Mega merger would create first coast-to-coast rail company in U.S.; farming and manufacturing sectors voice concerns

Union Pacific and Norfolk Southern railroads signed an 
agreement to merge. (Photo by Tyler Silvest, DTN CC)

Union Pacific has announced plans to merge with its smaller rival, Norfolk Southern. The $85 billion merger would create the nation's first transcontinental railroad while giving Union Pacific the power "to reshape the movement of goods from grains to autos across the country," report Sabrina Valle, Shivansh Tiwary and David French for Reuters. "If approved, the deal would be the largest ever buyout in the sector."

The mega deal, which would connect 50,000 miles of track across 43 states, "will face lengthy regulatory scrutiny amid union concerns over potential rate increases, service disruptions and job losses," Reuters reports. "The 1996 merger of Union Pacific and Southern Pacific had temporarily led to severe congestion and delays across the Southwest."

Particularly at harvest time, railroad changes, costs, delays and timing can directly impact farming incomes. The National Grain and Feed Association said in a news release "that it will undertake an extensive evaluation of the proposed merger to better understand its implications for our industry," reports Mary Kennedy for Progressive Farmer.

The American Chemistry Council weighed in and cautioned against further rail mergers. ACC leadership told Kennedy, "The impact of a transcontinental merger between two of these railroads threatens to leave American manufacturers, farmers and energy producers with even fewer competitive options to ship by rail. . . . Many rail customers are currently dealing with high rates and unreliable service. Further consolidation within the rail industry is likely to make these problems worse."

The proposed merger "reflects a shift in antitrust enforcement under U.S. President Donald Trump's administration," Reuters reports. "Executive orders aimed at removing barriers to consolidation have opened the door to mergers that were previously considered unlikely. . . .The Union Pacific merger would give the company a 43% market share, dominating most categories of commodities."