By TIM ALEXANDER
Illinois Correspondent WASHINGTON, D.C. — A new USDA report, USDA Study of Rural Transportation Issues, sheds light on the railroads’ monopoly pricing practices affecting thousands of rural, “captive” rail customers.
The study, released April 27, includes dramatic findings about the cost to American farmers from the lack of competition in the freight rail industry and concludes there is “considerable evidence” that freight rail companies used excessive fuel surcharges to artificially boost profits, according to Consumers United for Rail Equity (CURE).
“The study was ordered by Congress as part of the Farm Bill of 2008, and it’s pretty damning of the railroads and how their pricing affects rural America,” said Bob Szabo, executive director and lead counsel for CURE. “Even though the report studies other modes of shipping as well as rail, probably 75 percent of the study is devoted to rail shipping rates. The railroads didn’t want this study done.”
The report concluded that a decrease in competition and increased market power allows the railroads to charge farmers expensive rates because they have no access to rail competition. The USDA has had long-standing concerns regarding railroad consolidation, which has boosted prices for agricultural shippers as the number of providers dwindled. The study found that between 1992-96, 29 crop-reporting districts lost competitive choices.
In addition, rail consolidation has resulted in an increase in market power of railroads over shippers and many rail consolidations have resulted in service disruptions that are costly to agricultural shippers. Consolidation can also be blamed for a decline in competitive routes and marketing options for some agricultural shippers, resulting in lower prices received by producers.
Finally, the study found “considerable evidence” that railroad fuel charges recovered more than the additional cost of fuel, which artificially boosted railroads’ profits. From 2001-07, surcharges were 55 percent higher than the incremental cost of fuel, according to the report.
CURE noted that Congress can provide debt-free economic stimulus and restore fairness to railroad pricing by removing the monopoly protections that railroads have been exploiting.
To read the study, visit http://ams.usda.gov/AMSv1.0/RuralTransportationStudy |
