Rail-car supply more of a concern to shippers than the economy, informal poll shows
With an assist from the helpful folks at the National Industrial Transportation League, Progressive Railroading last month polled the shipper organization’s nearly 600 members. Among 10 survey questions, we asked NIT Leaguers: How would you rate the state of the economy at present? Poll takers could choose between “strengthening significantly,” “slightly better,” “about the same as it’s been,” “slightly worse” and “weakening significantly.”
Twelve of the 25 respondents selected “slightly worse,” while five chose “weakening significantly,” five marked off “about the same” and three picked “slightly better.” Hardly a consensus, but the majority believed the economy has stabilized or only marginally worsened of late.
Association of American Railroads’ traffic data shows some shippers aren’t singing the economic blues. Through 2008’s first 34 weeks, ore carloads are up 10 percent, chemical carloads are up 3.1 percent and coal carloads are up 3 percent vs. totals from the same 2007 period.
Grain traffic is faring even better, up 15.9 percent, and likely will continue to flourish because of a healthy fall harvest. The U.S. Department of Agriculture projects farmers will produce the second-largest corn crop and fourth-largest soybean crop in the nation’s history.
However, the good times aren’t necessarily rolling in the grain transportation industry. Rail-car supply isn’t keeping up with demand. Shippers are piling wheat, corn and other grains in towering mounds near elevators for up to a month while they await cars.
Car supply also is a concern to shippers of other commodities. In our survey, a metals shipper wrote: “The lack of rail cars on the railroad fleet has become a very serious issue this year. We have had many hundreds of tons of material that had to go by truck because the railroads were unable to supply equipment.”
In our October cover story, I’ll explore survey respondents’ car-shortage concerns and outline railroads’ potential solutions, as well as share poll results, comments and strategies on a couple of other key issues: service and rates. Suffice it to say that a majority of respondents gauge today’s rail service and rates in entirely different lights.
Posted by: 
Jeff Stagl | Date posted: 9/3/2008
Comments
Posted by Larry Kaufman on 9/4/2008 10:14:54 AM
Nice job and an interesting blog, Jeff. My only comment at this point (I'm sure someone else will find something to object to in it)is on the grain car supply. Grain always is piled on the ground in the upper Midwest every year at harvest time. No one in his/her right mind would acquire and hold all the cars -- remember, they are special purpose cars -- needed for the peak harvest period. That would be like building the church just for the Easter Sunday attendance. Also, there is nothing preventing grain shippers from acquiring and controlling their own cars, or from participating in the advance auction for cars conducted regularly by BNSF and UP. Most of the really big grain dealers do just that already. Others find it easier to complain and whine that the railroads are not providing them with the cars they need. You never hear them offering to pay a rate that would include the cost of capital equipment (cars) that would be parked for eight months or so out of every year. Let the games begin.
Posted by railroader on 9/4/2008 11:13:30 AM
I sincerely hope that potential solutions include the more efficient use of equipment by loaders and unloaders. It is not only the railroads that must come to the table with ways to improve service and car supply, but the shippers and consignees as well.
Posted by Peter Urban on 9/4/2008 3:29:41 PM
Jeff…nice article…a point of clarification. There is no shortage of grain cars, there are plenty to go around. The issue becomes who is going to lease them and at what price and for what term. The recent surge in crop prices and the profitability of the RRs has not found its way to the equipment owners/lessors.
Posted by Steve Martin on 9/5/2008 10:56:06 AM
grain is stored because there is a carry in the market right now, meaning the grain is worth more $ in Jan/Feb/March than it is in Oct/Nov/Dec....
Posted by Phil Hogman on 9/5/2008 12:38:39 PM
I would also add that the dynamics of the grain industry have changed as well. We see fewer grain shipments for export on the West Coast due to ethanol plants either online or under construction in the mid-west. There may be more than 100 plants being built in Illinois, Iowa and Nebraska. The only constant seems to be change. Will we change effectivly, or irresponsibly?
Posted by David Smith on 9/5/2008 6:57:14 PM
I agree it should be the shippers' responsibility to aquire or lease sufficient railcar capacity to meet their needs. I assume the railroads provide a rate discount if the shippers use their own equipment. However, the greater problem regarding the perceived lack of railcar supply comes in the form of an inefficent cycle time circuit. Railroads seem to ignore the multimodal possibilities of rail-to-barge transload at the nearest offload facility within the commodity flow lanes. I know that railcar cycle times from the Midwest to the Pacific Northwest could be significanty reduced if UP, CP, and BNSF were willing to offload at the first available Columbia/Snake river barge port. The same is probably true on the Missouri/Mississippi waterway.
Posted by Larry Kaufman on 9/8/2008 10:33:07 AM
Never let it be said that Dave Smith allowed his lack of knowledge of a subject to impede his willingness to comment on it. Yes, Mr. Smith, shippers who provide their own cars receive an allowance for the use of those cars. The allowance may or may not cover the full capital cost of owning, leasing and maintaining a private fleet, which is one reason not all shippers choose to do so. As for improving cycle times, you've obviously been living in a cave for a long time. Cycle times have improved greatly as UP and BNSF have migrated to shuttle trains for most of the export grain traffic they handle. These unit trains of up to 130 cars and locomotives operate from mainline terminals to export terminals and are broken up only for maintenance to the equipment. Use of shuttle trains has cut cycle times significantly, and after initial complaints that they were "unfair" to country elevators that couldn't load as much grain as a shuttle train required, they have become widely accepted. The western railroads do stop at river points, Mr. Smith. It's the shipper/beneficial owner of the grain who determines the routing. Funny thing, though, if the rail rate from origin to destination is lower than the combined rate of rail/barge from O-D, the shippers invariably opt for the all-rail routing. Perhaps in the future, you will confine your remarks to facts and those few things you understand about railroads and transportation, shunning the knee-jerk anti-rail posts for which you are known.
Posted by David Smith on 9/8/2008 9:13:34 PM
Apparently Larry is not aware of the rate differentiation employed by the railroads that discourages most rail to barge transloading opportunities, e.g. the combined rail/barge rate ends up being more than the rail only option. Of course, then he'd have to admit that the railroads engage in monopolistic practices. Thus we get a triple dose of inefficiencies - longer rail car cycle times, more rail congestion through traditional choke points (Columbia River gorge et al), and an underutilization of our waterway systems. As for the "question" of whether shipper owned cars receive a rate discount, that was of course tongue in cheek, since there are more odious issues that arise with shipper owned equipment, issues that effectively erase the benefits of said discounts. There's nothing quite like the frustration shippers feel when their cars are stuck in some other part of the country for weeks on end while their inventory exceeds storage capacity! The obvious solution is for the STB to set a per mile rate standard so that shippers with their own equipment can dictate what modal combinations best fit their needs. Either that, or go with the nuke option and enforce some serious intramodal competition.
Posted by Larry Kaufman on 9/9/2008 10:32:37 AM
Dave Smith continues to bleat about subjects on which he knows little more than the propaganda provided by the Reason Foundation, Cato Institute and Heritage Foundation. While he is busy representing the specious arguments of his tax-avoiding electric co-op employers, I've been dealing with rail issues and grain rates a lot longer than he. If a rail rate is lower than the rail/barge combination rate then that is the lowest (don't forget trucks, Davey. They also compete in the grain market) available rate. Nothing monopolistic about it at all. I don't see GM allowing Ford to use its capital investment to build Ford cars in GM plants just because it might be more convenient for Ford -- and more desirable for those who live by dogma rather than by reality. Grain is not an exempt commodity. Grain shippers can and have protested rail rates before the STB. They've even won a few cases. Perhaps it's time for Mr. Smith either to put a sock in his virulent anti-rail mantra or that he go back and study something so he can participate at this blogsite with some facts and intelligence rather than the dogma he spews here regularly.
