Posts Tagged ‘grain by rail’

AAR Warns Tariffs Would Harm Railroads

April 17, 2018

The Association of American Railroads is warning that tariffs on foreign goods could adversely affect U.S. grain exports, which in turn would be bad for Class 1 railroads.

 “For the industry whose job is to connect businesses, the integration of the global supply chain changed the game not just for our customers but also for how we run a railroad,” AAR said in a statement in response to the Trump administration recently announcing billions of dollars worth of punitive tariffs on Chinese-made products.

The administration has described the tariffs as a way to address what it terms unfair trade practices by China.

The tariffs on Chinese goods have not yet gone into effect and the threat of a trade war has sent stock prices plunging in recent weeks.

AAR released an analysis that showed international trade directly accounts for 42 percent of rail carloads and intermodal units, 35 percent of annual rail revenue, and 50,000 rail jobs worth more than $5.5 billion in annual wages and benefits.

“With ongoing trade posturing, much of the discussion of potential impacts has been narrowly focused on targeted commodities or whether the states where those goods are grown or produced went red or blue in 2016,” the AAR said. “Even when looking at a single commodity, the potential effect in a global market goes much deeper.”

Speaking of grain exports, AAR said farmers are accustomed to dealing with uncertainty due to weather or fluctuating prices and demand,  but “[t]hrowing questions about what foreign markets will resemble come harvest makes already challenging planting decisions even more fraught.”

AAR said that its members are caught in the middle in trying to plan for asset allocation “when they don’t know if their services will be needed.”

The AAR said rail revenue from grain totals more than $5 billion annually.

Mexico is the second-largest importer of corn whereas China purchases 62 percent of soy exports and 22 percent of sorghum exports.

Most agricultural products exported to China begin their journey in a rail car.

CSX Will, First and Foremost, Protect Its Own Financial Interests in Line Sales or Leases

January 23, 2018

Many years ago when I was a college student intern at the Illinois Department of Transportation, one of my co-workers in the Bureau of Planning schooled me on what CSX is seeking to do today.

The Illinois Central Gulf Railroad was slimming down its route network much as CSX is doing today.

ICG was seeking to abandon a web of former Illinois Central Railroad branch lines in Illinois whose primary commodity handled was grain.

My fellow planner quoted officials of the ICG as saying “we’re going to get that grain one way or another.”

Even if the grain was taken away from those scores of small town grain elevators that dotted the Illinois prairie like rural skyscrapers by truck rather than in covered hopper rail cars, it had a long way to go to reach its final destination.

Those trucks leaving the elevators were not bound for a port on the Gulf of Mexico or the Mississippi or Ohio rivers.

The grain traveled by truck a relatively short distance to a regional grain facility such as the one operated by Cargil in Tuscola, Illinois, where unit trains were made up to move the grain onward toward its final destination, whether for export or domestic use.

ICG would continue to make good money hauling grain while getting rid of the expense of maintaining hundreds of miles of branch lines and paying union scales wages and benefits to the railroaders whose trains ran once a day or less on those branches.

The routes that CSX is seeking to lease or sell are not necessarily 25-mph or 10-mph branch lines in need of millions of dollars of rebuilding as was the case with many of the lines the ICG abandoned in the 1970s. Some of them, like the New Castle Sub, are significant mainlines handling much overhead traffic.

But they do cost a sizable amount of money to maintain and the CSX employees who operate the trains on those routes make Class 1 union scale wages and benefits. CSX would rather see that money wind up in the pockets of its shareholders or used for other purposes, such as buying back its stock.

Like the ICG in the 1970s, CSX will do all that it can to keep most of the business generated by its “surplus” routes while not having to pay to maintain or operate them.

CSX doesn’t do much business in Akron. What business there is could be handled by the Wheeling & Lake Erie, which already has a considerable presence in town.

But the Wheeling won’t be hauling most of that freight to its final destination. How that freight reaches its destination will come down to how those sale or lease contracts are written.

The ICG also spun off most of the former Gulf, Mobile & Ohio mainline between Chicago and St. Louis to an upstart known as the Chicago, Missouri & Western.

ICG was careful to keep for itself the more financially attractive elements of the route, including ownership and operation of the track between Chicago and Joliet, Illinois.

CM&W quickly found the traffic it received from the ICG was not what it thought it had been promised.

CM&W had overpaid for the ex-GM&O and couldn’t earn enough to pay its debts and get back its investment.

There are, of course, numerous success stories in which a short line or regional leased or purchased a route from a Class 1 and was able to make a go of it due to lower labor costs and more attentive customer relations policies.

Such was the case when the late Jerry Jacobson leased some track from CSX for his Ohio Central System.

It remains to be seen how much, if any, of the New Castle Sub that CSX will be willing to part with.

Aside from whatever business there is to be had in Akron, there is considerable auto rack business at Lordstown and some business in the Youngstown area.

CSX is not going to put itself in a position where it is likely to lose most of that business to Norfolk Southern for the long haul.

We’ve seen this game played before. Route rationalization has been the modus operandi of Class 1 railroads for years. That is how the modern W&LE got started. We’re about to see it play out again.

Larger Grain Harvest Seen in U.S. This year

September 2, 2016

A Detroit-based logistic company said it expects a larger than normal harvest this fall.

train image2Rail Freight Solutions said it has expanded its export container loading capabilities at its Detroit facilities to handle the grain traffic, which it expects to be 15 percent higher in the United States. A larger than normal harvests is also expected in Canada

RFS said it has the capability of loading 40 containers per shift inside of its 90,000-square-foot building.

The company said it is communicating with rail shippers and agricultural leaders on the new grain loading capabilities that provide transportation to and from Detroit’s intermodal facilities, including those operated by Canadian National, CSX and Norfolk Southern.