Wednesday, February 11, 2009

U.S. may give farmers a say in grain freight rates

The cost of shipping grain by train has remained high, in large part because railroads are protected from antitrust regulations. Congressional Democrats are working to rewrite those laws, giving farmers a say in how much they pay to ship their products.

Over the past two years shipping rates have not been as much a concern because grain profits were high, making shipping rates a smaller proportion of the farmer's share. But as grain prices begin to fall off the issue is reemerging.

Farmers have been removed from the negotiation of shipping contracts because grain "elevators buy the wheat and barley, and then pay the railroad to ship it out," reports Tom Lutey of the Billings Gazette. "Because it's the elevator's name on the shipping contract, the farmer in the eyes of the law wasn't considered part of the deal, even though the shipping cost actually came out the farmer's grain payment."

Depending on the price of grain, the pass-through cost of shipping could cost farmers up to half their payments from an elevator. Other industries have complained about the costs of shipping by train. "Buyers of Montana and Wyoming coal are big critics of shipping costs," writes Lutey, noting that a Wisconsin utility "pays $75 million a year to ship $30 million worth of coal from Wyoming's Powder River Basin. ... Customers pay that shipping cost through higher utility bills." (Read more)

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