Since our nation’s founding, agriculture has been the backbone of our society and economy. Agriculture contributes approximately one trillion dollars to our gross domestic product, more than one dollar of every 19 in our nation’s economy.
But today, America’s farmers and ranchers and the retailers who support them face significant challenges, from global trade disputes to threatened retaliatory tariffs. With our future at stake, the Agricultural Retailers Association urges Washington to support policies and reforms that support American agriculture and the communities that depend on it.
Freight rail reform is one of those big opportunities.
Farmers need cost-effective and reliable transportation of the supplies they need to plant their crops. They also need to get their goods to market to ensure that the U.S. continues its important role of feeding the world through as much as $150 billion in annual agricultural exports.
Unfortunately, the domestic freight rail system is leveraging outdated regulations to increase rail rates. This is working as an impediment, rather than a benefit, to farm production.
Excessive rail rates make American farmers and suppliers less competitive in world markets, resulting in higher consumer prices for millions of American families. From 2005 to 2013, the rail rate premium paid by farmers increased 127 percent, while the amount they shipped declined by 16 percent.
If excessive rail rates were not bad enough, the U.S. rail network has recently been challenged by chronic service problems that could ultimately drive up consumer food prices. These service challenges, including slower train speeds and longer terminal dwell times, are delaying fertilizer shipments that farmers need and creating logistical bottlenecks nationwide.
These issues have at their core the federal government’s 30-year-old regulatory policies that led to a dramatic consolidation of the freight rail system. These outdated regulations created a virtual monopoly on shipping, allowing railroads to provide faulty service and charge whatever they want because shippers simply have no other option.
Competition is essential to the vitality of our markets, whether those markets are for grain, farm inputs, or rail transportation. But regulatory protections shield railroads from competition, reflected in expensive rail rates and deteriorating service quality. It’s time for common-sense freight rail reforms to provide regulatory relief and increase free-market competition.
The U.S. Surface Transportation Board has the power to modernize regulations and remove barriers to free-market competition. Unfortunately, that five-member board is currently operating with two seats vacant, severely limiting its capacity to get this job done.
In order to get the STB back on track, America’s retailers and their farm customers need the U.S. Senate Commerce Committee to move swiftly to confirm President Trump’s nominees. We are on record supporting Patrick Fuchs and Michelle Schultz for these vacant posts.
Once that happens, the STB can move forward to adopt long-overdue reforms, such as a competitive switching policy that would allow shippers to move their freight to another line if one is reasonably accessible. This would unlock market-based competition, reducing shipping distances and rates for farmers and shippers in other key industries like manufacturing and energy production. The U.S. Department of Agriculture is on record in support of competitive switching, saying it “offers a market-based solution to balance the needs of the railroads and shippers.”
In addition, a fully-staffed STB could fix its overly costly and bureaucratic rate review process. The current process uses a ridiculously complicated methodology that requires shippers to design an entire railroad business and prove that it could serve the same traffic at a lower cost than the rates charged by the existing railroad. Recent cases using this methodology have taken several years to resolve and cost each shipper well over $5 million.
Instead, the STB should implement competitive rate benchmarking, which uses existing rail rate data to develop predictive models for competitive conditions. This would provide simple benchmarks for determining if a railroad’s rates are unreasonably high.
Adopting these long-overdue reforms will provide retailers and their farm clients with greater access to competitive and reliable freight rail service, which will help rural communities across the country to thrive and improve our competitiveness in global markets.
Daren Coppock serves as president and chief executive officer of the Agricultural Retailers Association.
