Grain News

Rail Competittion and Agriculture: A South Dakota Perspective

Date Posted: May 7, 2010

By Lisa Richardson, South Dakota Corn Growers Association Executive Director

Last week, the U.S. Department of Agriculture released a rural transportation report in which it highlighted various transportation systems in the United States, including the nation’s rail system.

In relation to the rail system, the report tackled issues of rates, infrastructure and competition as they relate to agriculture.

For South Dakota producers, rail transportation is an especially critical issue. Here in South Dakota, we produce 129 million bushels of wheat, 719 million bushels of corn, 176 million bushels of soybeans, close to 8 million tons of hay, a billion tons of sunflowers and a billion gallons of ethanol.

We simply can’t call the U.S. postal service to pick up 100 million bushels of corn and take it to the Pacific Northwest because we have a sales call in Taiwan.

Instead, our products face 83,744 miles of road to go along with its 75,885 square miles of space.

Ninety-one percent of these roads are city, county and township roads.

These are the roads where grain transportation begins as producers truck the grain from fields along these roads to their nearest grain handling facility.

Now if the nearest grain handling facility doesn’t have rail access, that truck either keeps going to a processing facility or right out of state to a top paying market.

This means South Dakota processing facilities and agribusinesses are losing money in missed opportunities in addition to the added pressure placed on our local roads by greater transportation distance.

This is why rail competition is critically important.

The invisible hand of competition has been chopped off in many markets as 75 percent of agricultural areas lost rail competition from 1992 to 2007.

Also, monopolies increased to 15 percent.

As freight demand has the potential to double by 2035, we need more infrastructure to handle this growth.

However, railroads still have anti-trust protection and in the ag sector you simply have to ask why.

Many states are land locked and have only one shipper in the state.

The goal of rail competition legislation should be to provide more balance at the Surface Transportation Board (STB) between the interests of shippers and carriers.

Historically the STB has sided with the railroads in cases pertaining to rates and access.

Small and medium size shippers that are commonly found within the agricultural distribution chain have been shut out of the rate challenge process because it is prohibitively expensive and the chance of success is relatively low.

For agriculture to remain competitive, balance must be brought into the game. Here’s the deal with rail: we need it to be consistent, and we deserve to know what it’s going to cost.

Rail customers don’t want fluctuation.

For more information, call 202-789-0789.

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