Grainnet

This article is reprinted from the Jan. 24 USDA Grain Transportation Report.

On Jan. 17, the Surface Transportation Board (STB) adopted a Capital Asset Pricing Model (CAPM) to estimate the rail industry’s cost-of-capital.

The new method is expected to result in lower cost-of-capital estimates than previously used by STB.

Consequently, the new CAPM method could reduce the carriers’ ability to increase some freight rates because more rail carriers are expected to be revenue adequate and because estimates of revenue-tovariable cost ratios for rail rates should be higher than with the old method.

The STB will apply the new CAPM model to its 2006 railroad cost-of-capital calculations.

For more information, call Surajudeen (Deen) Olowolayemo, USDA, at 202-690-1328.

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