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Shipping Rates Up for Montana Wheat Farmers

by Staff
Capital Press, April 8, 2010

HELENA, Mont. -- Montana wheat farmers, who already pay more to get their grain to market than farmers just about anywhere else, will see another rate hike for their 2010 crops, an industry group said April 2.

BNSF Railway Co. is increasing its rates beginning Aug. 1 by 2 1/2 cents per bushel on its 110-car and 48-car trains, and by 4 1/2 cents per bushel for smaller trains, the Montana Grain Growers Association said in an e-mail to its members. BNSF is increasing its rates systemwide, the association said.

Lola Raska, head of the Montana Grain Growers Association, said mediation between her group and BNSF prevented higher rate increases for 48-car trains, which are important to Montana shippers. Talks with the railroad also led to an exemption for shipments headed to the markets the state is trying to develop in the eastern U.S., she said.

The grain growers association and the Montana Farm Bureau last year inked a first-of-its-kind agreement with BNSF that allows growers to challenge shipping rates. But that hasn't stopped the price from rising, and the state's top attorney said the deck is still stacked against the wheat farmers whose slim profit margins are cut further with each rate increase.

Montana's wheat and barley production makes up a third of the state's economy at $1 billion a year. Just about all of that wheat is shipped by rail to Portland, Ore., for export to Pacific Rim countries like Japan and Taiwan.

Ninety-five percent of the state's rail freight transportation is controlled by BNSF. Out of the five states that ship the most wheat by rail, Montana shippers pay the highest rates, according to a study of railroad rates and services published last year by the state attorney general's office.

In 2006, Montana shippers paid an average $32.74 per ton of grain to the railroad. North Dakota shippers paid $32.26 per ton, South Dakota shippers $31.58 per ton, Nebraska $27.27 per ton and Kansas $25.53 per ton.

Raska said rates since then have become more competitive with other states, which she attributes to a better relationship with the railroad.

Shipping rates vary across Montana, depending on location and the size of the train. April rates for wheat range from a low of 70 cents per bushel to a high of $1.40 per bushel, which is between $2,800 and $4,750 per rail car. Those charges are passed on to farmers by the grain elevators that purchase their wheat.

One case has gone through the new dispute resolution process to the growers' satisfaction that resulted in lower rates charged from a grain elevator near Shelby, said Lochiel Edwards, a wheat farmer and member of the grain growers' association.

But Montana Attorney General Steve Bullock said the agreement has not kept down rates. Further reform is needed, including removing antitrust exemptions that the railroads have operated under since the early 1980s, Bullock said.

He is leading an effort by a group of states asking the federal government to repeal those exemptions.

"The concept of having parties sit down and talk to each other is a great one. We'd like arbitration to work," he said. But "rates now in most areas are certainly higher than when the (agreement) was signed, and in some areas, it's the highest it's ever been."

BNSF spokesman Gus Melonas released a statement that said, "BNSF views this as an innovative and positive program that is part of BNSF's ongoing effort to strengthen the working relationship between Montana's grain growers and BNSF."

He declined further comment.

Farmers are wary of disrupting their relationship with BNSF, a relationship they said has improved over the last few years after decades being captive to their rate increases. The farmers now worry that the railroad will pass to them any cost increases brought on by the regulatory changes -- even when those changes are meant to protect them.

"Whenever you put government regulations on things, there's a cost," Edwards said. "Frankly, as a producer, I'm not going to take anybody's word for it."

Shipping Rates Up for Montana Wheat Farmers
Capital Press, April 8, 2010

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