OPINION:
As we celebrate Thanksgiving, it’s a great time to remember the farmers who put food on our tables and nourish our economy.
More than ever, our nation’s farmers must work as efficiently and cost-effectively as possible to compete in a global marketplace. They are particularly reliant on our nation’s railroads to get the materials they need to grow their crops and then transport these crops to market.
Unfortunately, our nation’s freight rail network is failing to deliver.
Rail customers, including agricultural retailers and their farmer customers across the country, are being hit hard by rising rail costs and chronic service issues. This is especially troubling because tariffs and trade wars are already taking a significant toll on the entire agriculture distribution supply chain.
It hasn’t always been this way. In 1980, Congress passed the landmark reform legislation called the Staggers Rail Act, which stripped away much of the railroad industry’s outdated regulatory structure.
The new policies ushered in by the Staggers act helped to revive a struggling industry and drive down high rail rates that were being paid by farmers, along with the higher food costs being paid by consumers at the supermarket.
But this is no longer the case today. Almost four decades after Staggers helped fuel a rebirth of the nation’s railroads, the positive trends of lower rates and reliable service for rail customers have long since reversed. In its place is a system defined by poor service, ballooning rates and endless charges. Nowhere is the failure of our current system felt more than in our nation’s $132 billion agriculture industry.
Part of the problem stems from the fact that the rail industry over the past three decades has consolidated from 26 Class I railroads to just seven today – with four of them controlling more than 90 percent of rail traffic nationwide. Those Big Four railroads are essentially regional monopolies. With more than 75 percent of rail stations served by a single major railroad, many customers are left with no competitive choice, forced to bear the burden of predatory pricing and practices.
The end result? Real rates for shippers have steadily risen by 30 percent, while the railroads’ profits grew by 186 percent. That’s according to a recent analysis of data collected by the Association of American Railroads. This is despite the fact that the railroads’ operating costs have only increased by just 3 percent in that time and the volume of carloads being shipped actually declining since 2006.
To make matters worse, the rail industry is going through yet another massive change thanks to the adoption of Precision Scheduled Railroading {PSR). While PSR is touted as a means of helping to streamline railroads, maximize efficiencies and improve service, rail customers are not seeing the benefits.
Agricultural retailers and their farmer customers are reporting arbitrary interruptions in service, freight that doesn’t arrive on time and exorbitant penalties levied by the railroads for infractions beyond the shipper’s control – in some cases, caused by the railroad companies themselves. A situation that can only happen in an environment where railroads don’t have to worry about repercussions or losing customers.
The Staggers act was drafted in part to prevent the current situation, with language calling for “competition and demand for services to establish reasonable rates” and “to prohibit predatory pricing and practices, to avoid undue concentrations of market power.” The act also created the Surface Transportation Board (STB), which is the sole agency charged with addressing freight rail problems.
Thankfully, it doesn’t require another act of Congress to resolve these issues. The STB could tackle many of these problems by adopting free-market reforms and streamlining some its overly bureaucratic procedures.
One option to create more competition among the railroads is through the use of “reciprocal switching,” which allows a shipper served by a single major railroad to request to have its freight switched to a second railroad at a nearby interchange for a reasonable cost.
Adopting this sensible reform will allow for more rail-to-rail competition for business, the STB would empower the free market and help give rail customers a choice in service providers.
Another option would be to streamline the STB’s overly bureaucratic method for handling rate disputes and replace it with competitive rate benchmarking. Under this approach, rail customers that lack access to competitive transportation options could compare their rates to “benchmarks” for competitive rail traffic.
The problems playing out every day on our nation’s freight rail system are hurting American producers and consumers alike. And just like three decades ago, these problems can only be resolved by changing outdated federal rules that are no longer equipped to deal with today’s realities.
The good news is that the STB has started to take steps toward addressing these growing problems and recently issued a very thorough report explaining how rates have increased and offering thoughtful solutions for the board to pursue. We support the STB’s efforts and encourage it to move forward without any further delay on regulatory reforms that will improve access to competitive and reliable freight rail service.
• Daren Coppock is president and chief executive officer of the Agricultural Retailers Association.
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