BNSF lists numerous Grain Train Shuttles on there scedules. I assume the BNSF wants to haul unit trains only. This was a problem in Canada were CN was cutting out service to small Silo operaters in Alberta. If someone wants two or 3 cars set out on there silo will BNSF serve them?. Right now there is 2 grain cars parked in Kennedy NY at Agway but they are served by a shortline.
BNSF does not want to serve small anythings. The discount for shippers using the shuttle services is about $300 in many locations, that makes it hard for the smaller elevators to be competitive. Depending upon where BNSF supports construction of a shuttle elevator it can decimate all smaller elevators in quite an area. All that investment by smaller companies, co-ops and farmers wiped out by a couple of large American conglomerates.
The expense of serving small elevators that generate only a handful of cars at a time only once or twice a week is proportionally higher than serving a larger elevator that generates 25+ cars at a time daily. Smaller elevators that are generating truck-size loads are probably better served by truck. BNSF is basically giving volume discounts similar to just about any business in any line of work.
Increasingly, it seems the railroads are developing a business strategy that consists of running solid trains of containers, trailers, grain, whatever from point to point.
This is far more efficient than traditional carload railroading. It makes sense. Serving small country grain elevators has always been inefficient. Equipment utilization is terrible and the cost of terminal handling (locals, endless switching into blocks, etc.) drives expenses through the roof.
Railroads have to compete for capital in a world maket. Obtaining financing for grain cars has to compete with obtaining financing for a shirt factory in China. The investment will go to the most productive use. There is absolutely no way any corporate or government action can realistically change this.
It’s not a question of the BNSF not “wanting” to do something. It doesn’t matter what they “want” to do. It’s a question of what they have to do to remain competitive for investment funding.
BNSF investors will get a better return on shuttle operations than they will on individual carload shipments. If BNSF would try to pay these investors less in order to serve the carload markets, the investors would go elsewhere. Would you rather see them invest in the US or China? If the government tries to force the BNSF to serve the inefficient small grain elevator market, they’ll drive the railroad into the ground. It won’t be able to attract investment and China will get a new shirt factory.
You can’t take pain out of the economy. Trying to do so will just make things worse over time. It’s a sad thing that some people will loose money on investments they made in inefficent grain terminal facilities. But making business investments is no guarantee of success. Profit is a reward for risk, and sometimes the risk goes against the investor. And there is absolutely no way to change that. None.
But is this legal? Under Common carrier obligations the railroad has to traet everyone the same. Its just that the farmers dont knwo this and cant afford to hire a law firm to figure this out. Effeciant? What about all those trucks going all over the place to pick up grain from the small elevaters
On a related side note, did anyone happen to notice the Supreme Court holding today saying that cities may condem property to attract private industry? Yet another blow against the little guy. This one is going to be bad.
Gabe
Gabe:
DIdnt see the Supreme Court ruling, but in my opinion, it is really a bad ruling. I had a customer in Des Plaines, Il which was not a glamorous company. They are a leasing company of trailers. In fact, they are HUGE. One day I stopped in and they said they were moving. It seems as if Des Plaines condemned their property to build a hotel.
Granted, this property was adjacent to I 90 and close to O’Hare and was no doubt valuable…but what gives them the right to do so? BTW…the trailer leasing company is no poor small company, it is owned by Warren Buffet’s Berkshire Hathaway.
Now, regarding the small elevator issue…Greyhound and Gabe, you will appreciate this one. Back in the day, I recall the IC line thru town would stop and switch boxcars of grain at the next town north (West Liberty, Il).
Imagine how far we have progressed…BOX CARS of grain!
ed
Gabe - I heard it on the news and just shook my head.
One bright spot - that muddy feathers can probably explain better - City of Lincoln vs a lumber company for what would have amounted to eminent domain.
City 0 lumber company - 1
Moo
Mookie:
That is really encouraging to see it doesn’t all go that way. But, my heart really goes out to all of those people who are going to lose their homes–not businesses–not for the direct public good, but another Mega store can move in. Some of the homes had been in the family for quite some time. I can’t imagine how hard it would be to lose your home in such a circumstance. I am geniunely sad for them.
MP-173:
I do like the boxcar bit. My father worked at a grain elevator in his youth and described how much he preferred actual grain cars to box cars, as sometimes they would actually have to shovel the grain inside the box car to create more room for the grain.
Thanks,
Gabe
Of course it’s legal. And farmers aren’t ignorant. And they have lawyers. And farmers are going through this same process. My father worked 160 acers in central Illinois. That was what one man could handle. Today, that would be a “hobby farm”. (disclaimer: I did not grow up on a farm, he was evicted the year I was born and I grew up in a small town.) The farms have gotten much larger, along with the equipment. The government can not pass a law that changes economics, just as they can not pass a law that water will run up hill.
As for the trucks, the economics of truckload transporation are very different from carload transportation. With trucks the unit of sale equals the unit of production. There is no need to aggregate sale units into production units. With carload there is an absolute need to aggregate the units of sale (carloads) into units of production (trainloads). There is also a need to break down trainloads of empties and distribute the cars for loading. As I said, this just destroys equipment utilization and drives up costs. These factors are not present in truckload.
So smaller facilities are more efficiently served by trucks.
And yes, I remember the C&IM spotting boxcars for grain loading at the elevators in Manito, IL. It’s where I received my first lesson in just how inefficient that sort of thing is. The agent was muttering to himself about the grain company not ordering any cars for six months, then wanting “everthing” right away.
I actaully saw this guy get on the phone with the dispatcher, get the OK, then flag down a southbound extra.
My brother put it very well last week, and I believe his quantities are about right. In the 1910’s a farmer could make a decent living for his family on 40 acres. In the 1970’s it took 400 acres to provide a decent living for a family. Now it takes 4000.
To put it another way (I may be slightly off with these figures, but you get the idea): In 1948, Yazoo County Mississippi had 48,000 people; in 1990, it had 21,000 people. Most farmers didn’t get tractors until just before or after World War II, so the vast decrease in the number of field hands and tenant farmers didn’t really hit until after WWII. You can see the effect in the population changes in Yazoo County.
Railroads still have a common carrier obligation. If I call the Buckingham Branch today and say I want to ship a car of grain from Crozet to East Budda, TX they and their conections must move the car. Although they can not refuse to provide service I must pay them the rate they want for their service. In addition they will expect me to supply the covered hopper.
RE: The recent Supreme Court Ruling - Don’t forget your railroad history. When the railroads were building West in the late 1800’s and early 1900’s, they were granted the right of Eminent Domain to allow the ROW across established private property.
This is nothing new.
RE: Unit vs carload shipments - Everything Greyhounds says is true, but in the larger picture it is possible to have a reverse macro effect. We’ve already hashed out the question of whether it is more “efficient” to move grain from a country elevator to a unit train terminal via truck or whether it would be more efficient to move that grain from country elevator to unit train terminal by shortline railroad. There are real world examples of shortlines being able to beat trucker’s shorthaul rates in this scenario (aka Watco’s opertations in the PNW). So in that vein the Class I’s will participate in carload grain movements vicariously via their shortline “partners” (or shortline “slaves” depending on your particular POV).
Depending on the infrastructure characteristics of a certain grain moving corridor, it is probable that shorthaul railroad companies could easily compete with truckers for carload quantities IF they could access the Class I property to get to those smaller elevators. This was one of the points made in the open access discussions, that smaller players would go after the business rejected by the Class I’s if they had access to the property.
Unit train dynamics are more efficient than carload dynamics, yet carload dynamics are (usually) more efficient than truckload dynamics. Thus, it is possible to have situations in which the combination of truckload hauls plus unit train hauls would be LESS efficient than carload hauls that come in 10’s, 5’s, or sometimes even single lots over the same corridors (from farm to port). So when Gabe bemoans the loss of individualized services, he’s not just being nostalgic.
I am born and raised in the central valley of CA, so I am curious as to the “stranded” grain elevators of the midwest. There are some fairly large farms still left in the greater sacramento area but it seems that they truck the grain to a siding where it is transferred to anywhere from 2-6 cars. There are still bigger elevators around I would say you wouldn’t have to go more than 60-80 mi to go from one to another from Redding almost all the way down to Los Angeles. Is this scenerio different from the midwest? I am just curious as to the scope. I am sure the distances between “train load” elevators is substantial. And out of curiosity what is the standard “train load”, 30-50 cars?
Thanks for the info.
I wish you were right; but you are not. This is a substantial departure from previous practice.
Yes, railroads have used the power of eminent domain for centuries in this country. However, there is a fundamental difference between railroads and the cases now allowed by our Supreme Court.
One, of course, may argue that there is no difference between the public interest served by Wal-Mart and the public purpose served by Union Pacific. Legally, at least, it is recognized that railroads serve a direct public benefit and would not be possible to run without the use of eminent domain. In any event, the restriction to things like reservoirs, railroads, highways, etc. substantially limited the power of eminent domain in the past. No more.
Now, the sanctity of the property is el finito. If Wal-Mart wants to move into a suburban neighborhood, all they have to do is say sell to us, or we will show the municipality that we have a larger tax base and will supply more votes. Trust me, your property rights have really been diminished because of this holding.
Gabe
Hi Alan, Montana shippers receive a $350 carload discount at 9 of the 10 shuttle elevators located in Montana, over single carload rates. That’s about $250 over multi-carload rates. At the same time, however, they pay an average $861 above the average BNSF system rate for identical shipping services elsewhere on the system, that is, same distance, export. If a shipper shipped by the carload, from Shelby to Portland, for instance, the cost of shipping would be 18.25% of the total price received at Portland for HRSpring wheat, based on 4/15 prices, or 16.34% of the total price received at shuttle rates. A relatively small difference, 1.91% of the gross profit.
In dollar terms, by shipping 110 carloads HR Spring through the enormous shuttle facility at Shelby (3.2 million bu. capacity, 162 car track capacity) the shipper saves $38,500 over single carload rates, or $27,500 over multiple carload rates on a shipment that will bring total revenue of $1.85 million in Portland. These “savings” are little more than 1% of the revenue received and are just not that significant in the overall scheme of things. Other factors are far more important to the shipper.
On the other hand, in order to take advantage of shuttle rates, shippers have to construct shuttle facilities. I checked with one of the big elevator contractors today, and they confirmed that typically a new shuttle facility costs between $8 and $10 per bushel.
So, for instance, to duplicate a typical Montana
Gabe, I’ll grant you that there is a fundamental difference between the public needs of a railroad/pipeline/transmission line et al and the public needs of a big box store or new multi family dwellings. However, in spirit (and from a legal perspective) a new private development is a new private development regardless of function or intent. In other words, I’m not sure the law sees a difference between local/regional juristiction that supports UP and local/regional juristicition that supports WalMart. The Supreme Court recognized that it would be discriminatory to allow Corporation A the right to eminent domain but not allow Corporation B the same right, regardless of what it is those corporations are involved. It is up to Congress to make the distinction between those corporations which absolutely need to access certain private property to function, and those which could effectively “shop around” for the right location.
Of course, I have argued in other topic lines that railroads are not the same as other private ventures, therefore it is ridiculous to allow railroads the same levels of “hands off” government approach, especially given the importance of preserving and expanding transportation infrastructure to meet the demands of an ever growing economy. If I remember correctly, even you Gabe presented the “McDonalds” analogy in defending the current railroad closed access status quo system. So therefore, if railroads are no different from McDonalds when it comes to what governments allow in terms of price or access regulation, then it can also be argued that McDonalds is no different from railroads in what governments allow when it comes to eminent domain.
For the record, I am all for allowing railroads the right of eminent domain, but with that right comes the necessary oversight of regulation to assure optimal citizen access to that ROW that utilized the right of eminent domain. Otherwise, we are just granting fiefdoms to discriminatory entities.
The grain trains I see are probably about 75 to 100 cars. All of the grain elevators around here are receivers. Do they load any grains besides rice up there?
No offense to Gabe but,
“Lawyers are like nuclear weapons, I got 'em because the other side’s got 'em; but once you use 'em, they screw everything up.”
By Danny DiVito in “Other People’s Money” - a really great (or “Greyt” as we fast dog folks say) movie.