Competition is essential to the American economy. From cell phones to grocery stores, consumers uniformly benefit when competition for their business exists. So why, then, should America’s freight railroads ship fertilizer, crop protection products, grain, feed and other essential goods in an antiquated, competition-free environment?
Twenty years ago, as many rail carriers were on the brink of financial collapse, Congress created the Surface Transportation Board (STB) to ensure that railroads would remain profitable and that shippers would have access to reasonably priced and efficient rail service.
Yet, Congress’ vision for the STB has not been realized. And rail-to-rail competition has been reduced substantially. In 1981, there were 31 Class I rail carriers; today, there are only seven–and of those, four dominate the industry. The reality is many shippers–from wheat farmers to agricultural retailers to car manufacturers–are captive to a single railroad. Current STB practices offer almost no effective recourse if rates or services are unacceptable.
Rules and government procedures administered by the STB are quite simply not working. They block competition between railroads and, when no competitive options are available, deprive rail customers of ways to resolve rate and service concerns.
For instance, the STB estimates that it takes an average of three and a half years, and costs a shipper more than $5 million, to complete a rate challenge. Some cases take longer and cost much more. Such a costly and lengthy process makes challenges to rail rates virtually impossible. In an environment where freight rail rates have increased at three times the rate of inflation during the past 15 years, this is unworkable and unacceptable.
The Impact on Agriculture
Fertilizer is an essential component of food production as it allows farmers to replace nutrients removed from the soil with each harvest. Application of fertilizer and other crop protection products is time-sensitive, weather-dependent and dictated by plant conditions. Farmers can’t afford transportation delays for their inbound supplies or their outbound crops. On-time rail transportation of fertilizer, grain and crop protection products is critical to making our food production system operate efficiently.
Congress recently recognized the need for change and called on the National Academies of Sciences (NAS) to conduct a review of the U.S. freight rail industry. The academies’ Transportation Research Board report confirmed what rail customers had known for years: STB procedures to address shipper concerns “lack a sound economic rationale and are unusable by most shippers,” and many current policies “should be replaced with practices better suited for today’s modern freight rail system.”
Congress took another important step last year by passing legislation to help improve how the STB operates. Now, the STB is making a good-faith effort to be more transparent and do a better job of resolving long-standing freight rail problems. These efforts should continue without interference. The STB’s pursuit of reform is not only justified by the times, but it also has been validated by an objective third party in the NAS and is consistent with the STB’s original statutory mandate in the Staggers Rail Act of 1980, which meant to ensure competition among carriers.
An Asset for Competition
ARA members support the practical, commonsense reforms proposed by the STB. These changes will allow the market to operate more effectively and foster competition, which drives innovation and cost savings throughout our economy. These reforms will foster a healthier freight rail system–something rail carriers should fight for, not against.
The freight rail industry remains an indispensable asset to American agriculture’s global competitiveness. Despite the protestations from some rail carriers, the case for modernizing rail policies for the good of the entire U.S. economy is undeniable.
Clearly, shippers need increased access to competitive freight rail service and a rail system that is more accountable to the U.S. marketplace. The efforts of Congress and the STB will hopefully lead to a more dependable, efficient and economical rail service for agricultural retailers, distributors and suppliers, as well as the rural communities they serve.