In early September the American Farm Bureau released a review indicating, “Increasing Freight Rail Rates Put Additional Pressure on Farm and Ranch Income”. From that release, the following are a few highlights:
- “Over the last five years, the cost of shipping grain on railways has increased. Rail rates on corn, soybeans, and wheat, including fuel surcharges, have gone up 13%, 11%, and 7%, respectively, since 2016. Similarly, rates to transport ethanol via rail have increased 18% or about $0.04/gallon.”
- “Considering rates individually, since 2016, both UP and CSX reported double-digit rate increases of 10% and 20%, respectively, amounting to an average of $1.23/bu and $1.62/bu. CN has remained fairly stable, hovering around $1.03/bu and BNSF has increased by approximately 5% to $1.41/bu.”
- “Considering the frequency of rail cars loaded, there is no obvious upward trend that would signify a clear increase in rail demand over the past five years”
- “Ohio experienced the highest rate increase (26%) by origin, with an average rate (including FSC) of $1.70/bu. Based on the destination, North Carolina had the highest increase (22%), with an average rate (including FSC) of $1.60/bu.”
- Conclusion: “In 2020, farm services, which include transportation and marketing expenses, accounted for over 12% of total farm-level production costs. Tightening margins due to increasing production costs across the spectrum put the solvency of farms and ranches at risk. Railways, a vital piece of the supply chain, are an efficient way to get agricultural goods to their final destination. Increasing tariff rates associated with railways put additional pressure on producers’ bottom lines, especially in locations with weak competitive forces, high product supply, constrained transportation infrastructure, and increased fuel prices.”
Many industries that ship by rail are not well-represented by a national trade group such as the Farm Bureau, leading to the importance of this detailed look at rail rates and their impact upon users. Hopefully, we will see more analysis like this in the future.