While rail service has improved for agricultural and grain shippers in 2023 compared with last year, ongoing service issues warrant continued attention and regulatory action, rail shippers are telling the Surface Transportation Board.
For starters, U.S. Secretary of Agriculture Tom Vilsack recently urged STB to follow through with a number of actions to bolster rail service, including moving forward on proceedings regarding private rail car use and emergency service orders, including addressing railroads’ demurrage fees; continuing actions to address reciprocal switching, which shippers perceive as a way to enhance competition; clarifying the definition of the common carrier obligation so that service terms can be made more precise; and requiring the collection of first- and last-mile service data, which shippers say can provide more granularity on how service varies among different geographic regions.
“The railroads should not be able to continue to operate without buffer for unexpected demand, make historic profits, and engage in enormous stock buybacks, all while providing subpar service to agricultural shippers and disregarding safety,” Vilsack said in his May 12 letter to STB. “STB can and should counteract these negative trends in rail transportation by increasing competition and improving oversight with enhanced data. The Board should also ensure the railroads balance their focus on shareholders with their duty to provide high-quality common carrier rail service to the Nation.”
Vilsack’s letter echoes sentiments by rail shippers of other commodities, such as those that ship chemicals and sand and gravel.
“While we have seen improvement in other modes of transportation in getting closer to pre-pandemic levels of service, we are challenged to get that same level of improvement on the rail side,” American Chemistry Council (ACC) President and CEO Chris Jahn said Wednesday on the FreightWaves TV program People Speaking Rail. Jahn was reiterating views that ACC expressed in an April report summarizing findings from a member survey on rail service in the second half of 2022.
Jahn had also last week called for continued action on reciprocal switching, which is when an incumbent carrier transports a shipper’s traffic to an interchange point where it switches the rail cars over to the competing carrier.
Meanwhile, in a May 3 letter to STB, Michael W. Johnson, National Stone, Sand & Gravel Association president and CEO, laid out some recommendations to improve rail service and service reporting at CSX (NASDAQ: CSX), BNSF (NYSE: BRK.B), Canadian Pacific Kansas City (NYSE: CP) and Union Pacific (NYSE: UNP).
Johnson’s letter was dated after STB called for CSX, UP, BNSF and Norfolk Southern (NYSE: NSC) to continue to submit biweekly rail service progress reports to the board through the end of the year as proof of improving rail service because they have not fully met their service targets.
Thoughts on rail service in 2023
While rail service in 2023 so far has improved over last year, rail service “remains inadequate and unreliable for many agricultural shippers,” Vilsack said, adding that taking action will help avoid inadequate network capacity from becoming an urgent, national issue.
Sarah Gonzalez, spokesperson for the National Grain and Feed Association, also said rail service has improved since last year, with “far fewer complaints from members lately compared to several months ago.” Most of the recent concerns have been from around the Pacific Northwest region, she said.
Meanwhile, the U.S. Department of Agriculture’s Agricultural Marketing Service noted in April that rail service metrics were mixed in the first quarter of 2023. Reduced carload volumes helped to improve service, but dwell times were still an issue, the agency said.
Since the start of the year through last Saturday, U.S. freight railroads originated 384,759 carloads of grain, a 6.9% decrease year over year, according to the Association of American Railroads. Carloads of food and farm products excluding grain totaled 312,811 carloads year to date, up 2.1% from a year ago.
For their part, the Class I railroads are confident that rail service will continue to improve throughout the year as hiring initiatives help provide the crews needed to meet network capacity needs — a point expressed during recent first-quarter 2023 earnings calls.
“We are getting really, really positive feedback from our customers, and that’s translating into strong merchandise growth,” said Kevin Boone, CSX executive vice president for sales in marketing, at an investor conference Thursday. Commodities in CSX’s merchandise segment includes chemicals, agricultural and food products, and minerals.
While CSX is seeking some weakness in intermodal and chemicals, the aggregates market is strong, Boone said.
“My hope is as we get through destocking events, you’ll see more stabilization in some of the markets that have been weakest for us,” Boone said.
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