The Cost To Ship Wheat Is Going Up


MFBF Vice President Bruce WrightTo hear what Bruce Wright had to say in his interview with the Northern Ag Network, click here.

The BNSF Railway announced a rate increase for the shipping of 2010 wheat crop. The Montana Grain Growers (MGGA) and Montana Farm Bureau Federation (MFBF) are disappointed but realistic about the implications of the increase. The new rates will be implemented system-wide, taking effect in the southern wheat states June 1 and in Montana and the Northern Plains August 1. Increased labor and input costs were cited by BNSF Railway as factors in their decision.

MGGA and MFBF are in ongoing mediation with the railway and are studying the rate changes. The producer groups have been successful over the past five years working with BNSF Railway to ensure the freight costs paid by Montana producers are competitive with rate structures in other states.  Montana’s tariff rates have remained relatively constant over that time, while fuel surcharges, indexed to monthly nationwide diesel prices, have been responsible for any volatility. 

“We are never happy with a rate increase, but it could have been worse. As costs have escalated on the railroad, we expected there would be an effort to take a general rate hike at some point,” noted  MFBF and MGGA representative for Alternative Dispute Resolution (ADR), Lochiel Edwards “We will still continue to study the effects of this, but we understand that any increase at this time is difficult for our producers.”

Beginning August 1, rail freight for a bushel of wheat will increase by two and a half cents for shipment in 110-car Shuttle trains and in Destination Efficiency Trains (DET).  For wheat in smaller shipments of 1 to 24 cars, the increase will be four and a half cents per bushel.  Montana also ships a third category of loading designation billed as a 48-car train. These typically serve domestic mill markets, and are of economic importance to Montana wheat producers.  In consultation with MGGA and MFBF representatives, BNSF has agreed to classify these 48-car shipments with the larger trains and apply the lower two and a half cent increase.

Further mediation of the issue has also exempted Montana shuttles to Eastern markets from any increases. 

“This is part of a joint effort by BNSF Railway, MGGA, and MFBF to develop markets to domestic mills for Montana’s high-quality wheat.  A hybrid of the shuttle train and the 48-car train, DET’s are another success of ongoing collaboration between the producer groups and the railway,” noted MFBF Vice President Bruce Wright.

The trains are loaded at a single origin elevator, but can be split to separate destinations to fill individual needs for domestic millers or exporters.  With reduced freight rate and additional delivery flexibility, Montana DET car loadings have doubled every year since 2008. 

“We are pleased that our efforts with the dispute resolution process has resulted in a lower rate increase than might have otherwise been the case,” Wright concluded.

Source: MFBF and MGGA

Posted by Kaci Switzer

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