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

[Murphy Siding]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by futuremodal
That's what businesses do, determine prices charged to their consumers based on their costs.

Nope. I take it you've never worked in a business where you had to compete? The selling price is based on market competition, not on your cost.

"Compete" is the key word there, alfalfa. If you had taken any economics classes, the first theory they teach you is the old "cost + 10%" rule of thumb which only applies to competitive markets. In monopolistic markets, it's more like "cost + the sky's the limit" because there is no competition there to keep you honest.

Why is this so hard for you to grasp?

OK. To be fair, I went back and re-read your post. It still says the same thing, and you're still wrong. If you'd ever worked in a business that had to compete you'd understand why you are wrong. Why is that so hard to grasp?[;)]
If you don't mean what you say, why don't you say what you mean? It's way to hard for those of us with average intelligence to decipher what you *mean*, when it's different than what you *say*.[}:)]

[n012944]

QUOTE: Originally posted by TomDiehl

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by n012944

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by rrandb

All I'm saying is if Idaho had wanted the truck/barge traffic there IDOT was that hard to work with. If they did roadblock the border it was not for the benift of BNSF. Idaho had asked for 120,000. A reason is at that weight 120,000 we did 8 mph uphill and 4 mph downhill. Granted it was winter and there was 5" of ice and cinders on the road. The point is the damage to the road at those weights is not that much different. Did the Feds do that maybe to help BNSF. I do not think so but it would fit the DC/railroad colusion theory.

It is a generally accepted fact that the rail industry had a major hand in convincing the federal government to cap each state's GVW limits for non-Interstate highways, with each state able to grandfather in their particular weight limit that was in place when the cap was enacted. The Interstate Highway cap has been 80,000 lbs since I can remember.

Most of the grain that was trucked from Montana to Lewiston went via non-Interstate Highways - US Highway 12, Montana Highway 200, etc.

Back to that old "its a railroad conspiracy theory' thing again. Give it a break.


Bert

http://www.aar.org
http://www.cabt.org

Since you seem to know absolutely nothing about the railroad industry, here's a primer. The AAR is the American Association of Rairoads, the lobbying arm of the rail industry. The AAR has a surogate group it uses called the Coalition Against Bigger Trucks, which is predicated soley on opposing increased GVW for trucks. It was CABT that was the major force in getting the federal cap on weight limits imposed.

Now, whether it is a conspiracy or not is up to your imagination.[D)]

Even in this weeks newspapers, there's an article that states the usual knee-jerk opposition to trucks and highways from the rail industry:

http://www.helenair.com/articles/2006/06/14/montana/a08061406_02.txt

Kitzenberg leading caravan for four-lane U.S. Highway 2

Quote of note: "The lone opposition he’s encountered to the “four-for-two” idea has come from BNSF Railway, which Kitzenberg (says) wants to keep its shipping monopoly across the Hi-Line. 'If you’ve got a monopoly and are making money, why would you want competition?' the legislator asked.”

Digging a bit further into the AAR link that YOU provided leads us to:

http://www.aar.org/GetFile.asp?File_ID=281

Most interesting is the third paragraph under "Issue Overview."

You should really read your own links before you post them. The noted paragraph blows your supposed "conspiricy" out of the water. [:o)]

Dave,

I really love how you seem to make a habit of acting all smug in your responses, and then have them thrown in your face. Did you read the link? The trucking industy opposed the weight increase. Let me say that again, the TRUCKING industy. Now I know you will put your usual spin on it, the railroads bribed them with all there money. But at the end of the day it shows that YOU are the one that knows nothing about the railroad industry.


Bert

[MichaelSol]

QUOTE: Originally posted by MP173

So, the VC180 rule implies that as a company becomes more efficient, they are legally required to pass entirely all of the productivity gains to the customer and not pocket any of the gains themselves.

Kind of like thinking that it should be illegal to have to compete for business at all. Charge whatever you want, and, of course, make no investment at all, if you "like".

This makes no sense, and it is simply the reducto ad absurdum of market theory and the effort that the Staggers Act made to attempt to protect against monopoly pricing, because it is illegal and contrary to our controlling economic theory.

It is competition that compelled the investment.

Not this bizarre theory that Strawbridge contends drives business: everything they do for the customer is just a favor, and the customer had better well like it.

Is the investment rational? Well, railroads are, fact, doing much better than pre-Staggers. The economy itself no doubt has something to do with that. Perhaps more than meets the eye. But they are doing much better for whatever reasons.

What drove the investment?

Benevolence?

No, competition on price.

That is how it is supposed to work. Your economic theory, that companies make enormous investments and "should be entitled" to pocket all the profits is some strange theory. Only a monopoly can do that, because in "the real world" the other guy is going to be doing the same thing, and cut his price to beat you.

This is where we disagree. I think investment is a competitive tool to be able to continue to earn profit. You believe it invokes a divine right to take uncompetitive profit, or to price gouge. That someone should be able to set it at whatever level they choose and that's that. That is command economy theory. It is ultimately destructive. Cuba still uses that approach to pricing.

Monopolies are not permitted in our economic system. Because of pricing power. Monopoly pricing is anti-capitalism, anti-market. We know, as an empirical fact, that monopoly pricing results in irrational and unproductive investment decision making, as well as imposing efficiency penalties on society as a whole. We don't need to learn that lesson again, or argue that some "special exception" exists for railroads and their captive shippers. But that is really what that argument is about: that railroads are entitled to a special exception, not just from the law, but from our controlling and successful economic theory of pricing.


Railroads got a deal. In return for not, repeat, not having to invest in redundant facilities in order to provide competition, a formula was substituted. Is it perfect? Probably not. Is it better than the alternative of providing redundant facilities? Probably so, in spades. That was the deal, and the railroads got a good one.

Well, then let's go back to that "investment" argument and say that by reneging on the deal, the social contract is broken. The railroads must restore the actual physical plant necessary to provide competition at all points.

Yes there was a trade off from a railroad profit standpoint -- but, that allowed railroads enormous investment benefits. Perhaps they should repay those because of the breach?

Further, how are railroads doing that much better? They have made enormous investments, but where is the profit really coming from?

The "investments" have been made to meet price competition.

Right? We do agree on that, I hope.

Yet, profit appears to be coming from the 20-30% of captive shippers who are paying 200-400% R/VC.

So, is the actual "investment" rational? Is it generating a fair rate of return from the actual business that prompts the investment, and to which the investment is directed? That is, the competitive shippers.

It can't be. They're not the ones paying for the investment.

Not if railroads are just beginning to recover cost of capital, it can only mean that with a high percentage of captive shippers, the price driven investment is being paid for by the captive shippers who do not benefit from their investment [since they are the ones truly footing the bill] which should result in better service and lower prices. The ones who aren't paying -- the competitive shippers -- are receiving the direct benefits of the investment.

This means pricing is not rational. It is not rational to the captive shippers, and it is not rational to the competitive shippers.

Irrational pricing introduces inefficient investment decision-making processes.

It has to.

You think its good. I think its bad.

We disagree.

[Anonymous]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by futuremodal
That's what businesses do, determine prices charged to their consumers based on their costs.

Nope. I take it you've never worked in a business where you had to compete? The selling price is based on market competition, not on your cost.

"Compete" is the key word there, alfalfa. If you had taken any economics classes, the first theory they teach you is the old "cost + 10%" rule of thumb which only applies to competitive markets. In monopolistic markets, it's more like "cost + the sky's the limit" because there is no competition there to keep you honest.

If BNSF had any realistic competition in Montana, it's grain rates would have gone down in response to the efficiency adjustment, because that would have been the only way to maintain market share. Otherwise, if they had done what they did, but in a competitive environment, the other competitors would have simply undercut them and they would have lost market share.


Why is this so hard for you to grasp? Everytime you post a reply, it seems you've totally spaced out the major differences between competitive and monopolistic markets. Next time you post a reply, keep the competitive vs monopolistic paradigm in mind.

[wallyworld]

All of this is a tempest in a tea pot. The STB is not going to reregulate rates. It's easy to pick up a rock and throw it, its another thing to actually turn around a situation. As long as reasonable eforts are made to increase capacity are underway, and it appears that they are, eventually this situation of "captive Shippers" will improve. It does'nt happen overnight as it would in more flexible modes of transport. The mood and opinion of shippers are the result of a default of management philosophy that has been inbred and commented on by outsiders for a score of decades. Ignoring a proactive stance in service recovery in terms of relations-communications to their customers and the general public as well, they are discovering for the upteenth time, that good will is not self generating. Ignoring this out of ignorance has the same effect of indifferent or at worst, appearing arrogant. Tom Murray nailed the problem in his Trains column. I cant imagine that on the other side of the coin, the roads are happy with this headache, any more than the shippers are. Here is room for some dialog, and not through a third party like the STB. It's a confederacy of dunces not a conspiracy of intent that is responsible for poor customer relations.

[MP173]

So, the VC180 rule implies that as a company becomes more efficient, they are legally required to pass entirely all of the productivity gains to the customer and not pocket any of the gains themselves.

So, by investing in higher productivity, a company's net income would be reduced on that segment of the business.

example.

variable costs per car = $1000.
maximum allowable rate = $1800
margin = $800 per car

I am not sure where this is in the income statement, whether it includes interest, taxes, depreciation, etc...but lets keep it simple and just call it margin.

productivity gains of 25% yields
variable costs per car = $750
maximum allowed rate = $1350
margin = $600 per car

Reduction in margin per car = $200.

So, investing in productivity gains results in a lower net income per car under this provision.

Interesting. Once again I find it fascinating that profits can be capped on the top side with no downside provisions. Now I find that not only can profits be capped, but there can be a forced reduction.

ed

[MichaelSol]

QUOTE: Originally posted by beaulieu
And inspite of this Grain movements through the ports of Duluth and Superior are just half of what they were from the end of WW2 through the '80s. In fact Grain now ranks below Misc. Cargo in the rankings at about 5 percent of the ports volume. They handled 2.8 million tons of Grain for 2005 a tiny fraction above the 5 year average. If the rates were any higher to Duluth-Superior it would dry up completely. BNSF has a lot of spare capacity on the high line west of Brookston, MN all the way to Minot, ND.

Rail rates aren't the issue or the explanation. Historically, Europe relied on the Black Sea grain trade for it's grain. A variety of events interferred with that source of grain, leading up to and especially the 1917 Revolution in Russia. Ultimately, American Midwest (and Canadian) grain replaced the historic Black Sea trade.

This has changed. The steppes are now producing prodigious quantities of grain for the first time in nearly a century. The natural result of abandoning command economics and captive producers and captive buyers. The natural victim: the Great Lakes grain trade.

[MichaelSol]

QUOTE: Originally posted by Character

One other significant point that no one has raised is that many farmers are becoming truckers in their own right. They have purchased older semis of their own to move their grain. This may be to a new larger grain elevator on a main line or to a barge port on a river. The family farm is an endangered species in our country, has been for years. The simple fact is that many farmers are corporate and have built the capacity to move their own produce as part of the logistics chain. So, the railroad gets another competitor or at least a customer that is willing to enhance the truck and water transport competition.

Except, insofar as the geographical area under discussion is concerned, the amount of grain trucked has gone down over the past twenty years. It is now only 2% of the volume. By an economist's standards, anything that can only command 2% of the market is not a competitive influence in the market.

[MichaelSol]

QUOTE: Originally posted by greyhounds
And yet you and Sol beat this railroad over the head - and both of you ignore the fact that the BNSF has been very, very, good to the Montana farmers.

But rail rates have gone down as the result of Staggers, not up. They have gone down by an average of 47%, not up by 18%. That is because costs have gone way down as the result of vastly increased productivity. The RCAF measures increases in costs, it doesn't measure increases in productivity. The only reason for a rate to have gone up is pure and simple price gouging resulting from a captive market.

Whiteside paper:
"Rail rates in Montana and North Dakota run 250-450+% of variable cost. Those are among the highest freight rates in the nation."

[MichaelSol]

QUOTE: Original posted by greyhounds
Oh, boy. I guess Sol is:
1) Trolling, trying to stir up trouble by fabricating a non-existant, never was, rate of $1.40/bushel
...
It's impossible to tell from the chart exactly what the 1981 rate was, but it was at least $0.70/bushel

As I mentioned much earlier, I was drawing from memory on some rates a while back. "By 1980, the last year the Milwaukee was in place, started inching up to about $1600 per carload, but that is just recollection." Greyhounds even quotes the statement a few posts above. He just didn't read it.

I actually qualify things, then correct them when I get better information. Some don't do that. To clarify, I specifically then stated I went to a specific rate that I did have, a station for which we had a 1974 rate, and a current rate. The derivation clearly showed that rates as measured by the Rail Cost portion of the PPI, had increased. Whiteside's study over a much shorter period, 1993-2004, says the same thing occured over that much shorter period.

The point then of greyhound's infatuation with the Whiteside chart? No idea. While I think the methodology of the chart is poor, it doesn't support greyhounds at all. No matter how you read it.

Can't tell what greyhounds is attempting to say about the Whiteside study, even by his interpretation, rates went up, not down as he claims. Simply bizarre. As I also say, I have never relied on the Whiteside study for anything, and as I have also said, they have long needed a good statistician. For instance, what rates are the chart based on? Only the 12/31/04 Rates from Great Falls and Collins MT are specifically identified. Are the rest Montana averages? Perhaps ranges of rates?

Well if so, here's actual numbers, looking at a range of Montana rates and you can see what I am relying on in interpreting Whiteside's chart :
1974, Moore, Montana. $1480 to Portland. Average load, 3336 bushels.

1974 Rate per bushel ... 44 cents.

Today, a Montana rate.
Reserve, Montana.
$4257 to Portland. Fuel surcharge app. .36/mile, 1189 miles

Current Rate per bushel ... $1.41

QUOTE: greyhounds: It's no where near $1.40/bushel

True, Montana rates range up to one cent higher. The "never was" rate as greyhounds alleges, once again, is absolutely false.

The Rail Cost Inflation (PPI) index shows that a 44 cent per bushel rate in 1974 should be 82 cents today. The rate at Moore is in fact at 86 cents per bushel, at the same time that similar wheat rates, benefitting from Staggers' competition and efficiency increases that resulted, the average rate would be closer to 42-45 cents per bushel. That's what other wheat shippers are getting charged.

Now, these represent "ranges" of rates. Those who will remember the conversation before greyhounds attempted to change it, was whether or not there was a competitive influence on rail grain rates as a result of Milwaukee Road. Greyhounds is gleeful that he has a study that shows no data at all relevant to that contention, but a study which relates only to captive shipper rates over time and yet, still shows, that overall, rates increased, even using actual rates, are higher than 1981, and, in a much more limited fashion, shows a RCAFadjusted rate that only dates from 1993. And the 2004 rate is higher, not lower, than than the 1993 rate, notwithstanding greyhounds effort to make people believe, by constant repetition of the lie, that the rate is "much lower."

It simply isn't.

No matter how you read the chart.

[Anonymous]

One other significant point that no one has raised is that many farmers are becoming truckers in their own right. They have purchased older semis of their own to move their grain. This may be to a new larger grain elevator on a main line or to a barge port on a river. The family farm is an endangered species in our country, has been for years. The simple fact is that many farmers are corporate and have built the capacity to move their own produce as part of the logistics chain. So, the railroad gets another competitor or at least a customer that is willing to enhance the truck and water transport competition.

[rrandb]

WE imported items for a fraction of a cent and sold them for 99 cents. Good profit right. Only if you sell a bunch of them. Had to sell 100 of them to make the same profit on other items we bought for $900 and sold for $1,000. With a huge ratio you still had to sell a bunch. Small margin not so many. It is not the ratio but whether or not your making money.

[Murphy Siding]

QUOTE: Originally posted by futuremodal
That's what businesses do, determine prices charged to their consumers based on their costs.

Nope. I take it you've never worked in a business where you had to compete? The selling price is based on market competition, not on your cost.

[TomDiehl]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by n012944

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by rrandb

All I'm saying is if Idaho had wanted the truck/barge traffic there IDOT was that hard to work with. If they did roadblock the border it was not for the benift of BNSF. Idaho had asked for 120,000. A reason is at that weight 120,000 we did 8 mph uphill and 4 mph downhill. Granted it was winter and there was 5" of ice and cinders on the road. The point is the damage to the road at those weights is not that much different. Did the Feds do that maybe to help BNSF. I do not think so but it would fit the DC/railroad colusion theory.

It is a generally accepted fact that the rail industry had a major hand in convincing the federal government to cap each state's GVW limits for non-Interstate highways, with each state able to grandfather in their particular weight limit that was in place when the cap was enacted. The Interstate Highway cap has been 80,000 lbs since I can remember.

Most of the grain that was trucked from Montana to Lewiston went via non-Interstate Highways - US Highway 12, Montana Highway 200, etc.

Back to that old "its a railroad conspiracy theory' thing again. Give it a break.


Bert

http://www.aar.org
http://www.cabt.org

Since you seem to know absolutely nothing about the railroad industry, here's a primer. The AAR is the American Association of Rairoads, the lobbying arm of the rail industry. The AAR has a surogate group it uses called the Coalition Against Bigger Trucks, which is predicated soley on opposing increased GVW for trucks. It was CABT that was the major force in getting the federal cap on weight limits imposed.

Now, whether it is a conspiracy or not is up to your imagination.[D)]

Even in this weeks newspapers, there's an article that states the usual knee-jerk opposition to trucks and highways from the rail industry:

http://www.helenair.com/articles/2006/06/14/montana/a08061406_02.txt

Kitzenberg leading caravan for four-lane U.S. Highway 2

Quote of note: "The lone opposition he’s encountered to the “four-for-two” idea has come from BNSF Railway, which Kitzenberg (says) wants to keep its shipping monopoly across the Hi-Line. 'If you’ve got a monopoly and are making money, why would you want competition?' the legislator asked.”

Digging a bit further into the AAR link that YOU provided leads us to:

http://www.aar.org/GetFile.asp?File_ID=281

Most interesting is the third paragraph under "Issue Overview."

You should really read your own links before you post them. The noted paragraph blows your supposed "conspiricy" out of the water. [:o)]

[greyhounds]

QUOTE: Originally posted by futuremodal


The absolute best item in the whole Whiteside paper:

"Montana Suggestion For the Board To Consider:

Montana has a suggestion for the Surface Transportation Board to consider. We
think it would be appropriate for the Board working with Montana Government
and its federally elected representatives to consider establishment of one or
several demonstration projects to explore the impacts of various approaches to
competitive access. Since the state of Montana is completely captive to one
railroad, it may be the perfect area in which to experiment with ways to return
competition to an industry where the numbers of industry players are extremely
limited. Other areas of the country might be identified according to unique
situations as well. In Montana, for example, a demonstration project of some
defined duration might allow an open access system to operate, allowing
Montana Rail Link (Class II) and Central Montana Railroad (Class III) and the
BNSF (Class I) to compete for Montana customers. The STB could monitor
service, etc. over a defined period, we’d suggest 2-4 years, and prepare a report
on each project that could be the subject of further public hearing and debate.
This sort of creative, yet gradual and controlled approach to restoring competitive
access and this would fulfil the competitive balance that the ICC/STB fostered to
create in the design of the Northern Line Merger in 1970 (creation of BN). It
would start to tell us a great deal about potential benefits and adverse impacts. It
would also allow the Board the opportunity to better assess the implications of
the rail industry’s configuration in the future."

Now we're talking!

Yes, we're talking legalized theft from the BNSF investors. Montana politicians (for their own political gain) want the Federal Government to order the transfer, in one way or another, of earnings from the BNSF investors to the people of Montana. It's called buying votes with someone else's money.

QUOTE: Originally posted by futuremodal




PS - Ken, the CPI has nothing to do with the rate debate. Rates are not a consumer item.

Well, Mr. Sol was using the 1981 CPI adjusted rate as a real rate. I just pointed out that he was full of it in doing so.

QUOTE: Originally posted by futuremodal



Adjustment of rates for the purpose of determining whether the real rate has increased or not for the shipper can only be analyzed based on relative costs of the rate supplier. That's what businesses do, determine prices charged to their consumers based on their costs. If your costs go down 50% but your rate remains the same, the real rate has increased. That is the only salient point to ponder, all else is just verbal diarrhea.

You've never "priced" anything, have you. Businesses don't determine prices based on costs. They "take" prices from the market. I'll tell you about an event in my life when I was pricing intermodal for the old ICG. I had a very competent sales lady come into my office and ask: "Is $900 OK to New Orleans?" My reply: "Can you get $925, if you can, then $900 is not OK." (of course, we were competing with trucks, but you deny that absolute fact.)

She made the sale at $925. (I should have said at least $950, been kickin' myself on that one ever since, I'll bet she could have sold it at $950). The $25 didn't mean a hill of beans to the ICG, me, or the shipper. It was one load a week.

I was trying to "train" the saleswoman. You're doing a dance. Sometimes you lead, sometimes you follow. But hang the freaking costs, if you can get $925, $900 is not OK. This isn't a game, it's business. All "Costs" do is put a floor under how low you can go.

That's why the BNSF hasn't raised their wheat rates from Montana in constant dollar terms, they lowered them.. Thy're "taking" the price from the market. If they charged more, they'd loose business to their trucking competition. In 1981 the per car rate on a 52 car shipment from Great Falls, MT to the export terminal was at least $2,356. Today it's only $2,781. Thats only an 18% increase in 25 years. In constant dollar terms, that's a significant decrease!

If anybody wants to check the BNSF rates go to:

http://wbc.agr.mt.gov/pressreleases/Montana%20Wheat%20Rates%20Effective%201-1-06.pdf

Now both those figures are without fuel surcharges, but they remain an example of how BNSF has kept its prices down; way, way, down, on export wheat from Montana.

And yet you and Sol beat this railroad over the head - and both of you ignore the fact that the BNSF has been very, very, good to the Montana farmers. But make no mistake, the BNSF is not a charitable organization. Its prices are where they are because those prices maximize its profit. If the prices were higher, they'd loose business to the truckers. The Montana farmers are not, in any way, "captive" to the BNSF, else the rail price would have gone up more than 18% in 25 years.

[Anonymous]

The absolute best item in the whole Whiteside paper:

"Montana Suggestion For the Board To Consider:

Montana has a suggestion for the Surface Transportation Board to consider. We
think it would be appropriate for the Board working with Montana Government
and its federally elected representatives to consider establishment of one or
several demonstration projects to explore the impacts of various approaches to
competitive access. Since the state of Montana is completely captive to one
railroad, it may be the perfect area in which to experiment with ways to return
competition to an industry where the numbers of industry players are extremely
limited. Other areas of the country might be identified according to unique
situations as well. In Montana, for example, a demonstration project of some
defined duration might allow an open access system to operate, allowing
Montana Rail Link (Class II) and Central Montana Railroad (Class III) and the
BNSF (Class I) to compete for Montana customers. The STB could monitor
service, etc. over a defined period, we’d suggest 2-4 years, and prepare a report
on each project that could be the subject of further public hearing and debate.
This sort of creative, yet gradual and controlled approach to restoring competitive
access and this would fulfil the competitive balance that the ICC/STB fostered to
create in the design of the Northern Line Merger in 1970 (creation of BN). It
would start to tell us a great deal about potential benefits and adverse impacts. It
would also allow the Board the opportunity to better assess the implications of
the rail industry’s configuration in the future."

Now we're talking!

PS - Ken, the CPI has nothing to do with the rate debate. Rates are not a consumer item. Adjustment of rates for the purpose of determining whether the real rate has increased or not for the shipper can only be analyzed based on relative costs of the rate supplier. That's what businesses do, determine prices charged to their consumers based on their costs. If your costs go down 50% but your rate remains the same, the real rate has increased. That is the only salient point to ponder, all else is just verbal diarrhea.

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
The rail rates on Montana wheat did not, in any way "escalate" as you falsely say. If someone will look at the facts in the "white paper" prepared for the Govenor of Montana they will see that: Take a look at the facts on page 14 and disregard the propaganda.

.http://rscc.mt.gov/docs/White_Paper_Meeting_10_05.pdf

The rates went way down with respect to inflation and stayed basically constant with regards to the BNSF's cost.

There is something wrong with you. Seriously, seriously wrong. Page 14 clearly shows that the "inflation adjusted" transportation rate, by the standard you went to great lengths to convince us was appropriate, went from 70 cents to $1.40 per bushel, 1981 -2005.

Hint: the inflation rate for a customer -- dollars he pays -- is different than the cost adjusted rate of cost to supply for the producer. You still don't understand inflation indexes.

Oh, boy. I guess Sol is:

1) Trolling, trying to stir up trouble by fabricating a non-existant, never was, rate of $1.40/bushel

OR

2) Unable to comprehed a simple graph and the English captions that go with it

OR

3) Is hooked up to his anti BNSF political agenda so emotionally that he will willfully misrepresent facts in order to further his agenda.

Maybe a mixture of all three?

Anyway, don't take my work for it. See for yourself on page 14 of:

http://rscc.mt.gov/docs/White_Paper_Meeting_10_05.pdf

The "$1.40/bushel" rate he refers to never happened. But he's misrepresenting it as if it did.

There are four lines on the graph:

a) Red Line- indicating what the rate would have been if the BNSF had increased it with inflation. It is clearly labeled as the "Inflation Adjusted Rate" and is captioned as "calculated (as in not real) utilizing Consumer Price Index (CPI) factor multiplied by rates with base year of 1981." There never has been a rate at that level, but that didn't stop Sol from using it. What the consultant did was provide context for the BNSF prices by showing inflation's effect on the purchasing power of a dollar.

b) Blue Line - indicating the actual BNSF rate.(This one must have been tricky for Mr. Sol - it's clearly labled "Actual Rate" and he seems to have trouble with things that are "clear" and/or "actual".) It's no where near $1.40/bushel. It ends in 2004 being only $0.88/bushel. That means the BNSF rates fell dramatically in constant, inflation adjusted, dollar terms. It's impossible to tell from the chart exactly what the 1981 rate was, but it was at least $0.70/bushel. So in 1981 the BNSF charged $0.70 something and at the end of 2004 it charged $0.88. That's a fantastic job of holding their price down over 23 years of inflation. They should be getting praise and adulation from the Montana farmers.

c) Purple Line - indicating the "Rail Cost Factor Adjusted Rate". This is the behavior of the costs inputs to the railroad. It tracks beautifully with the Blue Line, in fact, in this century the lines are virtually coliniar. The BNSF rate is moving with the rail cost inputs. There's nothing wrong at all with that.

d) Green Line - indicating the "Rail Cost Adjustment Factor Adjusted for Productivity Gains" (They're adjusting an adjustment!) This is the bone of contention, not the phoney rates represented by the Red LIne and falsely presented by Sol as being real.

The BNSF improved its efficiency. It became more productive. It reduced its costs of transporting the wheat significantly. The railroad put this money, that it earned by improving its operations, into its own pocket. That's fitting and propper; and that's just where that money belongs. BNSF managers would be violating their financial obligation to their investors if they just "gave" the productivity gains over to the farmers for no reason. But that's aparently what Sol wants. He wants to loot the railroad and forceably take money from it to give to people who didn't earn the money. If it happens it will be legalized theft.

If I had to take a guess, I'd guess that Sol really doesn't understand the data and the graph. He seems to have trouble processing information - he twists it to fit his ideology. That's why, in my opinion, he misrepresented the inflation adjusted rate projections as real rates.

And while I'm on the subject of Mr. Sol's lack of veracity, on June 2nd he said:

QUOTE: Originally posted by MichaelSol


Posted by MichaelSol Posted: 02 Jun 2006, 14:24:11

Didn't change much between 1974 and 1977. By 1980, the last year the Milwaukee was in place, started inching up to about $1600 per carload, but that is just recollection. I seem to be the only one here who even attempts to offer data. There were huge volume increases, however, in those years. Fleet utilization alone was much higher.

In order for a carload cost in 1980 to equal the equivalent cost in 2003 (the general PPI index with the handy calculator stops there) according to the PPI, the rate in 1980 would have to be $2,026.2. A 1980 figure less than that means that rates have gone up since 1980, not down.

Several of the inflation indexes don't go back beyond 1980 so, for reasons I again reiterate, I am picking a 1980 figure as that represents the last year of Milwaukee in Montana, and fits with available rail rate data as well as available index data.

So Sol claimed the rate on export wheat from Montana was only $1,600 /carload in 1980. This allowed him to fabricate data showing that the rates had increased with inflation - when the Whiteside and Associates "white paper' clearly shows they did no such thing.

The Montana Wheat and Barley Commitee uses a load factor of 3,366 bushels per rail car. At Sol's fabricated rate of only $1,600 per car this would have produced a per bushel charge of $0.475. But, we see from the Whiteside study that the rate in 1981 was at least $0.70/bushel. (and the Whiteside rate is on a 52 car minimum shipment, single carloads would be even higher.)

Now, either Sol is wrong with his $1,600/car figure (somebody said he might have just made it up) or the regulators granted a 47% rate increase in one year. I doubt the latter, but firmly believe the former.

The website of the Montana Wheat and Barley Committe is:

http://wbc.agr.mt.gov/

Please go see for youself.

Ken Strawbridge

[Anonymous]

QUOTE: Originally posted by n012944

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by rrandb

All I'm saying is if Idaho had wanted the truck/barge traffic there IDOT was that hard to work with. If they did roadblock the border it was not for the benift of BNSF. Idaho had asked for 120,000. A reason is at that weight 120,000 we did 8 mph uphill and 4 mph downhill. Granted it was winter and there was 5" of ice and cinders on the road. The point is the damage to the road at those weights is not that much different. Did the Feds do that maybe to help BNSF. I do not think so but it would fit the DC/railroad colusion theory.

It is a generally accepted fact that the rail industry had a major hand in convincing the federal government to cap each state's GVW limits for non-Interstate highways, with each state able to grandfather in their particular weight limit that was in place when the cap was enacted. The Interstate Highway cap has been 80,000 lbs since I can remember.

Most of the grain that was trucked from Montana to Lewiston went via non-Interstate Highways - US Highway 12, Montana Highway 200, etc.

Back to that old "its a railroad conspiracy theory' thing again. Give it a break.


Bert

http://www.aar.org
http://www.cabt.org

Since you seem to know absolutely nothing about the railroad industry, here's a primer. The AAR is the American Association of Rairoads, the lobbying arm of the rail industry. The AAR has a surogate group it uses called the Coalition Against Bigger Trucks, which is predicated soley on opposing increased GVW for trucks. It was CABT that was the major force in getting the federal cap on weight limits imposed.

Now, whether it is a conspiracy or not is up to your imagination.[D)]

Even in this weeks newspapers, there's an article that states the usual knee-jerk opposition to trucks and highways from the rail industry:

http://www.helenair.com/articles/2006/06/14/montana/a08061406_02.txt

Kitzenberg leading caravan for four-lane U.S. Highway 2

Quote of note: "The lone opposition he’s encountered to the “four-for-two” idea has come from BNSF Railway, which Kitzenberg (says) wants to keep its shipping monopoly across the Hi-Line. 'If you’ve got a monopoly and are making money, why would you want competition?' the legislator asked.”

[MichaelSol]

QUOTE: Originally posted by beaulieu

One question I do have about this discussion. Does the Cap on R/VC at 180 percent create a perverse incentive to have the Rail Costs increase since the railroad keeps the spread, indeed it would seem that an increase in RCAF versus CPI would be beneficial to Railroad shareholders. In this instance it would seem that Captive shippers would be beholden to the non-captive shippers to keep the rates as low as they are.

Well, this certainly underscores that it is the competitive environment that drives cost improvements and improved productivity in any company, and you are surely correct that railroads have no incentive to do so for captive shippers.

That is why monopolies tend to be poor providers of service and poor innovators. That is the foundation of why monopoly or captive customers are generally protected by law -- either consumer protection acts, unfair trade practices acts, anti-trust law, or ... the Staggers Act.

But your remark also underscores the importance of the 180% threshold using the STB methodology. The variable cost of the service claimed has to be rational. System averages play an important evidentiary role in determining what is rational.

What greyhounds is arguing is unfair about the Whiteside paper, for instance, is that substantial efficiency gains have occured on the BNSF. These are driven by BNSF's response to competitive markets. It is not benevolence, but rather economic compulsion that drives those efficiency improvements. That's the strength of a truly Market Economy. Whiteside is pointing out that the wheat trade, immensely profitable for the railroad in the first place, is now even more profitable because of efficiency gains, but that -- and this is the key to the argument -- in a truly competitive market, those gains are made to preserve profitability. It's what any business does to ... stay in business.

Whiteside is simply stating the obvious captive market result: that the benefits of market competition, which have promoted industry efficiencies and resulted in declining rates, must be fairly shared with captive shippers, if the purpose of the Staggers Act was to preserve access to competitive rates to captive shippers, while giving the railroads the freedom to set such rates and abandon such facilities as was necessary to ... improve the economic efficiency of the industry.

That goal is set in an economic context, not a vacuum, and the context is that captive shippers were supposed to enjoy the advantages of the Staggers Act. Both the railroads and competitive shippers did, in fact, receive those benefits.

Whiteside is simply pointing out for all to see that the captive shippers did not.

Whether one agrees or disagrees that they should have is not the point, the law says they should have, and as his paper points out, pretty clearly, they didn't.

[Anonymous]

QUOTE: Originally posted by edblysard

If you read the opening statement in the link, you will crack up with laughter...because it fits so well...
Kinda along the lines of "if someone wont believe what we want them to, lie about it and keep repeating the same story till you wear them down"...[:D]

Sounds a lot like some people on this thread...

[rrandb]

QUOTE: Originally posted by edblysard

Found it for you Tom,
Must be high on their bookmarks..
http://www.alaska.net/~clund/e_djublonskopf/Flatearthsociety.htm
Kinda fits their entire theme![:D]

He missed the part in the rules that said members should not use these conspiricy theories outside of FES website. You may be subject to ridicule!!!! [:-^] [swg]

[MichaelSol]

QUOTE: Originally posted by greyhounds
[Montana wheat still floats down the Snake/Columbia River System. This system provides competition for the BNSF.

97-99% of Montana wheat that goes by barge gets to the barge by rail.

[MichaelSol]

The barge is still cheaper than the railroad, but the truck isn't. When the truck is factored in, over the distances from Montana and the Dakotas, the railroad can get grain to Portland cheaper than the combination of truck and barge.

There are parts of Montana, where the owners can truck to Lewiston. Look at a map. Ravalli County, Granite, Mineral, Sanders, and Beaverhead Counties Montana can maybe make it work, it they don't have too much wheat and with the farmer doing his own trucking, compared to railroading the wheat up to Sandpoint and back down to the Snake, Columbia, or to Portland. But, it's small potatoes, and its not the wheat belt.

The fellow in this article drives his own truck -- that's the only thing that makes the Lewiston barge facility work for him. And it's not a big over-the-road truck either. This, one of those big Montana wheat farmers, incidentally, 200 acres.

http://www.missoulian.com/specials/followh2o/h2o12.html

But it's not much. And wheat does move into Canada by truck, and to local uses.

It just doesn't work for the areas where most of the wheat is grown, North-Central Montana. and the Dakotas. This is why trucks carry only a little more than 2% of wheat shipments (truckload equivalents) over a state border, and at least half of that is not export wheat. Total winter wheat shipments by truck last year were only 3,577. Spring wheat, a mere 2,354. These are almost entirely geographical exceptions, coupled with farmer operated trucks, or regional use. These compare with 115,000 train carloads of wheat and barley by rail, or 285,000 truckload equivalents.

If you know what the market actually is like, that is, specificially what is being shipped, from where, why, and how, you will understand that trucks are not a competitor to rail service from Montana and the Dakotas. If you don't understand the specific market, then you are wonderfully unencumbered by reality and can claim in all innocence of facts that the trucks are a competitive alternative.

[edblysard]

If you read the opening statement in the link, you will crack up with laughter...because it fits so well...
Kinda along the lines of "if someone wont believe what we want them to, lie about it and keep repeating the same story till you wear them down"...[:D]

[TomDiehl]

QUOTE: Originally posted by edblysard

Found it for you Tom,
Must be high on their bookmarks..

http://www.alaska.net/~clund/e_djublonskopf/Flatearthsociety.htm

Kinda fits their entire theme![:D]

David, male, from the Pacific North West, must be a charter member. [:D]

[greyhounds]

QUOTE: Originally posted by futuremodal

Originally posted by rrandb



Most of the grain that was trucked from Montana to Lewiston went via non-Interstate Highways - US Highway 12, Montana Highway 200, etc.

Wrong verb tense Dave. It should read "Most of the grain that is trucked from Montana..." Not "was trucked from Montana"

Montana wheat still floats down the Snake/Columbia River System. This system provides competition for the BNSF.

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.

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