BNSF hits Montana, N.D. growers with two rate hikes in five months
Burlington Northern Santa Fe Railway raised the per-car rate for grain shippers in Montana and North Dakota on Aug. 1 and has announced a second rate hike in January. According to Montana Attorney General, Steve Bullock, these increases represent...
Burlington Northern Santa Fe Railway raised the per-car rate for grain shippers in Montana and North Dakota on Aug. 1 and has announced a second rate hike in January. According to Montana Attorney General, Steve Bullock, these increases represent more overcharges to the state's grain growers, who already pay the highest rail rates, on average, of the five largest wheat-shipping states.
"The total annual overcharge by BNSF of Montana shippers for wheat alone is between $19 and $50 million," according to the Montana Railroad Rates and Services report, commissioned by the attorney general's office.
The cost of grain shipment is deducted from the price elevators pay growers for their wheat, so the overcharges are making direct hits on producers' bottom lines.
Big sky freight
Montana's export grain is shipped by rail to seaports in the Pacific Northwest. The state's wheat shipments account for nearly half of all railroad-originated wheat shipments to those ports, with North Dakota at a distant second with 24 percent.
In Montana, BNSF controls about 95 percent of rail freight transportation, making Montana grain shippers among the most "captive" rail customers in the country. This has enabled BNSF, according to Bullock's report, to restructure how Montana wheat is moved to market by encouraging the use of "shuttle" trains, 100-plus-car trains that move back and forth between Montana shuttle-capable elevators and the shipping ports.
From BNSF's perspective, it is more efficient to move Montana and North Dakota grain in large trains from a smaller number of elevators than to move 26 cars or 48 cars (formerly 52 cars) from a larger number of elevators. But most elevators in Montana lack the space or equipment to load 100 cars at a time. In North Dakota, only 29 of about 175 elevators that ship through BNSF are shuttle-capable.
Their way or the highway
On Aug. 1, BNSF rates were raised $80 per C6 (134-ton) car, and $87 per C6X (143-ton) car, according to Terry Whiteside, a transportation and marketing consultant in Billings, Mont. Non-shuttle, or "less-than-shuttle" customers saw their rates hiked by $130 per car.
"Larger rate increases on these less-than-shuttle facilities will make them less competitive with the BNSF-preferred shuttle loaders in the state and put pressure on the economics of these less-than-shuttle facilities," he says.
This does encourage grain producers to truck their grains farther, at greater expense, to the shuttle-capable elevators.
"The most alarming aspect of the BNSF rate increases is the escalation of the differentials between the less-than-shuttle and shuttle rates," Whiteside says. "The spread will be over $300 per car and may force less-than-shuttle facilities to financial hardship."
The January rate increases will be the same as in August, widening the rate gap between the shuttle and non-shuttle shippers, applying further economic pressure to on producers and shippers to ship their goods through a shuttle facility.
The attorney general report claims that, since the introduction of shuttle trains, many smaller elevators have gone out of business.
The two increases will represent a jump in the differential from $50 per car in 2006 to $370 per car in 2010 -- more than a 700 percent increase in four years.