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Hearing on Alleged Rate Disparity in Rail Charges

posted on November 3, 2006

Hello, I'm Mark Pearson. Just hours before the midterm elections, the government on Friday released its latest snapshot of the U.S. job market. **According to the Labor Department, the nation's unemployment rate fell to a five-year low of 4.4 percent in October, marking its third consecutive monthly decline. **The average American workweek, a critical component of personal income, inched up slightly to just under 34 hours per week. **And the government reports hourly wages rose nearly half-a-percent in October to $16.91 per hour. **The labor numbers pushed stocks higher briefly on Friday, but by day's end, the Dow and the broader indices all trended lower. **Since job availability, wage growth and other economic conditions are likely to influence voters on Tuesday, both parties were quick to respond to the data. **Republicans say the numbers prove the Bush administration's policies are working, while democrats claim middle and low-income workers are watching the economic recovery from the sidelines. The issue hits close to home for those who live and work in the heartland, since rural economic growth typically lags behind that of urban America. This week though, rural interests were in Washington airing their concerns about the rising costs of moving a sizable harvest to market.
Hearing on Alleged Rate Disparity in Rail Charges Farm commodity groups and major corporations in the grain transportation business ... railed on the railroads late this week over the cost of transportation.

Several groups appeared before the Surface Transportation Board – a regulatory agency Congress charged with, among other things, resolving railroad rate and service disputes. Much of the testimony was in reaction to a 95-page General Accounting Office report released in October that stated while rail rates have declined overall; the price reductions were not equal for all commodities. "For example," the report said, "from 1985 through 2004, coal rates declined 35 percent while grain rates increased 9 percent."

Darrell Wallace, VP Transportation, Bunge North America: "We've had instances where the prices that the railroad had given us to move freight has actually taken us out of markets we had. We got one or two plants we're probably going to close down because its cost ineffective to ship product to those markets."

Dale Schuler, National Association of Wheat Growers: "The cost of transporting wheat at times has represented as much as one-third of the overall price a producer receives for his grain."

As for solutions, the National Grain and Feed Association is urging the Surface Transportation Board to include monitoring and publicly reporting the extent to which rail carriers are investing in new infrastructure to address service and capacity constraints.

That suggestion may help address another item in the GAO report that, quote, "raises the question whether rail rates in selected markets reflect justified and reasonable pricing practices, or an abuse of market power by the railroads."

Representatives from four railroads also appeared before the committee. The representative for the Union Pacific railroad said the GAO used old data in concluding that the cost to grain shippers went up – when the cost had actually decreased. He added if his price is not competitive, he risks losing business.

Douglas Martin, Union Pacific Railroad: "If we fail to offer rates that are market competitve, the farm truck will simply passby the elevators we serve and seek the best price in the market less the cost of delivery."

In a question and answer session following the testimony, one railroad representative said it is sometimes difficult if not economically cost-prohibitive to provide a shipper with a specific request for service.

Kevin Kaufman, BNSF Railway: "And it is so market volatile that its constantly changing picture. and I think its a credit to our industry that we've been able to get it, mostly pretty good."

After a full day of testimony, the Surface Transportation Board said it will keep the record open until January 12.

Tags: news trains transportation