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Small Shippers Struggle for Railcars by Patricia R. McCoy, Idaho Staff Writer Capital Press, November 11, 2005

Complaints about railcar availability are almost an annual event in Idaho anymore, especially during harvest season when perishable agricultural products must get to market.

Union Pacific Railroad is the only rail service provider in Southern Idaho. Being captive shippers is a problem, many customers contend.

Small shippers -- those who need 25 cars or less a month -- must pay a royalty just to order a car. Adding insult to injury, the one or two cars that a small shipper may need each month may not arrive when promised, let alone when it's needed, or at all, said Bill Meadows, an American Falls farmer for 33 years and elevator operator for the last 29 years.

Meadows owns Mountain States Oilseeds, American Falls. He contracts with growers to produce safflower, mustard and canola, and ships to market by rail, filling one or two cars a month.

"The railroad bids cars to be shipped at certain dates through the year, but I'm never exactly sure when I'll need a car. If there are harvest delays, I may not have enough product to ship. I know approximately when I'll need a car 30 days ahead of time, but the railroad won't let me order that way," he said.

Meadows must call a railcar broker, in his case in Minnesota. The broker takes orders from people who need railcars, or who have bought too many and wish to sell some.

Pays Royalty

"I pay a royalty to that service, anywhere from $675 to $1,000 just for the privilege of ordering a car. I must indicate if I want delivery in the first or second half of the month, then ask for an exact date," he said.

"Cars never come on time. They're always late."

Meadows has 24 hours to load a car once one arrives, or pay demurrage fees for failure to meet that deadline.

"I contract my purchases and sales a year ahead of time, buying and selling at specified prices. I have to guess what freight rates and transportation costs will be, and charge growers accordingly. This year, it's costing my farmers 32 cents a bushel, but by the time I pay $1,000 just to order a car, I'm in the hole. Soaring diesel costs don't help," he said. "I have no choice but to absorb the extra cost. For a small shipper like me, it's devastating."

The problem started in the Reagan administration when the railroads were deregulated. It shows no sign of getting any better, he said.

"Every once in awhile Union Pacific sends me a customer satisfaction form to fill out. When I answer honestly, I get a telephone call and am chewed out for not giving them a good recommendation. If they were genuinely interested in helping the situation, they should listen to their customers," Meadows said.

"They don't want the small shippers any more. They're only interested in the big industries that ship 100 cars at a time," he said.

U.S. farmers still raise about the same commodities they did years ago, though modern technology and efficiencies let them raise more per acre, he said. The only change is railroad inefficiency.

"U.S. trackage is insufficient for the traffic, but nothing is being done about it. American agriculture used to be the epitome of the world. We've lost much of that. We're having a hard time competing against many other countries. A lot of the problem stems back to transportation," he said.

Meadows ships some product by truck, but for him it takes four trucks to replace one railcar.

Legitimate Complaint

Mark Davis, UP spokesman, concedes Meadows and other small shippers have a legitimate complaint, but says the railroad has been working hard with small shippers. UP tries to help them pool their shipments, working together to become a unit train point.

"We've been fortunate this year, compared to 2004. Our entire fleet of 22,500 cars is in service. Capacity is tight, and we aren't able to operate as fluidly as we'd like," Davis said. "In general, we're meeting market demands, but unit trains tend to get priority."

UP works one-on-one with small shippers to explain why they face delays their larger shipper neighbors don't, he said.

"A lot of the problem is the capacity of the railroad itself. We're seeing record volumes of all commodities moving by rail. We make every effort to get the best velocity for all our shipments. On the agricultural side, that includes both small and unit train shippers," Davis said.

Small shipment cars are handled under UP's manifest service, placed in a train that hauls all kinds of freight, he said. A single car leaving Nampa, Idaho, and headed for Laredo, Texas, for export into Mexico, for instance, may go to Pocatello, Idaho, where it may be separated according to its destination. It may next head for North Platte, Neb., and spend another day and a half or so there before being switched to a train headed for Fort Worth, Texas.

Fort Worth tends to be a gathering point for a lot of agricultural shipments destined for export markets, Davis said. By the time the single car originating in Nampa is headed for Laredo and Mexico, it will have been on the rails three days longer than a 100-car unit train made up of cars all headed for one destination, he said.

"We are currently experiencing 10- to 14-day delays for the smaller numbers. Part of the problem is Hurricane Rita. Katrina didn't affect us much, but we have a lot of traffic out of Beaumont, Galveston and Port Arthur, Texas, and Lake Charles, La. Since Rita, shipments going through there are experiencing some pretty good delays," Davis said.

Two weeks ago floods in Topeka, Kan., knocked UP's track out for a day and a half. That also caused delays, he said.

"When small shippers start looking for creative ways to move their shipments, there are times when they'll pay a premium. They have a legitimate gripe, but we're actively trying to help all our agricultural customers move commodities as rapidly as possible," the spokesman said.