond anyone’s ability to pay.
Katrinia didn’t hurt the crude supply one bit, it hammered the ability to make the finished product…so in that instance, yes, the “supply” of finished product, gasoline, is smaller, which drives the price up.

Ed

[edblysard]

QUOTE: [i] Even so, it is sophomoric and insulting that his response to Montana farmers being gouged by BNSF is to suggest that the entire state be shipped north. If any states should be "shipped north", e.g. cast out from this nation, it should be those that have done the least for this nation.

Yeah, but who in their right mind would want Louisiana?

[:D]

[Anonymous]

QUOTE: Originally posted by edblysard

QUOTE: [i] Even so, it is sophomoric and insulting that his response to Montana farmers being gouged by BNSF is to suggest that the entire state be shipped north. If any states should be "shipped north", e.g. cast out from this nation, it should be those that have done the least for this nation.

Yeah, but who in their right mind would want Louisiana?

[:D]

France?[:o)]

[Anonymous]

Note to NuclearWinter: You can edit the topic title to get rid of the "Framers" misspelling and replace it with the proper "Farmers" spelling, unless "Framers" really was your intent?

Do it, if for no other reason than to make the subsequent "framers" references look just plain stupid.

[MP173]

I personally like captive customers. It enables me to make good margins. That is the goal.

ed

[MichaelSol]

QUOTE: Ed writes:
I personally like captive customers. It enables me to make good margins. That is the goal.

Your customers understand you completely. That's the goal that will cause your clients to outsource to where the captive market doesn't exist. The inexorable operation of capitalism that will put you and your company out of business. "Good margins" will be replaced by no business at all if the customer perceives them as unfair, or perceives you as taking advantage of them.

Everyone sees it coming.

From Railway Age, November 2002, by Luther Miller:
...
[C]aptive customers insist that they're being under-served and overcharged in ways never intended by the Staggers Rail Act of 1980, nor by the Surface Transportation Board's approval of mergers that severely eroded rail-to-rail competition (particularly, for chemical shippers, the Union Pacific/Southern Pacific consolidation).

Solvay America President David G. Birney told Senator Breaux: "One of our major operations with thousands of railcars has seen an increase in the average transit time from 7 to 9 days on loads and from 10 to 15 days on returning empty railcars. This has forced it to add 250 cars at an annual cost of $1.7 million. To add insult to injury, railroads now claim that the chemical industry has too many railcars and have instituted punitive demurrage charges of up to $100/day for cars held out on their lines; shippers are left with no recourse because there are no competitive options available."

Sunoco Chemicals ships and receives 38,000 rail carloads annually. According to Senior Vice President Bruce Fischer, railroads "are willing to offer service accountability on select competitive movements, yet are unwilling to stand behind their service products on lanes where no competition exists. Our ability to deliver products competitively from two of our single-railroad served plants is hindered by the local carrier being inflexible on economic demands, often necessitating supplying a customer from a much more distant competitively served site producing the same products." [China?]

Petrochemical manufacturer BP, whose transportation costs add up to $110 million a year, put this into the record: "We have 80% of our business captive at origin or destination. One of our major businesses is significantly disadvantaged by lack of competitive access. Despite the efforts within the business to reduce manufacturing, site logistics, corporate overhead, and other supply chain costs, we continue to be faced with high rail costs. In this business alone, we pay an approximate premium of $9 million in rail freight annually, on a total spend of $35 million. This premium along with other competitive factors has caused BP to rationalize the business and shut down production sites and lines. Competition, much of which will be foreign in the future, requires us to have lower costs to compete. It is essential we have congressional support to allow us to be effective in meeting current and future competitive challenges."

Celanese Chemicals President Lyndon E. Cole said discriminatory pricing is going from bad to worse: "For Celanese, a freight premium of 30% to 40% is typically imposed at our plants without rail competition. This value gap is increasing, as railroads lower their prices in competitive markets and offset the revenue loss by increasing prices where they have no competition. Ultimately, this impacts decisions on where product is made, putting the economic viability of many existing plants and their communities at risk."

DuPont is "very concerned about the lack of competition in the rail industry," said Gerard L. Donnelly, Global Director, Logistics. Noting that the post-Staggers rail industry has "dramatically improved its overall financial situation," Donnelly said that "the competitive marketplace forces Congress had correctly relied on to 'regulate' the industry have all but disappeared." The result, he said, is "a less responsive and innovative rail partner and the imposition of a 'monopoly premium' in excess of 30% being imposed on captive shippers."

The build-out option, a condition imposed by the STB in approving the UP-SP merger, is one escape for captive shippers, though a costly one. A company that has taken this route is Basell North America, whose president, Charles E. Platz, represented not only his own company but the American Chemistry Council at the Senate hearing. Platz noted that Basell has production facilities in Lake Charles and Taft, La., as well as in Bayport, Texas, and Jackson, Tenn. "Basell is not captive at Lake Charles," said Platz. "But one of the railroads at that location [Union Pacific] does have a monopoly on rail service at Basell's Bayport facility. That railroad uses its market power to obtain leverage over our Lake Charles traffic. Because of this situation, Basell and three other shippers of chemicals have joined with another railroad [Burlington Northern and Santa Fe] to create San Jacinto Rail Limited, a partnership whose mission is to introduce and provide competitively priced rail service options. Although my company would prefer to invest in plastic resin production facilities rather than rail assets, current regulatory policies compel us to do so."

Texas Senator Kay Bailey Hutchison, October 23, 2003:

"For manufacturers facing tough economic times, the story is different. In the absence of competition, shippers are forced to pay arbitrary rates. It is common practice for captive shippers to send their goods without knowing how much they will pay for carriage, and without a guarantee of on-time delivery. Every day captive shippers face the choice: pay the rate or close the business.

"Almost 35 percent of the nation's railroad traffic is now considered captive. Not surprisingly, captive shippers pay a premium per mile compared to those served by more than one railroad. In Victoria, Texas, a shipper once had three railroads competing for business. After the mergers, only Union Pacific remains. With no competitors, UP has added new fees for carriage of empty cars, dispatching and storage until overall shipping costs rose more than 35 percent for this shipper in Victoria.

"Toyota currently operates five major manufacturing plants in the United States, some captive, some competitive. Captive facility rates were so much higher that Toyota adopted a policy dictating that no plant could be built without service from at least two railroads. Ultimately, Toyota chose to build its sixth plant in San Antonio, TX but not until our Legislature threatened to build a spur to the site so another railroad would be able to compete with the incumbent.

"In San Antonio, a build-out was an option, due to the relative proximity of a competing rail line. For most captives, this is not the case and build-outs are prohibitively expensive.

"The Staggers Act was explicitly intended to protect captive rail shippers and preserve competition. However, Congress had never anticipated that the Staggers dispute resolution mechanisms would have to function in a market of only five Class I railroads. Bringing a rate case under Staggers is slow and expensive. We need to bring the law into the 21st century."

STATEMENT OF GLENN ENGLISH, C.E.O. National Rural Electric Cooperative Association. Surface Transportation Board U. S. Department of Transportation October 19, 2005 STB Ex Parte No. 658:

Twenty-five years after the Staggers Act, deregulation is clearly not working for “captive” rail customers in many vital industries, as evidenced by the experience of consumer-owned electric cooperatives. Today, cooperatives that are “captive” under current practices and decisions are subject to the unrestrained monopoly power of the rail carrier upon whom they are dependent.

With some rare exceptions, cooperatives that are “captive” are not able to negotiate reasonable commercial relationships with their monopoly carriers. They have rates and terms of service dictated on a “take-it-or-leave-it” basis – rates that are significantly and unreasonably high when compared to non-captive shippers. In addition to exhorbitant rates, captive shippers often receive poor service and suffer from a lack of rail capacity.
...
NRECA has determined from a recent survey of our members, however, that at least 40-percent of our coal-fired generation and transmission cooperatives are subjected to captive rail rates for their shipments of coal. This issue is particularly important to our nearly 40-million consumer-owners because about 80% of the electricity produced by cooperative generators is fired by coal. And we should all be aware that when consumer-owned, captive electric cooperatives are charged arbitrary and unreasonably high freight rates for that coal, those increased costs make it even more difficult for our industrial, manufacturing, processing, and agricultural producers to be competitive in domestic and world markets, and impairs their ability to retain and expand jobs, facilities, and operations.

Best regards, Michael Sol

[MP173]

The biggest difference between my "captive" customers and the railroads is that my company delivers the value added difference that allows them to justify the difference. I make no bones about it. My customers have choices, as do the rail customers which are captive.

Dont even begin with me about BP. I fully understand how they operate and what their motives are. They are not about fairness, they are about BP and BP alone. That is the kind of customer I DONT want.

Michael, you make a very telling remark about moving from "good margins" to "no margins". That is what you and most large shippers require. "Here is my business, please go make money off of someone else, but not me."

My guess is that the majority of shipping locations have only one option. I could be wrong. But very few industries have more than one rail spur into their facility.

It looks like Toyota, for their case, got it right. Demand competition. Demand it from the government, or the plant and the jobs wont be there. Cant you see what this is? Michael, dont you understand all of this?

It is about leverage, pure and simple. It is not about evil railroads and wonderful shippers. IT is about leverage. Who can and will squeeze the very last drop out of every business dollar out there. It is called survival in today's business environment. Global survival.

BTW, how did you like Merging Lines? I would highly recommend the followup book Main Lines. But, I didnt understand your comment about "petty and childish behavior." Please explain.

ed

[MP173]

BTW...speaking of BP, their ROE is 20.5%, NS's is 13.6%.

Easy to ***, when your supplier is making all that money, isnt it.

ed

[MichaelSol]

QUOTE: Originally posted by MP173
BTW, how did you like Merging Lines? I would highly recommend the followup book Main Lines. But, I didnt understand your comment about "petty and childish behavior." Please explain.

Well, I was in San Jose last weekend as the Chair of a USOC-appointed committee reorganizing the business side of an NGB on behalf of the USOC. My copy of Merging Lines, complete with dog ears and my annotations, was and possibly still is sitting on top of the ATM at the San Jose Marriott.

I have ordered another copy. It's an interesting book.

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by MP173

BTW...speaking of BP, their ROE is 20.5%, NS's is 13.6%.

Easy to ***, when your supplier is making all that money, isnt it.

ed

So the moral of the story is that companies that locate plants overseas to obtain lower outbound shipping costs from the plant will earn more than the railroads the tried to screw them back in the States? Do you think the railroads should advertise this fact, especially to their stockholders?

I'm curious Ed, have you ever witnessed a business closing shop due to poor customer relations, or is that just storybook stuff in your opinion?

[MP173]

BP has a major presence in the United States. But, just to acknowledge your point...

XOM's ROE is 28.3% while BP's is 20.5%.

XOM (Exxon Mobile) is a US company, granted with worldwide productiona and refining. The fact they (and BP) are worldwide would not be because of captive rail rates, but for several other factors:
1. Location of crude oil.
2. Ability to refine such crude oil
3. Environmental laws allowing or restricting production and refining

Regarding your second question...yes, I was a part of a transportation company which eventually closed down due to poor service to customers. I left before the fact, as I saw the writing on the wall. Revenues were in a downward fall, upper management was weak and self centered, and there was no investment in the future of the company...in other words the owners (second generation) were living off of the father's investment and work.

So, yes, I have been involved in that type of business, first hand. I went to the exact opposite of a company, one with dynamic ownership which is involved in the day to day operations. A company which produces the industry's best product and service (based not on my opinion, but the marketplace reaction). A company which motivates and rewards it's employees and a company which invests it's substantial profits in both return to investor and growth of the company.

I have never said that railroads dont have problems. If you go back to my posts from day one, you will find me questioning their operations and their marketing. I will continue to do so. I believe that they must get better.

If it is one thing I have learned in business...actually I have learned a couple of things, but it is critical for a company to grow. For the rails, growth generally means intermodal in today's business climate. They have done a decent job of growth in intermodal.

I might as well clarify something now. I dont deal with buying transportation service from railroads. I am not going to try and be something that I am not. I am not on the front lines of buying rail services. Never ever admitted that I was. My background in the aforementioned company gives me a background in transportation. I can find my way thru a tariff, as Michael found out several months ago. My interests here are hobby related. I wish I could add antedotes of either successes or failures, but I cant.

However, I do understand the business climate. Perhaps I dont speak your language of STB, CURE, captive intermodal, etc, but I can usually figure it out with a little help.

Now, do me a favor. I could probably do it, but we have brilliant minds on this discussion that could do this in a fraction of the time I could.

What is a typical rate (today) from Montana to a major market for a unit train of wheat? How many bushels will that unit train hold and how much per bushel will the transportation cost? What is the price for a bushel of Montana wheat (today). What has it historically been? How much was it 1 year ago, 5 years ago, 10 years ago?

What is the size of an average farm in Montana (or is referred to as a ranch?). What is value of that farm (value per acre)? How does that compare to 1 year ago, 5 years ago, 10 years ago?

We can take this even further, if you like...seed prices, fuel prices, taxes, equipment costs, etc.

I dont know the answers. This is no trick question on my behalf. I have an idea as I do own a farm in Southern Illinois. Post your answers and then I will continue an intellegent discussion. You dont have to site your sources.

ed

[MP173]

Michael:

What is the USOC and NGB? Too bad about the book. Saunders did a great job with that book. It is a book that actually could have been bigger.

I am hoping he is following up on a third such book. I will call him today and see if he is.

ed

[Anonymous]

QUOTE: Originally posted by futuremodal

Note to NuclearWinter: You can edit the topic title to get rid of the "Framers" misspelling and replace it with the proper "Farmers" spelling, unless "Framers" really was your intent?

Do it, if for no other reason than to make the subsequent "framers" references look just plain stupid.

Actually I did that at 6 in the morning, my bad will change it now :)

[MichaelSol]

QUOTE: Originally posted by MP173

What is the USOC and NGB? Too bad about the book. Saunders did a great job with that book. It is a book that actually could have been bigger.

I am hoping he is following up on a third such book. I will call him today and see if he is.

USOC is the United States Olympic Committee; an NGB is the recognized business entity that "operates" or administers a specific sport, "National Governing Body."

There's a $100 million operating budget for the USOC (in a non-Olympic year, which just about triples in an Olympic year), plus individual operating budgets for the individual sport entities, probably a total of $300 million or so involved. As you might guess, there is a collision between "sport" people and "business" people over best practices and budgeting.

Once in a while an NGB -- which are pretty autonomous entities ordinarily -- falls flat on its face financially, typically misfeasance if not malfeasance.

In this instance, the USOC stepped in and restructured the particular entire NGB from the bottom up -- a very unusual step. In essence, it was a Receivership with the USOC taking the position of Trustee. Specialists brought in to oversee the actual operation and reorganization report to the Trustee, not to the former officers or board, and are technically "special assistant to" or just "assistant to the Trustee," which would be the position I was filling along with several other appointed persons.

In this instance, I was appointed to develop a plan to reorganize what was in essence the old entity into something on the order of a subsidiary that could operate within a larger but more streamlined new business entity with a different set of financial and political controls. Interesting process as it involves working with the former stakeholder interests who have conflicting goals and ideas, and sometimes not too much business or organizational sense. My review of the corporation's books suggested possible malfeasance, and I personally made the referral for criminal investigation to the Economic Crimes Unit of the Colorado Springs District Attorney's office [USOC's main office is in C. Springs]. But, the $1.5 million deficit is now nearly gone, and so next year will be a rebuilding phase as everyone gets reoriented to the new structure.

Saunders attacked a big, complex topic, but he's a good writer so its all very readable and interesting. There is a reliance on secondary and tertiary sources, inevitably, and a couple of spots where the secondary sources had the analysis wrong, but that is inevitable in a work of that scope. I would look forward to his third book (got the other one, Main Lines, sitting here, no time to read it just now).

Best regards, Michael Sol

[MP173]

Michael,

I would be the USOC group would be a pretty political group, not unlike the diverse opinions found here.

I am very interested in the economics of the Montana wheat farmers, so I am really looking forward to your answers to the questions I posed.

thanks in advance.

ed

[MichaelSol]

QUOTE: Originally posted by MP173

I would be the USOC group would be a pretty political group, not unlike the diverse opinions found here.

Cats, hundred and hundreds of cats, all daring to be herded.

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by Nuclearwinter

QUOTE: Originally posted by futuremodal

Note to NuclearWinter: You can edit the topic title to get rid of the "Framers" misspelling and replace it with the proper "Farmers" spelling, unless "Framers" really was your intent?

Do it, if for no other reason than to make the subsequent "framers" references look just plain stupid.

Actually I did that at 6 in the morning, my bad will change it now :)

On behalf of the framed farmers, we thank you![^]

[Anonymous]

QUOTE: Originally posted by MP173



Now, do me a favor. I could probably do it, but we have brilliant minds on this discussion that could do this in a fraction of the time I could.

What is a typical rate (today) from Montana to a major market for a unit train of wheat? How many bushels will that unit train hold and how much per bushel will the transportation cost? What is the price for a bushel of Montana wheat (today). What has it historically been? How much was it 1 year ago, 5 years ago, 10 years ago?

What is the size of an average farm in Montana (or is referred to as a ranch?). What is value of that farm (value per acre)? How does that compare to 1 year ago, 5 years ago, 10 years ago?

This is deja vu all over again! Didn't we go through that on the old "Montana Farmers Strike Back Against BNSF" thread? I do not look forward to searching through 300 forum pages to find out the stuff Micheal Sol and artftbe posted regarding Montana grain transportation rate comparisons. Maybe Micheal can reiterate all that data for you(?)

BUT, I can point out one thing in response to the framing of your questions: If you only want Montana prices compared to a few years ago, and not Montana prices compared to the rates other areas of the country are getting, then you will miss the gist of the problem. The problem is with the pricing and transport rates imposed upon Montana shippers relative to other areas of the country and other areas of the world. I made this point in the other thread regarding captive vs non-captive rates, it is the relative comparison that makes all the difference.

[DaveBr]

Gentlemen,You have your Montana farmers trying to survive with the railroads.Have any
one heard the full scoop on the Oregon farmers and the water they will be able to get?
I understand it's going to be a fight between the Salmon coming upstream and the
farmers trying to irrigate their land? At Klamath Falls
DaveBr.

[Anonymous]

QUOTE: Originally posted by DaveBr

Gentlemen,You have your Montana farmers trying to survive with the railroads.Have any
one heard the full scoop on the Oregon farmers and the water they will be able to get?
I understand it's going to be a fight between the Salmon coming upstream and the
farmers trying to irrigate their land? At Klamath Falls
DaveBr.

In the case of the Klamath farmers, they are fighting government entities, including but not limited to the EPA, USF&W, NOAA, and most importantly, the 9th Circuit Court of Appeals. The creation of the new 12th Circuit Court of Appeals can't come soon enough for them!

Isn't it ironic that farmers, dams, ect take all the blaim for ostensibly low salmon returns, yet the feds continue to allow tribal and commercial fishermen to stretch their hundreds of gill nets across all the salmon bearing streams and rivers? Last time anyone looked, a gill net doens't discriminate between a *protected* wild salmon and a harvestable hatchery fish. There was a federal judge who rightly ruled that there is no difference between hatchery and wild fish, and if push comes to shove I expect the Bush Administration will use that combined count to delist most of these fish.

[MichaelSol]

QUOTE: Originally posted by MP173
I am very interested in the economics of the Montana wheat farmers, so I am really looking forward to your answers to the questions I posed.

Well, I am tied up in an Employment and Labor Law seminar all weekend. Sort of like 16 hours of continuous dental surgery. However, the General Counsel of WalMart actually knew all about the Pullman Strike of 1888, which was both remarkable and generated an interesting discussion last night -- for the two of us in the room who knew what it was at all.

Sunday afternoon, I might be able to gather something together on economic trends of wheat shipping, wheat prices, and farm values, if the right box of stuff is in the right place where I can find it.

Best regards, Michael Sol

[gabe]

You guys know how to make me feel like I have not missed anything. I had to get away from the forum, and three months later, there is a carbon copy of the thread I was reading three months ago.

Gabe

[MP173]

Michael:

I can go and find tariff rates with anyone. The disagreement we got into last time was that the rates I was finding were not pertenent to the traffic movements.

I simply want to know this...what does a car of wheat cost, how many bushels in a car (I despite an MBA can then do the math to determine bushel cost) and then look at the cost of wheat and figure what the transportation costs are.

Anytime someone does analysis, it is always good to take a historical perspective. Hence the historical commodity prices. I also think it would be a good idea to take a look at typical farm size, etc.

I have a very good understanding of Illinois corn, beans, wheat farming but realize there is a difference.

FM, dont get too upset by what I want, it is pretty simple actually.

ed

[MichaelSol]

Well, this is pasted from an Excel Spreadsheet, but if you place these back into EXcel and then graph these, you will see that Montana and North Dakota wheat is one the few railroad items which has increased in shipping costs under Staggers, rather than benefitted from the huge drop in cost per ton-mile enjoyed by most other rail shippers, even as the price of wheat at Great Falls has stayed below $3.50 per bushel and even as operating costs are 375% higher in 2005 than they were in 1975.

National Average 0.063 0.039 0.0295 0.024
MT Cost to ship/ton-mile 0.023 0.028 0.034 0.038
Cost to ship/carload 1800 2268 2736 3066
Distance 870 870 870 870
Price of wheat 2.67 3.47 2.74 3.31
1975 1985 1995 2005

Best regards, Michael Sol

[MichaelSol]

Ed, a 100 Ton hopper car holds approximately 3450-3500 bushels of wheat.

Montana has been remarkably stable on some statistical farm criteria for the past thirty years., not so stable on others.

This first category is relevant to Bob Wilcox's misleading comment:

QUOTE: Small farmers virtually died twenty years ago after the credit crunch in the early 1980s. They are usefull when agri-business is after a political payoff such as a subsidy from the local evil railroad.

As you can see below, nothing of the sort happened as a result of the "credit crunch" of the early 1980s, indeed, farms did not consolidate and get larger, they got smaller. There are more farms in 2005 than there were in 1974.

The number of acres of farmland in Montana:
1974 [Average size of farm]
62,158,351 [2,665 acres]

1982
60,539,209 [2,618 acres]

1992
59,642,536 [2,613 acres]

2002
59,612,403 [2,139 acres]

Wheat crop yield per acre
1974 [Aver. price per bushel]
24.7 bu [$4.24]

1982
33.6 bu [$3.55]

1990
28.1 bu [$2.65]

1991
36.5 bu $3.17]

2000
27.5 bu [$3.02]

2004
34.5 bu [$3.61]

Market value of products sold
1974 (adjusted for 1974 dollars)
$1.03 Billion

1982
$1.6 Billion ($780 million)

1992
$1.7 Billion ($550 million)

2002
$1.8 Billion ($460 million)

Average age of operator
1974
51.1 years

1982
50.5 years

1992
54.0 years

2002
55.4 years

Source: National Agricultural Statistics Service, USDA.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by MP173

I simply want to know this...what does a car of wheat cost, how many bushels in a car (I despite an MBA can then do the math to determine bushel cost) and then look at the cost of wheat and figure what the transportation costs are.

Ed, I can email you an Excel BNSF Pricing Model that will calculate for you the specific carload cost, across four pricing categories, and the "per train" revenue as well as the transportation cost, as well as automatically selecting the best Port Export destination based on the port wheat price and the specific transportation cost, from virtually any elevator on the BNSF system, all in one Excel model. It is currently loaded with the April 15, 2005 tariffs as I haven't had time to update it to the current tariffs, but it calculates total cost and carload cost, as well as rate per mile automatically for any elevator location.

If you wish, I can ship it off to you by email.

Best regards, Michael Sol

[MP173]

Michael:

Thanks for the info. Any idea of what a typical acre of land is worth? It will be interesting to plug the numbers in and compare to farms in this area.

Sure, send me the excel spreadsheet. I will play with it.

ed

[MichaelSol]

QUOTE: Originally posted by MP173

Thanks for the info. Any idea of what a typical acre of land is worth? It will be interesting to plug the numbers in and compare to farms in this area.

According to the USDA, as of 2002, the "estimated market value of land and buildings" for Montana farmland is $386.00 per acre. The average for Illinois is $2,425.00 per acre.

Best regards, Michael Sol

[greyhounds]

QUOTE: Originally posted by MichaelSol

Well, this is pasted from an Excel Spreadsheet, but if you place these back into EXcel and then graph these, you will see that Montana and North Dakota wheat is one the few railroad items which has increased in shipping costs under Staggers, rather than benefitted from the huge drop in cost per ton-mile enjoyed by most other rail shippers, even as the price of wheat at Great Falls has stayed below $3.50 per bushel and even as operating costs are 375% higher in 2005 than they were in 1975.

National Average 0.063 0.039 0.0295 0.024
MT Cost to ship/ton-mile 0.023 0.028 0.034 0.038
Cost to ship/carload 1800 2268 2736 3066
Distance 870 870 870 870
Price of wheat 2.67 3.47 2.74 3.31
1975 1985 1995 2005

Best regards, Michael Sol

Are those costs adjusted for inflation?

[Anonymous]

QUOTE: Originally posted by futuremodal

Yep, just post something about railroad rate gouging, and the ilks will slither up from the cesspool of arrogant idiocy.

I didn't know your home had such an interesting and fitting name FM...FOFLMAO...

I missed a few things while turning and burning I guess...

LC

[MP173]

So a Montana acre in 2004 produced $124.55 in revenue. That acre is worth $386 per acre, so the revenue per acre/asset value per acre ratio is .32.

The Illinois farm valued at $2425 produces about $350 (based on 175 bushels of corn @ $2) for a ratio of .14.

The typical Montana farm generated $266,412 in revenue in 2004, much higher than I would have thought. The farm would have been valued in excess of $800,000.

Interesting numbers. Anything else farmed on those acres, or just wheat? Down here we have corn, beans, and wheat on a rotation.

ed

[jeaton]

The situation faced by the Montana farmers kind of reminds me of something of my past. Just after World War II, my father bought a small dairy farm in north central Wisconsin. We were typical of the size of the farms in the area. My father quit farming in 1959 and in the following decade or so most of the other farmers in the area also got out of the business.

The problem was the land was not too great, the growing season was fairly short, and the primary markets for the products were far away. Something like Montana.

[MichaelSol]

QUOTE: Originally posted by MP173

So a Montana acre in 2004 produced $124.55 in revenue. That acre is worth $386 per acre, so the revenue per acre/asset value per acre ratio is .32.

The Illinois farm valued at $2425 produces about $350 (based on 175 bushels of corn @ $2) for a ratio of .14.

The typical Montana farm generated $266,412 in revenue in 2004, much higher than I would have thought. The farm would have been valued in excess of $800,000.

Take that one step farther and you're on to something.

After expenses, including transportation, the average Illinois farm according to the USDA earns $148 net income per acre and the the average Montana farm earns $12 per acre, net revenue. Among other things, you can see the effect of the railroad cost penalty, roughly $44/acre in this instance, it's extremely significant, and I think that's the point where that cost is $14 to $20 higher per acre than anywhere else on the railroad for the identical commodity a similar distance shipped.

QUOTE: The problem was the land was not too great, the growing season was fairly short, and the primary markets for the products were far away. Something like Montana.

For wheat, this is backwards. Montana is the nearest and largest wheat producer in the nation to what is historically the single largest export port, offering historically the highest wheat prices: Portland, Oregon.

The growing season in Montana is considered ideal for wheat, which is why so much of it is grown in Montana and it is considered the highest quality of American wheat. None of that does Montana growers much good thanks to the BNSF.

In an economically rational world, Montana is ideally located to its primary market and should be enjoying a higher prosperity because of that compared to other wheat farmers. The opposite is true, entirely because of railroad pricing policy.

The problem is that, although the closest large producer to the largest and best market offering the highest prices, Montana pays the highest percentage of income earned for transportation of that product. As recently as 2003, BNSF engaged in the insidious practice of "inverse pricing." It cost more to ship a carload of wheat to Portland from Montana than it did a carload of wheat from Minnesota to Portland.

I don't mean "per mile," I don't mean "per ton mile," I mean that it was cheaper absolutely to ship the carload from Minnesota than it was from Montana even though on the same railroad on the same mainline, and even though it was more than twice the distance.

Minnesota wheat flooded into Portland. The price of wheat collapsed. Montana farmers paid more to get their wheat there, even though 1000 miles closer, and received less per bushel thanks to BNSF's pricing policy.

The wheat producers who were located the farthest from the market, offering a poorer quality wheat, got the better profit, entirely because of railroad policy.

And the railroad car cycle times collapsed, the COT system fell apart, overall congestion increased, all traffic encountered increased cycle times, and the railroad earned substantially less than it would have under a straightforward and fair set of rates. Who wudda thought that fair and rational pricing would have been more profitable to the railroad.

Not the railroad.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by jeaton
The problem was the land was not too great, the growing season was fairly short, and the primary markets for the products were far away. Something like Montana.

During the "settlement" era, these were the statistics available and used by the railroads, MILW, GN and NP, to promote settlement in Montana.

Average bushel per acre production of some Midwestern states and Montana from 1900 to 1910 (Wheat)

State/ Average Bushel Production
North Dakota 12.1
South Dakota 12.1
Nebraska 17.5
Kansas 14.0
Wisconsin 16.6
Minnesota 13.0
Iowa 14.0
Montana 26.3

Source: The United States Department of Agriculture, Yearbook of Agriculture, Washington: Government Printing Office, 1911, p.532.

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by MichaelSol

The wheat producers who were located the farthest from the market, offering a poorer quality wheat, got the better profit, entirely because of railroad policy.

This is actually a big problem for our global wheat marketers. What is getting out there the most is a relatively inferior product compared to what could be representing US wheat quality. If Montana wheat has the top characteristics of grain quality, it should be the product prioritized for transportation to overseas markets. But the U.S. railroads have skewed this market to the detriment of U.S. producers and to the benefit of foreign producers.

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton
The problem was the land was not too great, the growing season was fairly short, and the primary markets for the products were far away. Something like Montana.

During the "settlement" era, these were the statistics available and used by the railroads, MILW, GN and NP, to promote settlement in Montana.

Average bushel per acre production of some Midwestern states and Montana from 1900 to 1910 (Wheat)

State/ Average Bushel Production
North Dakota 12.1
South Dakota 12.1
Nebraska 17.5
Kansas 14.0
Wisconsin 16.6
Minnesota 13.0
Iowa 14.0
Montana 26.3

Source: The United States Department of Agriculture, Yearbook of Agriculture, Washington: Government Printing Office, 1911, p.532.

Best regards, Michael Sol

Statistics from 1910 mean absolutly nothing in 2005.

Statistics without context are a good lawyer's trick. For example, if they were only farming the best Montana land in 1910 while farming most of the land in Kansas the "average" yield per acre in Montana would be more.

We don't know because the man don't say. They evidently were trying to get people to move to Montana and start farming. It's reasonable to conclude that the best land would have been brought under cultivation first so any expansion of farming would have brought the "average" yield down. It's a political agenda and we ain't gonna' hear all the facts from someone with a political agenda.

I personally think they should stop raising wheat in Montana. Switch to grapes. They sure make a good whine out there. A good Montana Merlot with Colorado lamb? I'd try it.

[MichaelSol]

QUOTE: Originally posted by greyhounds
They evidently were trying to get people to move to Montana and start farming.

Yeah .. "evidently" railroads were trying to get people to move to Montana and start farming.

You're getting warm. Keep working on it.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by greyhounds
It's reasonable to conclude that the best land would have been brought under cultivation first so any expansion of farming would have brought the "average" yield down.

1910 26.3 bushels
2004 34.5 bushels

As to the average going down, keep working on your math as well. It also needs work.

Best regards, Michael Sol

[arbfbe]

Perhaps Montana growers should ship their grains to Gulf Coast ports. If BNSF's price structure holds in the reverse direction they should get the cheapest costs since they are the farthest away from that market. <<G>>

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
It's reasonable to conclude that the best land would have been brought under cultivation first so any expansion of farming would have brought the "average" yield down.

1910 26.3 bushels
2004 34.5 bushels

As to the average going down, keep working on your math as well. It also needs work.

Best regards, Michael Sol

Oh, my math is fine, I could use some work on spelling, but my math is fine.

If they've only increased the yeild by 8.2 (did I get that right?) bushels per acre since 1910 they must be farming some pretty poor land. The big revolution in farming has been education. Two out of three farmers I know (and I know three farmers) have degrees from the University of Illinois. One in Ag and one in Ag economics.

They're much better equiped to get productivity out of they land than the farm folks were in 1910. But they can't work with nothing. And I'm telling you, by the market valuation, by the amount of subsidies going to the farmers, and by the amount of blaming someone else so you don't have to blame yourself, Montana farm land seems to be close to nothing.

It's a crying shame, but you can't expect the BNSF to take it in the shorts because farmers can't make a decent living raising wheat in Montana. From what I've read here, the BNSF could haul that wheat for free and those farmers would still need to take confiscated money (a subsidy) from the rest of us.

Guys, it's time to move on.

[MichaelSol]

Let's see. If the average goes up 8.2%, that's the same as "going down." In other words, you had no idea what you were talking about, it was clear, so you changed the subject.

It has long been clear that ag is not an industry you know anythiing about. Your math on rail cars was bad enough -- five loose cars a day will make "hot trains run late." But, this is so obviously outside your experience, I'm not sure why you insist on commenting. Actually, I've wondered that on several threads. You have lots of opinon, few facts, and almost no analytical sense.

The above is a good example. In Montana, 2004 was a severe drought year. Think that might affect yield? You wouldn't know.

QUOTE: Greyhounds:
If they've only increased the yeild by 8.2 (did I get that right?) bushels per acre since 1910 they must be farming some pretty poor land. The big revolution in farming has been education. Two out of three farmers I know (and I know three farmers) have degrees from the University of Illinois. One in Ag and one in Ag economics.

Did they teach them that wheat plants don't need water? Of course drought impacts yield considerably. Is that any more significant than concluding that farmers shouldn't raise wheat in Wisconsin, because it has had severe droughts, or Texas, because it has had severe droughts, or Kansas, because it has had severe droughts?

Of course not. It is a conclusion only you can make, because of what appears to be nearly complete ignorance on the topic.

The point of the comment was simply to show that as agriculture expanded to the allegedly poorer soils, average overall yield did not decline for a variety of factors during that entire time, including planting improvements, fertilizer improvements, harvesting improvements, plant improvements, a variety of things, and affected by things like soil depletion and weather.

Now you are able to conclude from that that Montana, the third largest wheat producer in the nation, producing the highest quality wheat, shouldn't be in the business at all because of wheat yields in 2004.

Considering that in 1918, similar conditions in Montana resulted in yields of 2.4 acres per bushel, these modern Montana farmers are a pretty dedicated and innovative bunch.

The one thing they can't beat is discriminatory railroad rates.

Fortunately, no one put you in charge, as no one would be raising anything anywhere, ultimately, by your bizarre economic theories.

A little more math. Take the differential of the average rate charged for the distance, and add that back to the average Montana farmer's net income, given the size differential of the farms Compare that to Illinois as the above example.

The average Illinois farm earns $105,000. The average Montana farm earns $67,000. However, if the average Montana farmer paid the same transportation rates available to the Illinois farmer, the average Montana farmer would earn between $97,000 and $109,000.

In other words, outside of transportation rates, Montana farms are of the nearly identical economic productivity as Illinois farms.

Amazing, right?

And they are a more than a third less profitable, entirely because of the higher rates charged for the identical service, even though they produce a superior product more accessible to the better markets.

Now, as they are less profitable, they have less to invest. Ultimately, they will be less productive. Who will be hauling less product as a result?

The railroad.

This strategy, as all economic strategies are, subject to certain laws of economics.

By strangling an industry, the railroad is strangling its own customers. Besides running the risk of political backlash, does that make good sense in the long run for the railroad?

That makes sense only to you and Bob Wilcox.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by greyhounds
And I'm telling you, by the market valuation, by the amount of subsidies going to the farmers, and by the amount of blaming someone else so you don't have to blame yourself, Montana farm land seems to be close to nothing.

From what I've read here, the BNSF could haul that wheat for free and those farmers would still need to take confiscated money (a subsidy) from the rest of us.

Hmmm, and since Montana is the third largest wheat grower, pays the highest shipping costs in the nation, but is 16th in the nation in terms of farm subsidies, your comments on Montana mean ... what?

Don't you think its a little odd that those Illinois farmers get three times the subsidy as Montana farmers? Tell me more about "political agendas" and how BNSF is "taking it in the shorts" by charging higher prices to Montana farmers, but not "taking it in the shorts" when it is charging substantially lower prices to those Illinois farmers who already enjoy three times the subsidy?

Rank --------- State --------- Amount -------- Percentage
1. Texas ----- $12,899,984,867 ---- 9.0%
2 Iowa -----$12,541,321,124 ----- 8.7%
3 Illinois ----- $10,664,346,498 ----- 7.4%
4 Nebraska ------ $8,274,584,703 ----- 5.8%
5 Minnesota ----- $8,210,073,011 ------ 5.7%
6 Kansas -------- $7,992,519,474 ------ 5.6%
7 Arkansas ----- $6,705,286,472 -------4.7%
8 North Dakota ------- $6,247,445,370 ------ 4.3%
9 California ------ $5,301,039,851 ------- 3.7%
10 Indiana --------$5,215,455,705 -------- 3.6%
11 Missouri -------- $5,042,768,281 ------- 3.5%
12 South Dakota -------- $4,769,310,834 -------- 3.3%
13 Mississippi ------- $4,689,361,125 ------ 3.3%
14 Ohio ------- $3,847,882,164 -------- 2.7%
15 Wisconsin -------- $3,393,811,536 ------- 2.4%
16 Montana ---------$3,373,915,141 ------- 2.3%
17 Georgia --------- $3,173,828,694 ------- 2.2%
18 Oklahoma --------- $3,155,045,835 ----- 2.2%
19 Louisiana -------- $3,061,631,253 ------- 2.1%
20 Colorado --------- $2,576,802,008 -------- 1.8%

Best regards, Michael Sol

[MP173]

Michael:

How do you figure the Illinois farmer gets three times the subsidy as the Montana farmer? It appears your figures are based on aggregate subsidies.

How are the subsidies based? Acreage? I dont know...I get the checks, but I dont know. Call me apathetic if you will, but the checks are so small that I have never stopped to determine them.

Regarding transporation costs...what is the average haul (mileage) for Illinois farmers vs Montana? Lots of Illinois corn and soybeans are locally used (ADM and others). Decatur, Il is very centrally located and processes quite a bit of corn and beans. I know some corn goes for export, but it would be interesting to see the average length of haul. With you resources...I am sure you will come up with it.

With the ethonol plants going up on every block, there is a stronger demand for corn and the length of haul should be pretty short.

I maintained back in the original thread months ago that part of the problem with Montana and Dakota wheat is the length of haul and the need to add value to their product. Both are high hurdles to jump.

ed

[greyhounds]

QUOTE: Originally posted by MichaelSol

Let's see. If the average goes up 8.2%, that's the same as "going down." In other words, you had no idea what you were talking about, it was clear, so you changed the subject.

It has long been clear that ag is not an industry you know anythiing about. Your math on rail cars was bad enough -- five loose cars a day will make "hot trains run late." But, this is so obviously outside your experience, I'm not sure why you insist on commenting. Actually, I've wondered that on several threads.

Well, let's just conceed, for the sake of argument, that I'm a complete moron. After all, I disagree with you What further proof does anyone need. And furthermore, I can't do math at all.

But I am not so complete a moron as to falsely claim, as you do, that an 8.2 bushel per acre increase in Montana wheat production per acre from 1910 to 2004 is a "8.2% increase. "

The statistics you cited said the average acre of wheat in Montana yeilded 26.3 bushels in 1910 while the 2004 yeild was 34.5 bushels. That's a 8.2 bushel increase. That's pathetic considering the impovements in farming since 1910. It's only a 31% increase. Again, that's a pathetic increase in farm productivity since 1910.

But again, you misrepresent the numbers - falsely calling it to be an "8.2 %" increase.

Look, a 8.2 bushel per acre increase is not an "8.2 percent" increase as you claim.

And yet, you criticize MY math.

You use numbers without understanding the numbers. I deal with people like you every *** day. You folks cause a lot of useless trouble.

[MichaelSol]

QUOTE: Originally posted by MP173
I maintained back in the original thread months ago that part of the problem with Montana and Dakota wheat is the length of haul and the need to add value to their product. Both are high hurdles to jump.

And three months ago I pointed out in excrutiating detail that Montana/North Dakota rates are 130-150% higher FOR THE SAME DISTANCE shipped by nearly any other wheat grower in the country.

The length of haul of wheat, Montana/Portland, is a relatively short haul by railroad standards, averaging 780 miles. The overall system line haul is something around 1200 miles on BNSF. The Montana distance is 65% of the average line haul distance for all traffic on the BNSF; that does not support an argument that Montana wheat is somehow handicapped by distance.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by greyhounds
[But again, you misrepresent the numbers - falsely calling it to be an "8.2 %" increase.

Look, a 8.2 bushel per acre increase is not an "8.2 percent" increase as you claim.

And yet, you criticize MY math.

You use numbers without understanding the numbers. I deal with people like you every *** day. You folks cause a lot of useless trouble.

Unlike you, I am responsible to clients and customers for my numbers and have been for 35 years, and especially so when I was in engineering. The 8.2% is an obvious typo, replace % with "bu", and I am sure that it will jump right out at you Neither of which has anything to do with the math, but of course which does have a lot to do with the fact that both represented increases, which is the opposite of what you claimed.

By the way I am sure you can see the difference -- an error of labelling which oddly enough has nothing to do with the math involved. I guess you got that wrong too.

"You folks cause a lot of trouble".

When you feel strongly and know little, it of no doubt great trouble to you. People like you are everywhere: all opinion, no facts.

This thread is typical: not one fact, not one useful idea, not one shred of evidence that you have anything to offer on this topic.

But, here you are. And the thread goes downhill.

Again.

Best regards, Michael Sol

[MP173]

Oh, I am not disputing the fact that the Montana rates are higher than others. We have discussed that.

What is the average length of haul for Montana wheat vs say...Illinois corn? What percentage of Montana wheat that goes the distance to the Pacific? What percentage of the Minnesota wheat goes the distance vs what is process locally?

Those are fairly important figures to know when looking at the entire picture.

Without competition in the form of other railroads, water, or a method of adding value to the product it is tough situation. The obvious answer, if one cannot lower costs is to increase revenue and how that is done in a commodity market is based entirely on supply and demand. So, somehow either increase demand, lower supply or add value to the product. None of which is easy.

ed

[MichaelSol]

QUOTE: Originally posted by MP173
How do you figure the Illinois farmer gets three times the subsidy as the Montana farmer? It appears your figures are based on aggregate subsidies.

Well, I referred to "Illinois farmers," and "Montana farmers" attempting to assert that the farming community, industry, however one wishes to label it, receives the stated amounts, and that this was on a statewide basis.

The figures are aggregate. On a "per farmed acre" basis, Illinois receives $391 per acre in farm subsidies, and Montana receives $57 per acre. On that basis, Illinois farmers receive approximately Seven times the subsidy per acre farmed as Montana farmers.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by greyhounds
The statistics you cited said the average acre of wheat in Montana yeilded 26.3 bushels in 1910 while the 2004 yeild was 34.5 bushels. That's a 8.2 bushel increase. That's pathetic considering the impovements in farming since 1910. It's only a 31% increase. Again, that's a pathetic increase in farm productivity since 1910.

You are repeating yourself. Let me repeat myself.

In Montana, the year 1910 was a year of abundant rainfall. As I pointed out, railroad literature was distributed far and wide proclaiming the superior fertility and productivity of Montana soils. The railroads could not have survived out West but for the farmers; there wasn't intermodal, not enough chemical, industrial, and forest combined to support the railroads the way the farmers did.

The farmers came West, they planted, and they shipped. They made the railroads possible.

And 1910 was a very good year for rainfall.

The Year 2004 was classified by USDA as "severe to extreme" drought in Montana.

It is clear from your above statement that you don't get the connection between rainfall and crop productivity. It is to farming what the track is to the train in railroading.

Best regards, Michael Sol

[MP173]

Ok, here we go. Time to analyze a few points made here. BTW, I am using numbers provided by Michael, I must assume his sources are good.

1. Based on statements made, the average Montana farm net income is $67,000 per year. Also, the average Montana farm is 2139 acres. Thus, the average net income per year would be $31 per acre, not $12 per acre, as stated.

2. As of 2003 BNSF engaged in "inverse pricing". I must assume that since the term "as recently as 2003..." that the inverse pricing is not a current issue, nor was it in 2004.

3. Michael, you indicated there was a $44 per acre penalty for Montana farmers due solely to BNSF pricing. Check again. I am going to use your figures. It appears that the average yield is between 28 to 34 bushels per acre. So, lets use 31 bu/acre. Average farm is 2139 acres. Thus we have:

Average farm produces 66309 bushels of wheat per year.
2005 price per bushel = $3.31
Average revenue per farm = $219482
Average net income per farm = 67,000
Thus expenses = 152482

Average carload (870miles = $3066
Capacity = 3450 per car
Cost per bushel = 89 cents per bushel

Are you with me so far? Thought so...pretty simple math.

Montana cost per tonmile = .038
National average per ton mile = .024
Thus National average = 63% of what Montana pays per ton mile.

If we take the 63% of $3066, we will find the cost Montana would pay, if it paid the national average per ton mile for a carload of wheat.

That number = $1931 per car
per bu (1931/3450) = 56 cents per bushel

Thus, it could be said, when looking at the 89 cents vs 56 cents that Montana pays 33 cents per bushel more for transportation, which multiplied by 31 bushels per acre = $10.23 per acre

Thus, the "penalty" per acre is $10.23, not $44 per acre as you indicated.

The net income for the Montana farmer would increase by $21,881 per year based on .33 per bushel * 31 bu/acre * 2139 ave acre/per. The net would go from $67,000 to $88,881 not the $97,000 to $109,000 you stated.

There are flaws in my logic. I doubt if Montana would receive the "national average" of .024 per ton mile. I dont know what the rate is for agricultural products moving 870 miles.

Regarding subsidies....I dont have a comment on that. Far too complex for me to get into at this point in time. I dont know how the subsidies are determined, nor how they are paid. No comment.

In looking at the raw numbers, a couple of things jump out:

Average Illinois revenue per acre:
160 bushel corn @ $2 per acre = $320.00 per acre
Montana revenue per acre:
31 bushel wheat @ $3.31 = $105.00 per acre

I think you need to work on both the revenue side and the cost side. However, the acreage is simply not producing enough revenue per acre.

If, as you say, the Montana wheat is superior to all other wheat, it should be commanding a premium on the market, even as a commodity.

Enough for now.

ed

[greyhounds]

Ed,

He's probably not gonna' like your math.

Ken

[Anonymous]

now i can see why both kids had to go to the principals office.

what a convoluted and confusing way to point out what the railroads and farmers have been doing to each other for the last 150 years (and don't criticize my math).

when it's all said and done, the farmers will still suffer, and the railroad will get smaller due to public resentment. this is an old story, and i can't believe i wasted the time to read all five pages.

-rrick

[MP173]

I never had to go to the principal's office. I was the one that stayed in the classroom and checked the numbers.

BTW...I sort of see Michaels point. There is a very fine line between maximizing your profit and driving away business. I live that every day.

My point is this...BNSF reacts to market pressures among other things. In other parts of the country there are rivers, lakes, or other railroads. None apparently exist in Montana (dont know, never been there, but I might soon).

In my line of work, my "rate" goes from slightly below our costs to 50% profit, based primarily on market conditions of competition. However, if I am developing business and it needs to be at a certain pricing, more than likely I will shed the fact there is no competition and get the business. However, I dont price all of my customers uniformly, nor do I reduce my margins for all customers when I reduce it for one.

Montana shippers have no alternative. We can talk all we want about inverse pricing, STB, variable costs, 160%, etc. but in this case it comes down very simply to leverage, as I have stated in the past.

Railroads are finally at a point where they are getting pricing power. More power to them. Their returns have been lousy for years...no make that decades...or even centuries. This is not about the family farmer vs Chinese imported plastic goods. A group of managers whose paycheck depends on maximizing profits has found the key to the candy store...nothing different than what Bill Gates, Lee Raymond, or Warren Buffet do. One of the keys to Warren Buffet's success over the years has been to look at a company's franchise and determine whether or not they have economic leverage. He once told his son who was contemplating farming in Central Illinois "Howie, ADM is not going to pay more for your corn, just because you are Howie Buffet." Point well taken, commodities, even oil are priced according to availability.

Check the numbers Michael provide carefully and it is obvious the pitfalls a commodity producer faces. You are completely at the whim of supply and demand. Pricing for wheat has not increased since 1975. If I would take a bit of time and find an inflation chart, we would probably find it has not only not increased, but fallen.

Michael does in fact give the facts of the total economic harvest and adjusts it to 1974 dollars. Capitalism in this country has found a way of eliminating those industries which cant make it. I am not saying that wheat farmers are not important...obviously they are critical.

Ironically they face similar issues of the railroads, lots of assets required and very low returns.

Marketing and pricing is a very complex issue in any industry. It cannot be explained in a few paragraphs.

My point in looking at these numbers in detail was to determine if BNSF is the problem it has been portrayed, or rather a convenient whipping boy. It is very dangerous and unproductive to lash out at your customers who are buying your product at market prices and much easier to attack the messenger, in this case the delivery man.

Farming is a tough, dangerous, often low yielding career. There are enormous benefits to it. The next time I am with my brother in law, who farms about 1500 acres we will have quite a chat...by the way he is also a railfan.

ed

[Anonymous]

QUOTE: Originally posted by rick bonfiglio

now i can see why both kids had to go to the principals office.

what a convoluted and confusing way to point out what the railroads and farmers have been doing to each other for the last 150 years (and don't criticize my math).

when it's all said and done, the farmers will still suffer, and the railroad will get smaller due to public resentment. this is an old story, and i can't believe i wasted the time to read all five pages.

-rrick

What you're missing is that until Staggers, rail rates were regulated to reflect mileage based hauls, and frankly there were more railroads to do business with. The rate differential between Montana grain shipments and Nebraska grain shipments with the same destination and same relative mileage was for all intents and purposes indistinguishable. Since Staggers, you get to the point where the captive shippers like Montana are paying double the rates of the non-captive shippers like Nebraska.

So it's not an analysis of the last 150 years of acrimony between farmers and the multitude of railroads, it's the focus on the last 25 years of acrimony between suddenly captive rail shippers and the immense railroad oligarchy. It's a situation that needs to be rectified before we lose our ag and industrial base to foreign producers.

[greyhounds]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by rick bonfiglio

now i can see why both kids had to go to the principals office.

what a convoluted and confusing way to point out what the railroads and farmers have been doing to each other for the last 150 years (and don't criticize my math).

when it's all said and done, the farmers will still suffer, and the railroad will get smaller due to public resentment. this is an old story, and i can't believe i wasted the time to read all five pages.

-rrick

What you're missing is that until Staggers, rail rates were regulated to reflect mileage based hauls, and frankly there were more railroads to do business with. The rate differential between Montana grain shipments and Nebraska grain shipments with the same destination and same relative mileage was for all intents and purposes indistinguishable. Since Staggers, you get to the point where the captive shippers like Montana are paying double the rates of the non-captive shippers like Nebraska.

So it's not an analysis of the last 150 years of acrimony between farmers and the multitude of railroads, it's the focus on the last 25 years of acrimony between suddenly captive rail shippers and the immense railroad oligarchy. It's a situation that needs to be rectified before we lose our ag and industrial base to foreign producers.

No they weren't. Prior to Staggers, we charged less to move a load from New Orleans to Chicago than we did to move a load from Chicago to New Orleans. The miles are obviously the same.

Mileage is only one small factor in rail costs. Line haul miles are one of the cheapest parts of the rail cost structure. It can cost less to move a load 1,000 miles than it does to move a load 750 miles. It depends on a lot of things such as supply, demand, terminal efficiency, etc.

[Anonymous]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by rick bonfiglio

now i can see why both kids had to go to the principals office.

what a convoluted and confusing way to point out what the railroads and farmers have been doing to each other for the last 150 years (and don't criticize my math).

when it's all said and done, the farmers will still suffer, and the railroad will get smaller due to public resentment. this is an old story, and i can't believe i wasted the time to read all five pages.

-rrick

What you're missing is that until Staggers, rail rates were regulated to reflect mileage based hauls, and frankly there were more railroads to do business with. The rate differential between Montana grain shipments and Nebraska grain shipments with the same destination and same relative mileage was for all intents and purposes indistinguishable. Since Staggers, you get to the point where the captive shippers like Montana are paying double the rates of the non-captive shippers like Nebraska.

So it's not an analysis of the last 150 years of acrimony between farmers and the multitude of railroads, it's the focus on the last 25 years of acrimony between suddenly captive rail shippers and the immense railroad oligarchy. It's a situation that needs to be rectified before we lose our ag and industrial base to foreign producers.

Oh, boy, here we go again...

I thought I was watching the ad for "Chicken Little" again...

But, no, it's just FM with his usual, "the sky is falling" approach to railroads...

Of course, in the pre-Staggers world many of the granger roads were nearly or really bankrupt. Look at the finances of the CRIP, MILW or CNW and you'll find that all were having a tough go of it.

Also, the dynamics of the grain markets have changed quite a bit over the years with a large shift to western ports for exports rather than domestic use or shipments from the Gulf Ports via the river systems. Last time I checked Montana was pretty challenged in terms of water transport to any deepwater port.

LC

[MichaelSol]

QUOTE: Originally posted by greyhounds

Ed,

He's probably not gonna' like your math.

Ken

The math is fine, the assumptions are wrong, and for that I bear some of the burden.

The average national ton mile rate I used is for all railroad carriage, not just wheat. So, unless you can think in terms of gallons of oil per acre, Hondas per acre, and VCR's per acre, there is no comparability between that national average, and the average rate for wheat, and by the time that analysis gets to rate per acre, the train is pretty far off the track.

My wheat acreage cost of tranportation per acre is derived from an average of all BNSF wheat rates, creating algorithims to permit that average to be derived at any given point (mileage) and then comparing the Montana rate with the average rate. That is, the wheat rate per acre comparison is calculated compared to an average wheat rate per acre, not an average of all railroad transport. That is not the method Ed uses above, and his result is naturally different, and also partly for the reasons below.

My point in comparing the rise in wheat charges to overall carriage rates was to show that while railroads have been able to offer that enormous productivity gains have been obtained, permitting rates to tumble over the past 20 years, the fact that those productivity gains apply as much to grain as to any other item. This is to suggest that Montana grain, which was highly profitable for railroads 30 years ago, cannot be anything but enormously profitable today and that arguments that it is expensive to haul because of distance, which is what Ed suggested at one point, is simply not valid because a key factor, distance, hasn't changed in the intervening 30 years, while the railroads themselves claim that costs have plummeted.

The Montana farm figures, like the Illinois farm figures, can't be used in the fashion that Ed uses them. The stumble is that neither Montana farms nor Illinois farms raise wheat exclusively. The "figures" offered for farms were just that: "all farms." Ed is asserting, unintentionally, that all those farms are wheat acreage, and is attempting an analysis of wheat farm income and transportation cost, by including all farm income in his calculations. This will indeed produce the figures that Ed produced, but they are wrong because those results include hay, barley, oats, sugar beets, mint, potatoes, and a variety of other non-livestock products.

Similarly, Illinois farm income is derived substantially from non-wheat products. Further, the proportion of farm income from wheat -- if that were to be offered as a basis for a comparison -- is entirely different in Illinois than Montana.

While I attempt to identify my figures as to purpose -- and different numbers do indeed offer different comparative purposes, these have to be closely read because the assumptions of one set of figures -- say "Montana farm land" -- cannot be read casually as meaning the same thing as the underlying computation leading to "net profit per acre from Montana wheat acreage" because in fact it does not.

Further, the purpose is to use numbers for illustrative purposes as it is easy to get into numbers and numbers and numbers and make these posts unreadable. Further, I am not inclined to get into publishing my next Doctorate thesis online in railroad forums. However, that is one specific reason that I typically offer citations to source, and if anyone cares to walk through the underlying data that I don't include for the purposes of brevity, they are more than welcome to do so.

In short, looking to find net revenue per acre for wheat production, but using the total Montana farmland acreage in the calculation will indeed offer different numbers than I offered, because you can't use one to find the other, or if you do, the result will simply be wrong. From there, the analysis goes downhill because these underlying assumptions on data are incorrect.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by MP173
2. As of 2003 BNSF engaged in "inverse pricing". I must assume that since the term "as recently as 2003..." that the inverse pricing is not a current issue, nor was it in 2004.

It is an "issue" because the railroad engages in it. Inverse pricing caused enormous problems in 2003 for both farmers and the railroad. It was an incomprehensible policy. The Montana Legislature met in 2004, and rates always get adjusted to be "reasonable" just about the time of the biannual Legislative sessions, along with major announcements along the lines of "We Promise to Be Good."

BNSF offered several "special" tariffs in 2005, and these are usually where inverse pricing shows up. They are usually relatively short term. Since I haven't reviewed any of BNSF's special tariffs for 2005, I couldn't say whether there was or wasn't any inverse pricing. Since I haven't looked at them, the safe and accurate thing to say was "as recently as 2003," without suggesting anything more either way.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by MP173
If, as you say, the Montana wheat is superior to all other wheat, it should be commanding a premium on the market, even as a commodity.

It does.

The premium received, and more, is paid over to the railroad, and so there is no benefit from the farmers for the higher price that Montana wheat receives.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by greyhounds

QUOTE: Originally posted by futuremodal
What you're missing is that until Staggers, rail rates were regulated to reflect mileage based hauls, and frankly there were more railroads to do business with.

No they weren't. Prior to Staggers, we charged less to move a load from New Orleans to Chicago than we did to move a load from Chicago to New Orleans. The miles are obviously the same.

Mileage is only one small factor in rail costs.

Regulated tariffs show an approximately 93% or greater correlation with mileage through linear regression analysis. For a statistician, that's not a "small" factor but very close to a sole determining factor.

Under deregulation, competitive rates are approximately 55-75% correlated with mileage, and non-competitive rates to captive shippers can correlate as high as 97% with mileage.

Best regards, Michael Sol

[MP173]

In my past life I worked in LTL trucking, as a manager of pricing, which included filing of tariffs.

I agree that "tariff rates" published were almost always mileage or distance driven. Exception ratings or commodity rates were developed to meet competitive pressures. When these rates were published it was generally worded to be for a specific shipper, or based on point to point movements. The fact that these rates were published did not mean that all other filed rates were lowered. Hence the general level of rates were preserved.

ed

[greyhounds]

QUOTE: Originally posted by MichaelSol

Regulated tariffs show an approximately 93% or greater correlation with mileage through linear regression analysis. For a statistician, that's not a "small" factor but very close to a sole determining factor.

Under deregulation, competitive rates are approximately 55-75% correlated with mileage, and non-competitive rates to captive shippers can correlate as high as 97% with mileage.

Best regards, Michael Sol

Which regulated tariffs? If you're going to cite a tariff, then name the tariff.

I agree with MP173, when they first tried to "regulate" rates the government attempted to enforce a rate structure that reflected three things:

1) Terminal Costs (which were the same regardless of distance moved)
2) Line haul distance
3) Value of commodity

The LTL rate structure of his motor carrier reflected this because, 1) the truckers basically copied the railroad rate structure when they became regulated in the mid 30's and, 2) the LTL motor carriers had a lot of protection from compitition. The government restricted who could haul the stuff (barrier to entry) and enforced the rates. You couldn't kill a truckline under regulation.

The rail rate structure quickly broke down because it made no allowance for things such as supply, demand, compitition, etc. Hence, the point to point commodity rates that basically resulted from negotiations between shipper and carrier. They moved the vast majority of rail freight.

The inability of the railroads to get out from under the government structured rate plan on LTL played a big hand in moving that traffic to the highway. They did better with their carload business.

The existance of a tariff rate, in itself, means nothing. If the freight wasn't moving on that rate, it's just a piece of paper. You'd have to do your correlation on rates that actually moved business, and 25 years after the fact, I'd be supprised if you can develop that data.

Again, what tariffs are you using?

[Anonymous]

QUOTE: Originally posted by Limitedclear

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by rick bonfiglio

now i can see why both kids had to go to the principals office.

what a convoluted and confusing way to point out what the railroads and farmers have been doing to each other for the last 150 years (and don't criticize my math).

when it's all said and done, the farmers will still suffer, and the railroad will get smaller due to public resentment. this is an old story, and i can't believe i wasted the time to read all five pages.

-rrick

What you're missing is that until Staggers, rail rates were regulated to reflect mileage based hauls, and frankly there were more railroads to do business with. The rate differential between Montana grain shipments and Nebraska grain shipments with the same destination and same relative mileage was for all intents and purposes indistinguishable. Since Staggers, you get to the point where the captive shippers like Montana are paying double the rates of the non-captive shippers like Nebraska.

So it's not an analysis of the last 150 years of acrimony between farmers and the multitude of railroads, it's the focus on the last 25 years of acrimony between suddenly captive rail shippers and the immense railroad oligarchy. It's a situation that needs to be rectified before we lose our ag and industrial base to foreign producers.

Oh, boy, here we go again...

I thought I was watching the ad for "Chicken Little" again...

But, no, it's just FM with his usual, "the sky is falling" approach to railroads...

Of course, in the pre-Staggers world many of the granger roads were nearly or really bankrupt. Look at the finances of the CRIP, MILW or CNW and you'll find that all were having a tough go of it.

Also, the dynamics of the grain markets have changed quite a bit over the years with a large shift to western ports for exports rather than domestic use or shipments from the Gulf Ports via the river systems. Last time I checked Montana was pretty challenged in terms of water transport to any deepwater port.

LC

Not real suprised you're a "Chicken Little" fan, when it comes out on VHS you can stick it next to your copy of "The Little Mermaid".

Not overly suprised that your view of grain hauling pre-Staggers is focussed on the granger lines. Of course, what I was refering to is the grain hauling of the current Class I's then vs now. One thing that hasn't changed for the BNSF or UP lines is that they were hauling most of the grain to the Western ports for export under regulation, same as now, and nothing has changed here other than relative rates have doubled for captive shippers.

Montana isn't "challenged" for access to water transport any more than the wheat growing areas of southeast Wyoming, western Nebraska, or Colorado. In fact, Montana is closer to the Pacific ports than all other HRS and HRW wheat growing areas. The big factor of course is that Montana is mostly captive, while Wyoming and Colorado are not.

[MichaelSol]

QUOTE: Originally posted by greyhounds
The existance of a tariff rate, in itself, means nothing. If the freight wasn't moving on that rate, it's just a piece of paper. You'd have to do your correlation on rates that actually moved business, and 25 years after the fact, I'd be supprised if you can develop that data.

In this instance, the data was developed in March of 1979 in preparation for ICC Hearings and most of the data for that was provided by Glenn Reynolds, Milwaukee Road's Director of Pricing.

Best regards, Michael Sol

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
The existance of a tariff rate, in itself, means nothing. If the freight wasn't moving on that rate, it's just a piece of paper. You'd have to do your correlation on rates that actually moved business, and 25 years after the fact, I'd be supprised if you can develop that data.

In this instance, the data was developed in March of 1979 in preparation for ICC Hearings and most of the data for that was provided by Glenn Reynolds, Milwaukee Road's Director of Pricing.

Best regards, Michael Sol

I guess I'd call that meaningless. When you go into a hearing you generally select evidence to support your position. So, again, what tariffs are you citing?

I know we took mileage into consideration, but it was part of a mix and it didn't govern our decisions. And we charged less to move freight north than we did south because the demand for northbound freight was less than the demand for southbound freight. Even if the miles were the same, we charged different rates.

[MichaelSol]

QUOTE: Originally posted by greyhounds
Which regulated tariffs? If you're going to cite a tariff, then name the tariff.

"A" tariff could tell you just about zilch. . A credible linear regression requires as many data points as possible. Which tariff? As many as possible. In this instance, a data set of Milwaukee revenue carloadings including, from actual waybills, distance (from origin and destination) and product.

Statistically, that is the relevant data.

For a linear regression to assess rate/mileage correlation, rate and mileage is extracted from the data set. A citation to a specific tariff is irrelevant at that point because the linear regression doesn't care: it wants actual, real data.

We requested waybill data and that's what we got. Since the purpose of the study was not to determine if Milwaukee waybills matched published tariffs, nor any reason whatsoever to suspect they didn't, there was absolutely no reason whatsoever to be looking for individual tariff numbers in a compilation of thousands of waybills no doubt including hundreds of tariffs.

At that point in time, it was a safe guess that all such rates were regulated and so there was no question that every single combination of price and distance was governed by a regulated rate.

For current pricing on wheat carriage, BNSF Rate Book 4022K was used. Within that rate book are subsets of unregulated and regulated rates, corresponding neatly with competitive and captive shippers.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by greyhounds
I know we took mileage into consideration, but it was part of a mix and it didn't govern our decisions. And we charged less to move freight north than we did south because the demand for northbound freight was less than the demand for southbound freight. Even if the miles were the same, we charged different rates.

On the way to work, I was wondering what on earth this meant. Why look at the price differential on direction, when there are hundreds of price differentials on the same mileage in the same direction, because a railroad hauls different commodities/products at different prices, even over the same distance. Direction has nothing to do with it. There are simply another set of tariffs over the same mileage.

Chicago to New Orelans has/had hundreds of tariffs at different rates for the same mileage. Does that change the statistical relationship between each tariff and the mileage? Not one bit.

The "standard error" is a different statistical measure than correlation (r-squared). The strength of statisitical analysis is to be able to measure a relationship that may in fact have offsets up or down for a variety of reasons, but for which a specific factor is still the controlling factor in setting a rate.

Greyhounds is discussing a situation which would affect the standard error (in large samples, the standard deviation), not the correlation. The standard error has nothing, or at least little, to do with determining whether or not the rates are set by reference to mileage, only whether or not such rate differentials exist -- which is a completely different measure than correlation.

Over very large data sets, a correlation can be very strong, and still have a relatively large standard error, that is, a variety of different rates over the same distance, and a multiple of such distances, all of which ultimately are set by reference to mileage, will yield a statistical analysis that shows exactly that.

Which is exactly what linear regression analysis is supposed to do.

Best regards, Michael Sol

[arbfbe]

The underlying question remains, how does the BNSF justify charging Montana farmer more $$ to move grain a shorter distance than North Dakota and Minnesota farmers? The crops from the east wil use more fuel, more crews and plug up more terminal facilities than those from Montana. What gives here? The folks in Montana want to know.

It is an interesting note about shipping rates between Chicago and New Orleans and the reverse route. The return charges for the mty grain cars are figured into the loaded rate but what about cotainers from the midwest to the Pacific northwest? The railroad has no containers of their own any more so it is not their problem to balance loads and mtys to keep the equipment where it is going to be needed like they must do with grain cars. The balance component for containers is with the customers. Loads weight more but mtys take the same amount of space on the train. So it would seem there is no benefit to the railroad to charge much less for the mty move and besides, depending upon the time of the year, sometimes it is loads west and mtys east and a few months later it is loads east and mtys west. The railroad does not care about that any more, a box is a box is a box to them. Some are heavier than others but the customer needs to stage them, no longer a railroad pricing problem. They no longer have an incentive to price the move differently in order to give the market an incentive to route the loads and mtys for the benefit of the railroad.

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
I know we took mileage into consideration, but it was part of a mix and it didn't govern our decisions. And we charged less to move freight north than we did south because the demand for northbound freight was less than the demand for southbound freight. Even if the miles were the same, we charged different rates.

On the way to work, I was wondering what on earth this meant. Why look at the price differential on direction, when there are hundreds of price differentials on the same mileage in the same direction, because a railroad hauls different commodities/products at different prices, even over the same distance. Direction has nothing to do with it. There are simply another set of tariffs over the same mileage.

Chicago to New Orelans has/had hundreds of tariffs at different rates for the same mileage. Does that change the statistical relationship between each tariff and the mileage? Not one bit.

The "standard error" is a different statistical measure than correlation (r-squared). The strength of statisitical analysis is to be able to measure a relationship that may in fact have offsets up or down for a variety of reasons, but for which a specific factor is still the controlling factor in setting a rate.

Greyhounds is discussing a situation which would affect the standard error (in large samples, the standard deviation), not the correlation. The standard error has nothing, or at least little, to do with determining whether or not the rates are set by reference to mileage, only whether or not such rate differentials exist -- which is a completely different measure than correlation.

Over very large data sets, a correlation can be very strong, and still have a relatively large standard error, that is, a variety of different rates over the same distance, and a multiple of such distances, all of which ultimately are set by reference to mileage, will yield a statistical analysis that shows exactly that.

Which is exactly what linear regression analysis is supposed to do.

Best regards, Michael Sol

No, I'm not.

I'm talking about the fact that the northbound FAK intermodal charges on the ICG, which I put in, were significantly below the corresponding southbound FAK intermodal charges.

This was because the demand for northbound transportation was less than the demand for southbound transportatiion. We charged a different "Per Mile" rate comming north than we did going south. (They were not "mileage" rates as such, but point to point charges.)

If a potential shipper wanted to negotiate a special commodity rate southbound, we pretty much said "No". If a guy had northbound loads the salesman took him out for a round of golf at the country club, got him tickets to whatever game he wanted to see, and asked him how much he'd be willing to pay. It beat dragging the trailers back north empty with $0 revenue.

But it's the same mileage going north or south, we just charged different rates. This was due to things like supply, demand, competitiion, etc.

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
Which regulated tariffs? If you're going to cite a tariff, then name the tariff.

"A" tariff could tell you just about zilch. . A credible linear regression requires as many data points as possible. Which tariff? As many as possible. In this instance, a data set of Milwaukee revenue carloadings including, from actual waybills, distance (from origin and destination) and product.

Statistically, that is the relevant data.

For a linear regression to assess rate/mileage correlation, rate and mileage is extracted from the data set. A citation to a specific tariff is irrelevant at that point because the linear regression doesn't care: it wants actual, real data.

We requested waybill data and that's what we got. Since the purpose of the study was not to determine if Milwaukee waybills matched published tariffs, nor any reason whatsoever to suspect they didn't, there was absolutely no reason whatsoever to be looking for individual tariff numbers in a compilation of thousands of waybills no doubt including hundreds of tariffs.

At that point in time, it was a safe guess that all such rates were regulated and so there was no question that every single combination of price and distance was governed by a regulated rate.

For current pricing on wheat carriage, BNSF Rate Book 4022K was used. Within that rate book are subsets of unregulated and regulated rates, corresponding neatly with competitive and captive shippers.

Best regards, Michael Sol

Well, you said "regulated tariffs". I asked "which tariffs" and now you have a waybill study.

We do agree on something. The existance of a tariff rate means nothing.

But you're trying to extend a waybill study of Milwaukee Road traffic to the rest of the rail network, and that's dubious. The Milwaukee was a basket case that went broke. Extending their pricing strategy to the rest of the world through assumption is quite a stretch.

And always remember, correlation does not mean causation.

[MichaelSol]

QUOTE: Originally posted by greyhounds
But you're trying to extend a waybill study of Milwaukee Road traffic to the rest of the rail network, and that's dubious. The Milwaukee was a basket case that went broke. Extending their pricing strategy to the rest of the world through assumption is quite a stretch.

Oddly, the results of that study are very similar to the regulated rates on the BNSF today. Probably just a coincidence that regulated rates show similar characteristics, at different points in time, on different railroads. Of course, if you are contending that therefore BNSF is also a basket case ...

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by greyhounds

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
I know we took mileage into consideration, but it was part of a mix and it didn't govern our decisions. And we charged less to move freight north than we did south because the demand for northbound freight was less than the demand for southbound freight. Even if the miles were the same, we charged different rates.

On the way to work, I was wondering what on earth this meant. Why look at the price differential on direction, when there are hundreds of price differentials on the same mileage in the same direction, because a railroad hauls different commodities/products at different prices, even over the same distance. Direction has nothing to do with it. There are simply another set of tariffs over the same mileage.

Chicago to New Orelans has/had hundreds of tariffs at different rates for the same mileage. Does that change the statistical relationship between each tariff and the mileage? Not one bit.

The "standard error" is a different statistical measure than correlation (r-squared). The strength of statisitical analysis is to be able to measure a relationship that may in fact have offsets up or down for a variety of reasons, but for which a specific factor is still the controlling factor in setting a rate.

Greyhounds is discussing a situation which would affect the standard error (in large samples, the standard deviation), not the correlation. The standard error has nothing, or at least little, to do with determining whether or not the rates are set by reference to mileage, only whether or not such rate differentials exist -- which is a completely different measure than correlation.

Over very large data sets, a correlation can be very strong, and still have a relatively large standard error, that is, a variety of different rates over the same distance, and a multiple of such distances, all of which ultimately are set by reference to mileage, will yield a statistical analysis that shows exactly that.

Which is exactly what linear regression analysis is supposed to do.

Best regards, Michael Sol

No, I'm not.

I'm talking about the fact that the northbound FAK intermodal charges on the ICG, which I put in, were significantly below the corresponding southbound FAK intermodal charges.

It is clear you do not understand the point that mileage is the primary controlling factor for any rate within the relevant range and that this is statistically provable, whereas your contention has no statistical support which makes it a species of "pretend" economics.

Best regards, Michael Sol

[MP173]

Mileage may be the determining factor for a "rate", but the determining the final "cost" will almost always be based on demand and supply.

You can file all the rates you want, they are starting points for negotiating the final cost. Sometimes, as in Montana or southbound Chicago -NO freight, there is no negotiating. That is traffic imbalance. Happens all the time. Look at airline pricing. It even happens in my field. Got a memo yesterday to the effect that "backlog is very low", take a look at any business out there.

Had I gone and picked up an MBA like some of you I would know if that is elastic or inelastic demand. If you run a business or are in sales you dont need to know the proper name, you just realize the necessity to adjust the throttle.

Seriously, from the LTL days, rates began based on mileage (rate basis which was a form of railroad mileage), but then found the water level mark based on all other factors. Some rate programs I developed did not even factor mileage, but were based on the number of aggregate pickups and deliveries and total tonnage tendered.

Pricing and yield management are very interesting aspects of any transportation company's marketing and are often very much protected within that organization. To say there is no reasoning on a company's pricing is often based on looking at it on a micro economic scale, rather than the big picture.

I have always maintained that if I were negotiating the Montana wheat rates (for the farmers), I would use a method of tying that freight into a much larger pool of traffic. Large agricultural concerns such as Cargil, ADM, etc possibly have, or should have much favorable rates, based on mileage.

Darn, I wish I had gotten my MBA!

ed

[bobwilcox]

Ed-We were always very concerned about the impact of a local chemical shipper turning over their logistics to someone like UPS. Many large rail shippers have contracted their physical distribution management out to UPS and other firms. They can come to the table with a very large portfolio of business to offer; most of which is competitve with other railroads or motor carries.

Also, in the early days (1980s) of deregulation we would bid on a customers entire package of traffic within North America. The only thing the customer wanted to hear was how much we would charge him to move all of his traffic for three to five years. Other distinctions such as the specific commodity or distance became secondary to this primary issue. I can recall cases where the charge from the TX/LA Gulf Coast to California would be lower than the charge to Alabama.

[MichaelSol]

QUOTE: Originally posted by MP173

Mileage may be the determining factor for a "rate", but the determining the final "cost" will almost always be based on demand and supply.

Ed, I was very, very clear that unregulated or deregulated rates are poorly correlated with mileage. and I hope this is not an intentional misreading of my comments just to get a rise. Please reread my comments.

I'm not sure that you are seeing the distinction that the discussion related to regulated rates. Hence the specific date, 1979.

If what you say is true for that era, then the Staggers Act was of no particular use at all.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by greyhounds
The Milwaukee was a basket case that went broke. Extending their pricing strategy to the rest of the world through assumption is quite a stretch.

ICC Chairman Daniel K. O'Neal testified to the US Senate in January, 1978 that there were four railroad "basket cases," the Rock Island, the Illinois Central Gulf, The Milwaukee Road and the North Western, but that the other railroads were not far behind.

When Milwaukee petitioned for bankruptcy, it had something like $10 million cash on hand and $38 million accoounts payable. When Stanley Hillman left ICG, it had 0 in the cash drawer and $100 million in accounts payable outstanding. Interestingly, as of December, 1977, the Milwaukee Road was not technically bankrupt, and ICG technically was.

Best regards, Michael Sol

[samfp1943]

QUOTE: Originally posted by futuremodal

Yep, just post something about railroad rate gouging, and the ilks will slither up from the cesspool of arrogant idiocy.

Sounds like it must be ilk hunting season in montana, do they use stamps or tags?
Is ilk hunting with howitzers permitted?

[MichaelSol]

QUOTE: Originally posted by MP173

Mileage may be the determining factor for a "rate", but the determining the final "cost" will almost always be based on demand and supply.

Well, these economic platitudes are starting to wear a little thin.

Demand is the greatest where? Supply is the most constricted where?

And the rates are the lowest on those corridors, not the highest.

QUOTE: Originally posted by MP173
...you just realize the necessity to adjust the throttle.

So this explains why rates are lowest where demand is the highest? Well, that is exactly what you are saying. And rates are highest where demand is the lowest because of supply and demand?

I have long been puzzled by these frequent simplistic references to "laws" of supply and demand, because they have made just about zero sense in this context.

The discussion has been about captive and non-captive shippers. The economic fact of life is that supply and demand has nothing to do with it; it is a matter of market share pricing, rather than cost pricing, which leads to plummeting margins for most traffic, especially where demand is the greatest and capacity supply the lowest which is exactly why the railroads are struggling with excessive demand and inadedquate supply -- because they keep lowering the price, not raising it. Except to certain parts of the system where, ironically, there is little congestion and seemingly, lots of supply of train and track capacity.

It does not take an MBA to see that the platitude and the reality are two different things.

Best regards, Michael Sol

[bobwilcox]

CSXT is raising pricessignificantly. The blurg from Train Orders is at http://www.trainorders.com/news/story.php?2900

BNSF, NS and UP should be following.

[MichaelSol]

QUOTE: Originally posted by bobwilcox

CSXT is raising pricessignificantly. The blurg from Train Orders is at http://www.trainorders.com/news/story.php?2900

BNSF, NS and UP should be following.

You're behind on the news.

BNSF already did ... in Montana and North Dakota. We've known that for 25 years.

Best regards, Michael Sol

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
The Milwaukee was a basket case that went broke. Extending their pricing strategy to the rest of the world through assumption is quite a stretch.

ICC Chairman Daniel K. O'Neal testified to the US Senate in January, 1978 that there were four railroad "basket cases," the Rock Island, the Illinois Central Gulf, The Milwaukee Road and the North Western, but that the other railroads were not far behind.

When Milwaukee petitioned for bankruptcy, it had something like $10 million cash on hand and $38 million accoounts payable. When Stanley Hillman left ICG, it had 0 in the cash drawer and $100 million in accounts payable outstanding. Interestingly, as of December, 1977, the Milwaukee Road was not technically bankrupt, and ICG technically was.

Best regards, Michael Sol

Well, my paychecks were good. Neat trick with zero cash.

I think you may have made another "typo". Being bankrupt is a legal condition, not a financial condition. You're not bankrupt until a judge says you're bankrupt.

You might be insolvent, might not be able to pay your bills, but you can't be bankrupt until "The Man" says so. As I said, the ICG never missed a payroll and never went to bankruptcy court. So I guess "technically" we were a going concern.

Boy we fought it hard. We ran what I considered to be the best intermodal operation in the country. We went head to head with truckers between Chicago and St. Louis. Our longest realistic haul was 900 miles - and there wasn't much of that.

But we never missed a payroll and, unlike the Milwaukee Road, we never tucked our tails between our legs and went to court for protection from our creditors.

[bobwilcox]

QUOTE: Originally posted by greyhounds

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
The Milwaukee was a basket case that went broke. Extending their pricing strategy to the rest of the world through assumption is quite a stretch.

ICC Chairman Daniel K. O'Neal testified to the US Senate in January, 1978 that there were four railroad "basket cases," the Rock Island, the Illinois Central Gulf, The Milwaukee Road and the North Western, but that the other railroads were not far behind.

When Milwaukee petitioned for bankruptcy, it had something like $10 million cash on hand and $38 million accoounts payable. When Stanley Hillman left ICG, it had 0 in the cash drawer and $100 million in accounts payable outstanding. Interestingly, as of December, 1977, the Milwaukee Road was not technically bankrupt, and ICG technically was.

Best regards, Michael Sol

Well, my paychecks were good. Neat trick with zero cash.

I think you may have made another "typo". Being bankrupt is a legal condition, not a financial condition. You're not bankrupt until a judge says you're bankrupt.

You might be insolvent, might not be able to pay your bills, bt you can't be bankrupt until "The Man" says so. As I said, the ICG never missed a payroll and never went to bankruptcy court. So I guess "technically" we were a going concern.

Boy we fought it hard. We ran what I considered to be the best intermodal operation in the country. We went head to head with truckers between Chicago and St. Louis. Our longest realistic haul was 900 miles - and there wasn't much of that.

But we never missed a payroll and, unlike the Milwaukee Road, we never tucked our tails between our legs and went to court for protection from our creditors.

The CFO at the C&NW (aka The Best of the Bankrupts) once told us you were not broke untill the banks wouldn't loan you any more money. That never happened to us and later came Employee Ownership, Coal and the UP.

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by MP173

Mileage may be the determining factor for a "rate", but the determining the final "cost" will almost always be based on demand and supply.

Well, these economic platitudes are starting to wear a little thin.

Demand is the greatest where? Supply is the most constricted where?

And the rates are the lowest on those corridors, not the highest.

QUOTE: Originally posted by MP173
...you just realize the necessity to adjust the throttle.

So this explains why rates are lowest where demand is the highest? Well, that is exactly what you are saying. And rates are highest where demand is the lowest because of supply and demand?

I have long been puzzled by these frequent simplistic references to "laws" of supply and demand, because they have made just about zero sense in this context.

The discussion has been about captive and non-captive shippers. The economic fact of life is that supply and demand has nothing to do with it; it is a matter of market share pricing, rather than cost pricing, which leads to plummeting margins for most traffic, especially where demand is the greatest and capacity supply the lowest which is exactly why the railroads are struggling with excessive demand and inadedquate supply -- because they keep lowering the price, not raising it. Except to certain parts of the system where, ironically, there is little congestion and seemingly, lots of supply of train and track capacity.

It does not take an MBA to see that the platitude and the reality are two different things.

Best regards, Michael Sol

Well, this one goes in my book, along with his contention that The Railroad (Milwaukee Road) went broke because it had too much business.

So, supply and demand has nothing to do with prices. You could get the Nobel Prize in Economics if you could actually show that.

[Anonymous]

QUOTE: Originally posted by samfp1943

QUOTE: Originally posted by futuremodal

Yep, just post something about railroad rate gouging, and the ilks will slither up from the cesspool of arrogant idiocy.

Sounds like it must be ilk hunting season in montana, do they use stamps or tags?
Is ilk hunting with howitzers permitted?

Well, you have my permission.[^]

[MP173]

Supply and demand is quite simple in the case of Montana.

There is a demand for transportation services (grain) and very little supply (rail service). Perhaps I put it into too simple of terms to understand, but when there is an abundance of competition (supply of services) the prices will find equilibrium by falling. Happens all the time.

It happens everytime Southwest Airlines opens a new market. It happens every time a drug goes generic.

As far as getting a rise out of you...dont think so. I simply responded to your prior statement. I really dont feel the need to attempt to get under anyone's skin. I would like an explanation, tho on the difference between regulated and unregulated business.

Bob Wilcox....glad you understood what I had to say about the logistics management aspect. After I wrote it and was driving around to customers, I realized that a logistics company would probably be better equipped to handle this rather than an ADM or Cargil. They have their hands full right now.

Wow, imagine UPS Logistics getting ahold of that Montana grain and leveraging it with the high paying intermodal stuff! At the standard 40% of freight savings, someone would be happy at UPS. Of course the folks in Montana would probably be wanting to tax UPS.

I wonder why this hasnt been done yet?

ed

[MichaelSol]

QUOTE: Originally posted by greyhounds
Well, this one goes in my book, along with his contention that The Railroad (Milwaukee Road) went broke because it had too much business.

So, supply and demand has nothing to do with prices. You could get the Nobel Prize in Economics if you could actually show that.

Well, these are just little "cute" sessions for you aren' they?

1) Management experts point out that as many businesses fail from being unable to handle business growth, as from lack of business. This occurs when actual growth exceeds self sustainable growth and the company is unable to finance the additional growth. Oddly enough, the standard business model where this occurs almost exactly describes the Milwaukee Road during a period when American Class I's uniformly had difficulty finding outside financing. If the actual growth equals or is less than the SSG, there is little risk of failure due to lack of outside financing. Pretty standard finance stuff.

2) Do you actually know Milwaukee's business, and the revenue and carloadings, 1970-1977? Or just shooting off your mouth as usual on something that you clearly don't know anything about? I have sitting here the Milwaukee Road Station Revenue and Carloading Reports for those years. Want to challenge what they contain? Or is this another hot air attack?

3) Congestion. Lengthened cycle times. Too much demand. Not enough capacity (supply). Prices continue to go down for 20 years. Doesn't matter how you define "competition" -- that's a different concept than "supply." I understand supply and demand just fine. It's the way you define it, contrary to how any economist would define it, that is just bizarre, Orwellian.

QUOTE: I think you may have made another "typo". Being bankrupt is a legal condition, not a financial condition. You're not bankrupt until a judge says you're bankrupt.

4) Bankruptcy. And the last time you appeared in a federal court in a bankruptcy matter? Your professional training and qualification to be defining bankruptcy for anybody? Never, right? Nothing, right? It's a legal term -- how many years of legal training and practice? How many creditors have you represented? How many debtors have you represented? Which railroad bankruptcy proceedings were you involved in? You are admitted to practice in the Northern District or Southern District of Illinois? Have you litigated to the Circuit Court level on bankruptcy matters?

Want to show me and this Forum the place in any of Federal Judge Thomas McMillen's orders where he actually declares the Milwaukee Road "bankrupt"?

I'll wait.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by MP173

Supply and demand is quite simple in the case of Montana.

There is a demand for transportation services (grain) and very little supply (rail service). Perhaps I put it into too simple of terms to understand, but when there is an abundance of competition (supply of services) the prices will find equilibrium by falling. Happens all the time.

"Supply" and "competition", for good reasons, are not the same word.

QUOTE: I would like an explanation, tho on the difference between regulated and unregulated business.

Well, this is getting ridiculous. The definition you offer makes no allowance for regulated rates prior to Staggers, and argues that the process of rate making is exactly the same as post-Staggers.

A statistical analysis shows a considerable difference in the effect of mileage on the rate under regulation as compared to deregulation. Why that might have become a controversial observation to a couple of individuals is a mystery I care little about since the facts speak for themselves.

However, since you define the process of rate-making as independent of regulation, there is no point in continuing the conversation. I have no reason based on other exchanges to think you actually believe that, but since you are now offering the idea that rate deregulation had no effect on how rates are actually set, the topic need not include me any more, since I have nothing to offer on that unusual premise.

Best regards, Michael Sol

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by MP173

Supply and demand is quite simple in the case of Montana.

There is a demand for transportation services (grain) and very little supply (rail service). Perhaps I put it into too simple of terms to understand, but when there is an abundance of competition (supply of services) the prices will find equilibrium by falling. Happens all the time.

"Supply" and "competition", for good reasons, are not the same word.

QUOTE: I would like an explanation, tho on the difference between regulated and unregulated business.

Well, this is getting ridiculous. The definition you offer makes no allowance for regulated rates prior to Staggers, and argues that the process of rate making is exactly the same as post-Staggers.

A statistical analysis shows a considerable difference in the effect of mileage on the rate under regulation as compared to deregulation. Why that might have become a controversial observation to a couple of individuals is a mystery I care little about since the facts speak for themselves.

However, since you define the process of rate-making as independent of regulation, there is no point in continuing the conversation. I have no reason based on other exchanges to think you actually believe that, but since you are now offering the idea that rate deregulation had no effect on how rates are actually set, the topic need not include me any more, since I have nothing to offer on that unusual premise.

Best regards, Michael Sol

Well the "statistical analysis" would likely show such a difference. There's no reason, other that stupid, ignorant, government regulaton, to base a freight rate on mileage. There are a lot of other factors to be considered.

Staggers made it easier to "comply with the market", which you have to do, rather than "comply with the regulations", which have no relavance to reality.

Under "Reg" I had Crown Zellerbach come in and request a rate for a filter paper move from Bougalousa, LA to Sheybougan, WI. Now this was going to be a truck-rail-truck move. Bougalousa to Jackson, MS via truck, Jackson to Chicago on the train, and delivery to Sheybougan via another truck. It took months. I had to find a trucker that would do the pickup and negotiate a division of revenue with him. Then I had to find another trucker who would do the Wisconsin run, and strike a deal with him. I finnally got it done. I had to stick the letter documenting the rate in an envelope and send it off the nuts in Washington, DC. They did nothing with it. They had no idea how much revenue we received from the move since they didn't generally bother themselves about "divisions" between carriers.

After "Dereg" I could do it in under a minute. CZ could call and ask. I'd quickly crunch some numbers and say yes or counter with a proposed rate. We could do the trucking ouselves and I didn't have to "Date" trucklines to find a willing partner.

It made things a whole lot better.

[MichaelSol]

QUOTE: Originally posted by greyhounds

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
The Milwaukee was a basket case that went broke. Extending their pricing strategy to the rest of the world through assumption is quite a stretch.

ICC Chairman Daniel K. O'Neal testified to the US Senate in January, 1978 that there were four railroad "basket cases," the Rock Island, the Illinois Central Gulf, The Milwaukee Road and the North Western, but that the other railroads were not far behind.

When Milwaukee petitioned for bankruptcy, it had something like $10 million cash on hand and $38 million accoounts payable. When Stanley Hillman left ICG, it had 0 in the cash drawer and $100 million in accounts payable outstanding. Interestingly, as of December, 1977, the Milwaukee Road was not technically bankrupt, and ICG technically was.

Best regards, Michael Sol

Well, my paychecks were good. Neat trick with zero cash.
...
You might be insolvent, might not be able to pay your bills, but you can't be bankrupt until "The Man" says so. As I said, the ICG never missed a payroll and never went to bankruptcy court. So I guess "technically" we were a going concern.
...
But we never missed a payroll and, unlike the Milwaukee Road, we never tucked our tails between our legs and went to court for protection from our creditors.

Well, considering that this comment is from the same source as the following

QUOTE: QUOTE: Originally posted by greyhounds
And I'm telling you, .... by the amount of subsidies going to the farmers, and by the amount of blaming someone else ....

From what I've read here, the BNSF could haul that wheat for free and those farmers would still need to take confiscated money (a subsidy) from the rest of us.

Milwaukee Road total Federal Government transfers, 1977-1984:
$102,951,000.

Illinois Central Gulf total Federal Government transfers 1977-1987:
$198,145,000.

ICG received 192% more direct federal subsidy than Milwaukee Road. During those years, ICG lost $271,094,000, while Milwaukee Road lost $349,467,000. Despite losing more money than ICG, Milwaukee Road was more solvent and able to cover its losses out of its own resources to a much greater degree than ICG, while ICG was more insolvent and was forced to rely much more heavily on government subsidies and handouts to cover its losses than Milwaukee Road.

Indeed, your paychecks did continue, because you were benefitting from "confiscated money (a subsidy) from the rest of us."

Indeed, Greyhounds, you personally benefitted more than any Milwaukee Road employee from taking "confiscated" money, and more so than any Montana farmer.

Naturally, I see no irony in your allegations, only what I have often suspected.

Best regards,
Michael Sol

[arbfbe]

QUOTE: Originally posted by MP173

I have always maintained that if I were negotiating the Montana wheat rates (for the farmers), I would use a method of tying that freight into a much larger pool of traffic. Large agricultural concerns such as Cargil, ADM, etc possibly have, or should have much favorable rates, based on mileage.

Darn, I wish I had gotten my MBA!

ed

Well, negotiating here is the operant wording. In Montana, there is no negotiation of the rates with the farmers. BNSF sets the rate and the farmers can either take it or leave it. End of negotiations. Yes, Cargill, Conagra and Pillsbury have better rates than what the independent or co-operative elevator operators have.

[Anonymous]

QUOTE: Originally posted by MichaelSol

Milwaukee Road total Federal Government transfers, 1977-1984:
$102,951,000.

Illinois Central Gulf total Federal Government transfers 1977-1987:
$198,145,000.

ICG received 192% more direct federal subsidy than Milwaukee Road.

This sentence should say, "ICG received 92% more than Milwaukee Road," even though the ICG figure is 192% of the Milwaukee figure.

Accuracy gentlemen.

[MichaelSol]

Yup.

best regards, Michael Sol

[Anonymous]

QUOTE: Yup.

lol.

[Anonymous]

Remember, let the free market determine rates via head to head competition among railroad service providers, and the farmers/utilities/manufacturers/producers will have no reason to complain to the feds.

It's as simple as that.