July TRAINS takes on the captive shipper debate - Best Issue Ever?

[jeaton]

I have to add that in 30 some years on both the carrier side and the shipper side of the business, I never heard anybody use the term "rate" in the context he suggested. And I don't think I had a sheltered existence.

[Anonymous]

QUOTE: Originally posted by MichaelSol

Good grief, trim yer posts -- looks like an entry in the Encyclopedia Britannica ...

So you don't care for that 3D effect?[8D]

[MichaelSol]

Jay, don't be coy. I specifically said everyone calls it that, but, when you break down the discussion, you have a "something" that can be lower, and a "something per mile, per bushel, per whatever" that can go up. To have a discussion you need to identify a terminology. It was useful in this case to refer back to definitions understood clearly in the general business world, that "price" is the quote, and that rate is, well, exactly what I said it was -- a quantity measured with respect to another measured quantity -- and this allows us to have a discussion without confusing the industry jargon of "rate" with an actual measurement of "rate" which is a different measurement, as it happens.

I understand that greyhounds would object to any effort to clarify the discussion, just as he does above where he strenously argues terminal costs and line haul costs and rates and spin and prices and agendas and politics without a single acknowledgment that of course all of that is nicely summarized by the R/VC ratios, which of course do not support his argument at all.

That's the part of the Whiteside paper he studiously ignores, and, of course, that is the measure mandated by law on this topic.

Billings .. 376% R/VC
Conrad.. 321%
Fort Benton..393%
Great Falls..359%
Havre.. 388%
Moccasin..392%

Alliance..298%
Beatrice..217%
Crete..235%
Fremont..231%
Grand Island..218%
Lincoln..233%
North Platte..225%
Omaha..231%
Superior..238%

[Anonymous]

QUOTE: Originally posted by TomDiehl

So what you're saying is the links you offered here refute a link you offered on an earlier post.

Talking in circles again, I see.

More evidence you're not even looking at the links you offer as "proof" of your position.

[#wstupid]

[(-D]

This is so simple even you should be able to get it.[sigh]

The AAR and CABT links were provided as proof the rail industry has played a major role in lobbying for stricter GVW limits. As part and parcel of this lobbying effort, both AAR and CABT will naturally claim that the trucking industry also supports stricter GVW limits. This refutes Bert's claim that the railroad industry had nothing to do with efforts to enact stricter GVW limits.

However, the ATA refutes this false claim by the AAR and CABT, since the ATA has come out in favor of higher GVW limits. This refutes Bert's subsequent claim that the trucking industry supports stricter GVW limits.

And in conformity with predictable double digit IQ responses, Tom then goes on to claim circular reasoning on my part.

Tom, it is the AAR, not myself, who claims trucking industry support for stricter GVW limits. The ATA site refutes this, ergo it is the AAR that has published a false premise. I am aware of this tendency to falsify information on the part of the AAR, I have commented on it several times in the past.

Let's make a deal: We'll let the AAR speak for the rail industry, and we'll let the ATA speak for the trucking industry. Okay?

[greyhounds]

There are some reasonable people in Montana.

http://www.greatfallstribune.com/apps/pbcs.dll/article?AID=/20050807/NEWS01/508070301&SearchID=73...

Note the real advantages of the shuttle loaders.

Ken Strawbridge

[MichaelSol]

Has anyone seriously argued that there is not "an" advantage to shuttles? Or is this just another false argument? No doubt the railroad likes them. The R/VC at Shelby for a single car is 172%. The Shuttle R/VC is 338%.

Interesting though that the article suggests that farmers are more willing to use them, when they get a better price as a result of the efficiency gained by the railroad -- the very incentive that Strawbridge argued earlier the farmers were not entitled to.

Does any of that mean that 338% is a contemplated "reasonable rate" under the Staggers Act?

[MP173]

So, there really hasnt been any inverse pricing since 2003. There may have been some circumstances which caused BNSF to have done that. I wont try to comment as to the reasons since I dont know.

It almost seems as if Montana wheat farmers expect a closed economic environment. In other words, when an "outside" source of wheat appears, it provides undue competition, driving pricing down.

My guess is that PNW wheat commands a premium price, dont know why, but it is just an educated guess...and the movement of wheat into those ports upsets the market pricing. Just a hunch.

ed

[greyhounds]

QUOTE: Originally posted by MichaelSol

Has anyone seriously argued that there is not "an" advantage to shuttles? Or is this just another false argument? No doubt the railroad likes them. The R/VC at Shelby for a single car is 172%. The Shuttle R/VC is 338%.

Interesting though that the article suggests that farmers are more willing to use them, when they get a better price as a result of the efficiency gained by the railroad -- the very incentive that Strawbridge argued earlier the farmers were not entitled to.

Does any of that mean that 338% is a contemplated "reasonable rate" under the Staggers Act?

I stand by my assertion that the farmers are in no way "entitled" to any (as in no, none, zip, nadda) of the railroad's productivity gains. Those gains belong to the railroad. Just one of the many things Sol fails to understand . The railroad invested in the new 286K cars, the railroad acquired the more efficient locomotives, etc.

The farmers are in no way "entitled" (his word) to those gains than I am.

However, the BNSF may freely choose to use its productivity gains in a manner that is in its own best interest. In this case they see their total gains of moving to a shuttle train system as outweighing anything they must "share" to get the grain gathering system reconfigured.

I suppose Sol will try to redefine "entitiled" in a similar manner as to how he has tried to redefine "rate".

As to the supposed R/VC of 338% being "reasonable" -

I don't buy the costing system. At all. Rail costing is complex and a "one size fits all" political formula just won't be accurate.

But leaving that aside, the R/VC at best measures margin, not profitablity. Profitability can be expressed as margin x volume =profitability. A railroad could concievably haul all its freight at a 338% R/VC and go broke due to lack of volume. Conversely, a railroad could haul all its freight at 110% R/VC and make a lot of money. It will depend on the volume. Sol always leaves this out.

The grain volume (wheat and barley) produced in Montana is so pathetically small that high margins would naturally be required to produce transportation profitability.

In 2005, according to the Montana Wheat and Barley Committe, Montana produced only 192,480,000 bushels of wheat and only 39,200,000 bushels of barley. And 2005 was the largest wheat production year since 1995.

At the Committee's load factors of 3,366 bushels per car for wheat and 3,847 bushels per car for barley that would only be 157 cars of wheat per day and 28 cars of barley per day. That's not even two trains per day! Out of the whole state of Montana! This whole Montana rate thing is much ado about very little.

The BNSF will originate as many coal trains out of the Powder River Basin in 15 days as grain trains out of Montana in a year.

If the high margins Sol harps on are real, and I'm not convinced they are, they could certaily be justified by the low volume of freight comming out of Montana.

[MichaelSol]

QUOTE: Originally posted by greyhounds
The farmers are in no way "entitled" (his word) to those gains than I am.
...
I suppose Sol will try to redefine "entitiled" in a similar manner as to how he has tried to redefine "rate".

That was the term you have repeatedly used. You will define it as your needs change. You always do.

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
The farmers are in no way "entitled" (his word) to those gains than I am.
...
I suppose Sol will try to redefine "entitiled" in a similar manner as to how he has tried to redefine "rate".

That was the term you have repeatedly used. You will define as your needs change. You always do.

I've been consistant, which will always confuse Mr. Sol.

The farmers are not, in any way 'entitiled" to the railroad's productivity gains. But the railroad may use those gains in furthering its own best interest.

Ken Strawbridge

[MichaelSol]

QUOTE: Originally posted by greyhounds
If the high margins Sol harps on are real, and I'm not convinced they are, they could certaily be justified by the low volume of freight comming out of Montana.

2005 Winter wheat
Montana. 3rd in the nation
94,500,000 bushels

Nebraska, sixth in the nation
68,640,000 bushels

Well that certainly explains why Montana pays high "rates" and Nebraska pays lower "rates" doesn't it?

[MichaelSol]

QUOTE: Originally posted by greyhounds

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
The farmers are in no way "entitled" (his word) to those gains than I am.
...
I suppose Sol will try to redefine "entitiled" in a similar manner as to how he has tried to redefine "rate".

That was the term you have repeatedly used. You will define as your needs change. You always do.

I've been consistant, which wil always confuse Mr. Sol.

The farmers are not, in any way 'entitiled" to the railroad's productivity gains. But the railroad may use those gains in furthering its own best interest.

Ken Strawbridge

Never said it. What I specifically said was that the controlling law says if it earns an R/VC less than 180% they can do whatever they like. Over that, they have to justify it, because the shipper is, by definition captive. Doesn't matter if its from efficiency gains driven by competitive shippers, deflation in the economy, or dumb luck -- railroads are not "entitled" to charge whatever they please to captive shippers.

That's the deal that railroads agreed to in return for being able to aggressively pursue efficiency gains, and that's they deal they got.

And that also happens to be the law.

[greyhounds]

QUOTE: Originally posted by MP173

So, there really hasnt been any inverse pricing since 2003. There may have been some circumstances which caused BNSF to have done that. I wont try to comment as to the reasons since I dont know.

It almost seems as if Montana wheat farmers expect a closed economic environment. In other words, when an "outside" source of wheat appears, it provides undue competition, driving pricing down.

My guess is that PNW wheat commands a premium price, dont know why, but it is just an educated guess...and the movement of wheat into those ports upsets the market pricing. Just a hunch.

ed

"Inverse pricing" was a way cool, gutsy, ecnomicaly and ethically sound move on the part of the BNSF that protected its shareholders and employees alike.

In case some of you haven't noticed, they grow a little bit of wheat in Montana. Why? I don't know - absent government welfare subsidy checks they certainly can't sell it at a profit, but they keep growing it. They're literally farming for the sake of farming.

Anyway the BNSF has to haul some of this wheat. So they've got this equipment, these facilities, and these employees to move this Montana wheat that nobody really needs or wants.

A few years ago, because of extended drought conditions, which were, of course, the fault of a BNSF conspiracy, Montana wheat production took a nose dive.

2000= 149,968,540 bushels
2001= 118,666,464 bushels
2002= 67,732,673 bushels

So there was the BNSF; equiped, staffed and configured to move 149,968,540 bushels and looking at crop forecast of less than half that. What to do?

Well, the railroad could have just sat around, hoped for rain, parked their equipment and laid off employees. That seems to be what the Montana farmers and politicians wanted. You see, there was some grain in storage - and if it was held long enough the shortage created by the drought would drive wheat prices up and the Montana folks with grain in storage would make a nice fat buck. They'd be acting in their own best economic interests, as it were.

Of course the BNSF figured that the grain comming out of storage would not make up for the tremendous reduction in production.

So what the railroad wisely did was take "emergency rate action." They reduced the rates on wheat to the PNW from points further east, i.e. Minnesota. Wheat that would normally have never moved to the PNW could now be competitive there because of the reduced BNSF rates. BNSF kept its equipment utilized and its people working as best it could.

Now they couldn't do this on a long term basis, but for the short term, it was the best available solution. As an example, if your only alternative is to put the equipment in storage, the ownership costs of that equipment become a non-issue. You can do it for a couple years, but long-term, it would be a going out of business stragegy.

Of course, the BNSF did not reduce the rates out of Montana. There was no reason to do so. The BNSF was already fully competitive with the truck/barge competition. Any rate reduction out of Montana would be just 'giving it away'.

This was all just a logical and ethical buisiness decision. And it drove some people in Montana nuts. Those folks were perfectly willing to act in their own economic best interst, but they got really, really, really mad when the BNSF acted in its own economic best interest.

As for now, the drought is over and the "inverse rates" are gone. There's no longer a need for the BNSF to "low ball some rates" in order to keep its equipment and crews busy. But they'll be another drought in Montana someday.

The people who complain about the "inverse rates" just wanted the BNSF to take it in the shorts without doing what it could to protect its interests. It was just fine for them to act in their own best interest, but it was wrong for another entitiy to act in its own best interest. People who think like that think they are born to priviledge - and they turn my stomach.

Ken Strawbridge

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
If the high margins Sol harps on are real, and I'm not convinced they are, they could certaily be justified by the low volume of freight comming out of Montana.

2005 Winter wheat
Montana. 3rd in the nation
1,499,434,000 bushels

Nebraska, sixth in the nation
68,640,000 bushels

Well that certainly explains why Montana pays high "rates" and Nebraska pays lower "rates" doesn't it?

Yes, Sol, it does. You're just being your own deceiptive self, spinning selected numbers to further your political agenda.

You see, in Nebraska they can grow other crops. You know, corn, soybeans, The elevators handle and export all the crops.

Now they can't basically grow anything but unneeded wheat and some barley in Montana. So you're making a false comparision, which you do all the time.

Why don't you look up the total grain shipments from Nebraska - I mean those trains can take wheat one trip, beans the next, and corn the third. Except from Montana where the farming is so poor that only wheat and barley can be grown.

[MichaelSol]

QUOTE: Originally posted by greyhounds
[In 2005, according to the Montana Wheat and Barley Committe, Montana produced only 192,480,000 bushels of wheat and only 39,200,000 bushels of barley. And 2005 was the largest wheat production year since 1995.

At the Committee's load factors of 3,366 bushels per car for wheat and 3,847 bushels per car for barley that would only be 157 cars of wheat per day and 28 cars of barley per day. That's not even two trains per day! Out of the whole state of Montana! This whole Montana rate thing is much ado about very little.

Well, this underscores any doubt that may have existed about Strawbridge's knowledge of any of this.

He averages the crop over the year, pretending that farmers are harvesting and shipping in January, for instance.

Wheat is a crop.

It is harvested.

The harvest begins as far south as Mexico in April, and moves north to Canada in June.

Then the Spring wheat crop matures, and the same cycle begins.

The grain trains are in constant motion from early May to late October, following the crop. Montana wheat is a big part of that. And the trains are numerous and heavy. Not "two" a day.

And its part of the same grain fleet structure that serves Nebraska, Texas, you name it where wheat is grown, and Montana wheat is part of that. What would hurt BNSF is if Montana wheat were not part of it, because then the fleet would get to that part of the harvest cycle when Montana kicks in, and suddenly go idle.

It is absolute baloney to suggest that once a covered hopper car is done carrying Nebraska wheat, it goes on to carry Nebraska beans.

It goes on to carry Montana wheat.

It's part of the same fleet.

Unbelievable.

[MichaelSol]

Commissioner Tony Clark
North Dakota Public Service Commission

Burlington Northern Santa Fe’s inverse rates on wheat shipped from North Dakota to the Pacific Northwest (PNW) make a great deal of sense from the railroad’s perspective – they allow BNSF to maximize profits and shift its costs to the public sector. If this were a competitive market, we likely wouldn’t be here today. But in a non-competitive market, this policy raises great concern, as these are essential services that are being provided.

The BNSF has been able to carry out its plan because shippers in almost all of western North Dakota are captive to BNSF. If there was effective competition in this market, BNSF could not implement this rate structure. Unlike so many other regions of the country, we simply have no alternatives. BNSF is the only rail carrier west of the Missouri River, and is the dominant carrier throughout all of North Dakota. We do not have any direct access to water transportation and trucks are inadequate when it
comes to moving bulk commodities distances of 300 to 1000 miles.

The extent of North Dakota’s captivity is exemplified by the rates that we pay. North Dakota’s rail rates are among the highest and most profitable anywhere. While the Stagger’s Rail Act sets 180 as a reasonable and profitable revenue-to-variable-cost ratio, many of North Dakota’s rates generate ratios of 300 or more. If there was effective
competition in the local transportation marketplace, the railroads would not be able to achieve ratios of this magnitude. We estimate that these excessively high rates cost North Dakota farmers and shippers between $50 and $100 million annually.

BNSF’s inverse rates were implemented about a year ago. At the present time, the 110-car shuttle train rate from southwestern North Dakota to the PNW is about 28 cents per bushel higher than the rate paid by shippers in eastern North Dakota, even though the shippers in western North Dakota are over 250 miles closer to the market.

These preferential rates are available to only a very small number of eastern shuttle train loaders. They put western North Dakota shuttle and non-shuttle shippers at a disadvantage relative to their eastern counterparts, but they have an even greater impact on non-shuttle loaders in eastern North Dakota.

Prior to the implementation of these inverse rates, eastern shuttle loaders had a 15-cent per bushel rate advantage over nearby 52 car loaders. This advantage increased to as much as 38 cents with the implementation of inverse rates.

Grain elevators cannot compete when they are faced with rate disadvantages of this magnitude. In the long run, we believe these unfair rate advantages will result in the closure of many grain elevators, a loss of local competition and farmers being forced to truck their grain to more distant markets. Farm operating costs will increase and branch lines will be abandoned. The railroad’s costs will be shifted to public roadways and state taxpayers. These changes will be forced in ways a competitive market would not allow.

[MichaelSol]

Steve Strege. Executive Vice President of the North Dakota Grain
Dealers Association.

Our primary focus today is on inverse rates, the unusual concept that grain elevators and farmers who ship their grain a shorter distance should pay more than those who ship a longer distance.

Inverse rates distort markets and traditional grain flows, period. They cannot be explained away by calling them “differential pricing.” The BNSF claims no market distortion. It is hard for us to believe that reversing the normal mileage-based rates, to create a disadvantage for western shippers for westbound movements, doesn’t distort markets. It is also hard to believe that changing the crosscountry freight differentials between two elevators from five cents per bushel to around 30 cents per bushel over a distance of 40 miles (Edgeley, ND – Jamestown, ND), or from 15 cents to around 35 cents across a distance of 20 miles (Portland, ND – Alton, ND), doesn’t distort markets. Adversely affected elevators managers can tell you it definitely does.

The BNSF says these inverse rates from eastern locations are necessary to supply needs of the PNW export market. That is simply not true. According to the Montana Grain Growers Association, quoting the Montana Ag Statistics Service, there were 79 million bushels of spring wheat in Montana on December 1, 2001. Millions more bushels are in western North Dakota. But yet these areas are the very ones disadvantaged by BNSF’s inverse rate scheme. If the Pacific Northwest market actually needed more bushels, then let it bid up the price to get them. This BNSF manipulation of rail rates has a price-depressing effect for farmers and elevators normally serving that market.

[TomDiehl]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by TomDiehl

So what you're saying is the links you offered here refute a link you offered on an earlier post.

Talking in circles again, I see.

More evidence you're not even looking at the links you offer as "proof" of your position.

[#wstupid]

[(-D]

This is so simple even you should be able to get it.[sigh]

The AAR and CABT links were provided as proof the rail industry has played a major role in lobbying for stricter GVW limits. As part and parcel of this lobbying effort, both AAR and CABT will naturally claim that the trucking industry also supports stricter GVW limits. This refutes Bert's claim that the railroad industry had nothing to do with efforts to enact stricter GVW limits.

However, the ATA refutes this false claim by the AAR and CABT, since the ATA has come out in favor of higher GVW limits. This refutes Bert's subsequent claim that the trucking industry supports stricter GVW limits.

Ignoring your expected lame attempts at insults here, the quote from the AAR website, which YOU provided in the first place, clearly states that the trucking lobby and the railroad lobby were together on this. I simply highlighted where you missed reading the link YOU posted.

And since I have over a 2 digit IQ, along with an ability to read, which you seem to lack, it brings to question if you DO read things before you post a link to them, especially in view of your missing this obvious contradiction of your tunnel visioned point of view. You've totally ignored the possibility that the ATA changed their position since June 2003 and automatically accuse the ARA of "false claims."

Typical for David, Male, from the Pacific Northwest.

[MichaelSol]

Steve Strege. Executive Vice President of the North Dakota Grain
Dealers Association.

An example of rail market power in the northern plains started about a year ago when BNSF set up secret inverse contract rates on wheat to the Pacific Northwest (PNW). “Inverse” means the shorter haul pays a higher rate. Western North Dakota and Montana rates to the Pacific Northwest were kept high, while rates for a selected few large 110-car shuttle train loading grain elevators in eastern North Dakota and western Minnesota were lowered. This disadvantaged other grain elevators in areas surrounding the selected few, and westward across North Dakota and Montana, with spillover effects on markets from South Dakota. Of course we support lower rates, but let’s spread the benefit around and be equitable among shippers. This was an exercise in its monopoly power to select grain industry participants that the BNSF wanted to promote, while continuing to milk excessively high rates from more captive shippers and putting in jeopardy the investments of those and many of its other
shippers.

This rate action jeopardized our foreign markets by shipping non-traditional grain into them. Wheat from traditional source areas in western North Dakota and Montana mills differently than wheat from spring wheat growing areas several hundred miles to the east. Complaints and concerns have come back from those foreign buyers. Bottom line is that unusual railroad rate actions can damage both shippers and markets.

Another effect of this BNSF inverse rate action was short-circuiting normal grain market forces. BNSF’s stated reason for the rates was to maintain its market share of PNW exports in the face of drought-reduced crops in Montana. But there were millions of bushels of wheat in storage in Montana and western North Dakota when BNSF took these steps. Instead of the PNW market bidding up the price to get more wheat, the BNSF’s inverse rate scheme held down or reduced grain prices for traditional farmer and country elevator suppliers. This is market manipulation. Meanwhile BNSF advocates free markets and noninterference by anyone in its pricing and practices. This is a double standard. Later in this statement I address the difficulties we encountered when we sought to consider a legal remedy for BNSF’s actions.

These inverse rates distorted normal marketing patterns to the point that a farmer from western North Dakota actually hauled 50,000 bushels of wheat 160 miles east for loading on a train to move back west right past his normal delivery point 20 miles from his farm, that did not have the special rate.

He reported driving approximately 16,000 miles to do this.

As of today the BNSF has discontinued these inverse rates. But BNSF CEO Matt Rose has left the door open to bringing them back.

[MichaelSol]

Grain Net July 17, 2002:

The differential pricing structure, instituted last summer, raised a considerable hue and cry on the northern Plains by offering significantly lower freight rates to a handful of shuttle-train-loading facilities, primarily in the Red River Valley of Minnesota and North Dakota.

In some cases, those rates were considerably lower than for shuttle loaders located farther west and, therefore, closer to Pacific Northwest export terminals.

The railroad argued that the differential pricing was necessary to offset the trend of smaller wheat crops in Montana and western North Dakota.

NDGDA and others in the region's wheat industry argued that the differential freight rates were discriminatory and threatened to put many of the region's wheat shippers out of business, including some who had made considerable investments in order to be able to load BNSF shuttle trains.

Strege's statement continued: "The BNSF always favors what it calls free markets. It does not want any government interference in its rate or service programs. But with regard to wheat movements to the PNW from the northern Plains, this inverse rate program short-circuited a free grain market.


"If the PNW wanted more wheat, as BNSF says it did, then that market should have been allowed to bid up the price so as to shift its draw territory farther east. Instead, BNSF's inverse rates held down or reduced grain prices to traditional shippers to that market, while favoring only a few shuttle train loaders to the east.


"The distorted grain movements caused by that kind of rate-making also raised quality issues with our hard-won Asian markets.

[MichaelSol]

QUOTE: Originally posted by greyhounds
A few years ago, because of extended drought conditions, which were, of course, the fault of a BNSF conspiracy, Montana wheat production took a nose dive.

2000= 149,968,540 bushels
2001= 118,666,464 bushels
2002= 67,732,673 bushels

Except, inverse pricing was imposed in 2001, and taken off in mid-2002, then put back on in 2004, and again in 2005.

[bobwilcox]

QUOTE: Originally posted by MichaelSol
As of today the BNSF has discontinued these inverse rates. But BNSF CEO Matt Rose has left the door open to bringing them back.

If the BNSF has so much market power why did they cut their profits by cancelling these rates?

[MichaelSol]

BDS REPORT
Prepared by Patrick Nygaard
October 10, 2005

Essentially everybody in the room agreed that the rates were too high, except for the lone BNSF representative. The BNSF rep stated the RR’s don’t make any money off the increased rates because it barely covers fuel costs. The committee members disputed this claim. The main areas of contention is the switch to 110 car trains, increased fuel surcharges, and the inverse rates on grain going west. The BNSF rep also mentioned they are switching to mileage based fuel surcharges and will be using highway miles instead of RR miles.

[MichaelSol]

(World-Grain.com, May 4, 2004)
by Melissa Alexander

BISMARCK, NORTH DAKOTA, U.S. — The North Dakota Wheat Commission, concerned that pricing tactics by Burlington Northern Santa Fe Railway will damage U.S. hard red spring wheat exports to Asia, has urged the railroad to reconsider its so-called inverse rate policies on grain shipments.
--------------------------------------------------------------------------------
The commission contends that the pricing scheme makes it less expensive for certain grain handling facilities in eastern North Dakota and western Minnesota to ship grain to export outlets such as Portland, Oregon, than for similar facilities in western North Dakota and Montana that actually sit hundreds of miles closer to the U.S. West coast.

"It is our understanding that the pricing scheme went into effect in early March, and some shifts in movements already have taken place," wrote Larry Lee, the commission’s chairman, in the letter to BNSF "Customers in the Asian region are now getting shipments that are likely to express performance characteristics unfamiliar to them."

The commission noted that a shift in pricing of rail shipments could unduly influence the quality of wheat shipped to the West coast.

"Intrinsic quality parameters are vastly different between western and eastern parts of the spring wheat region in each growing season," said Jim Peterson, the commission’s marketing director.

Peterson added that the inverse rates "blunt positive market signals in western parts of the region and threaten to rob all hard red spring wheat producers and shippers of hard-earned markets."

Pat Hiatte, a spokesman with BNSF, said the railroad had defended its position in a response letter to the commission. But he declined to elaborate on the contents of the letter.

The commission, meanwhile, claims the new policy may prove especially damaging considering China’s emergence as a key buyer of spring wheat from Pacific Northwest ports. That country has purchased 11 million bushels of hard red spring wheat due for May delivery and an additional 16 million bushels for delivery in June and beyond.

Similar pricing practices by BNSF in 2001 caused complaints among Asian customers then, Peterson asserted, adding that a period of "damage control" helped restore customer confidence — as did BNSF’s lifting of the inverse rates

[bobwilcox]

QUOTE: Originally posted by greyhounds

Why don't you look up the total grain shipments from Nebraska - I mean those trains can take wheat one trip, beans the next, and corn the third.

These covered hopper fleets are not just dedicated to grains. The railroad looks at using it's cars for anything the will load to cube with a gravity outlet. It may be Phosphates one day and soyabeans the next day. The one caveat is if you will lose utilzation when you need to clean a car between trips. An example would be needed to clean a car coming off an amonium nitrate load for a sweet corn load. You would have to delay the car a have someone clean it. If cars are short the corn loader will often clean the car for the railroad.

[MichaelSol]

Well, during the wheat and barley harvest season, that pretty much shoots down the shuttle and unit train concept. I don't think this recognizes that "harvest" is an ongoing process as described above.

QUOTE: Originally posted by bobwilcox
These covered hopper fleets are not just dedicated to grains.

BNSF has a covered hopper car fleet of approximately 34,600 cars.

Out of that BNSF, in fact, maintains a specific "grain car fleet" of approximately 29,000 cars. In fact, they even call it their "grain car fleet."

http://www.bnsf.com/markets/agricultural/ag_news/fleet/fleet.html

For good reason.

[Anonymous]

QUOTE: Originally posted by MichaelSol

This rate action jeopardized our foreign markets by shipping non-traditional grain into them. Wheat from traditional source areas in western North Dakota and Montana mills differently than wheat from spring wheat growing areas several hundred miles to the east. Complaints and concerns have come back from those foreign buyers. Bottom line is that unusual railroad rate actions can damage both shippers and markets.

Question: Can anyone from the pro-BNSF camp show us an example of BNSF using inverse pricing to skew the Asian import markets? Why is this destructive marketing method reserved only for US produced goods?

[Anonymous]

I hate to drag this discussion back to a previously posted remark, but since it got lost in the ilk storm........

Paper barriers - The federales are seriously considering eliminating the paper barrier caveats from the shortline contracts. I think is was White from AAR who stated that if such should happen, the railroads would just stop selling branchlines to shortline operators and abandon them instead.

Haven't the railroads squandered that bluff by now? Most if not all branchline sales to shortline operators have already taken place, so there are not too many branchlines left under Class I ownership for the railroads to use as blackmail bait.

I would venture that the feds will go ahead and eliminate the paper barrier constraints from current shortline sales contracts. That's good news for rail shippers on shortlines which have physical connections to more than one Class I but which are captive to the original Class I owner via the restrictive caveats.

[MichaelSol]

QUOTE: Originally posted by bobwilcox

QUOTE: Originally posted by MichaelSol
As of today the BNSF has discontinued these inverse rates. But BNSF CEO Matt Rose has left the door open to bringing them back.

If the BNSF has so much market power why did they cut their profits by cancelling these rates?

?

The "inverse pricing" gave a lower rate to selected shuttle elevator operators on westbound grain shipments from Minnesota. Cancelling the lower rate did not "cut profits" on the BNSF, but presumably would have raised them.

Now, maybe I am misunderstanding your response, but I think you have it exactly backwards. The inverse rate is a lower rate. Cancelling it restores a higher rate.

But, it also begs the question, since BNSF is "entitled" to every extra spare nickel, why would BNSF take a cut in profits to "help out" those poor Minnesota Shuttle Elevator operators by offering them a reduced shipment price on westbound grain traffic? Just to wreck the normal wheat market in Portland? Is that their job?

Doesn't fit the greyhounds "theory" at all.

US Senate Testimony
Steve Strege
North Dakota Grain Dealers Assoc.
MARCH 27, 2002

If the Pacific Northwest market actually needed more bushels, then let it bid up the price to get them. This BNSF manipulation of rail rates has a price-depressing effect for farmers and elevators normally serving that market.

We believe there is a more sinister motive at BNSF for its inverse rates. That is to artificially promote the building of shuttle train loading facilities in other parts of this state and western Minnesota, with the eventual goal of closing other grain elevators in those areas and abandoning branch lines and short lines. The process goes as follows: Give a super special rate to a selected few shuttle train loaders in eastern North Dakota and western Minnesota, and prioritize their service. This takes grain volume away from existing elevators, jeopardizing their very future. Then when the volume from those elevators goes down, the railroad will say it can no longer operate the branch line, and so it will be abandoned.

Some elevators will close, some others may exist as receiving stations for the shuttle train loader. The end result is less competition out in the country for the farmers’ grain, longer hauls for everybody, a huge impact on roads and the taxpayers who fund them, and further deterioration in rural communities.

Meanwhile the grain in western North Dakota is held hostage to much higher rates.

DISHARMONY WITH CUSTOMERS AND MARKETS

BNSF is being irresponsible to its present customers. BN encouraged investments in unit train facilities of 26/27 or 52/54-car capacity. The larger ones were the cream of the crop. Now they are second-class citizens because BNSF wants to emphasize shuttles. We are not against shuttles, or reasonable and consistent rate spreads between shipment sizes. What we oppose is the artificial manipulation of incentives and rates to benefit a very few at the expense of the very many.

In round numbers, of the 230-some North Dakota grain elevators served by BNSF and its shortline affiliate the Red River Valley and Western Railroad, about 60 load 52/54-car trains and another 50 load 26/27-car trains. Only nine load shuttle trains. Although the details are kept secret, it is commonly understood in the grain trade that only three of the nine have the special inverse shuttle rate. The BNSF caters to a couple percent of its grain elevator customers, to the disadvantage of all others.

Our domestic milling market is primarily for 26-car trains or less. It is not for the shuttle trains BNSF is pushing. BNSF has said that it will always have single, 26-car and 52-car rates for niche markets. (Niche markets don’t take 52-car trains.) But if BNSF continues to push grain to shuttle train loaders through its discriminatory rates and service priorities, these other elevators can’t exist on the dribblings.

There is sometimes a misconception that the struggle in our state over inverse rates and shuttle train loading is between modern shuttle loading facilities and small dilapidated elevators that have had their day and are no longer useful.

This is not true. Many of the grain elevators being jeopardized by BNSF’s new schemes are huge modern facilities that have kept themselves up to date for not only their own efficiency, but also for the railroad’s. Millions of farmer dollar investments in their local cooperatives will be lost if these are put out of business.

[MichaelSol]

QUOTE: Originally posted by greyhounds
Now they can't basically grow anything but unneeded wheat and some barley in Montana.

Your penchant for simply making up out of thin air conclusions about stuff you know nothing about is by now legendary.

As a matter of fact, we raised corn, sugar beets, wheat and high quality hay that shipped out of state.

USDA ranking by value, Montana crops

Wheat
Hay
Barley
Potatoes
Lentils
Peas
Corn
Flaxseed
Beans
Safflower
Oats
Canola
Peas Austrian Winter
Corn For Silage
Sugarbeets
Beans Pinto
Chickpeas