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Farmers Suffer From Rail Monopolization, But Solution Could be Near

Farm producers in North Dakota only have one choice of rail service. (Michael Matalis/U.S. Department of Agriculture)
Farm producers in North Dakota only have one choice of rail service. (Michael Matalis/U.S. Department of Agriculture)
December 6, 2017

BISMARCK, N.D. – North Dakota farmers are concerned about the dwindling number – and increased monopolization – of railroad companies.

Terry Whiteside, an attorney who mainly represents grain producers in the West, says the problem for farmers is twofold.

First, the cost for transportation typically is taken out of the commodity price for producers, meaning it also is taken out of their bottom line.

Whiteside says this makes transportation a largely hidden cost for farmers.

"So what happens is, the farm producer bears the freight because it's taken out of their price, but they don't physically pay the railroads for the freight,” he explains. “And unlike every other industry, the farm producer can't pass those freight charges on to anyone else."

Secondly, Whiteside says market concentration in the rail industry compounds the problem.

Since 1980, 26 major rail carriers have disappeared, leaving four main carriers that generate 94 percent of the revenue.

Whiteside says in places where competition doesn't exist, the shipping rate goes up considerably.

North Dakota is an example of that. Across the state, producers only have one rail service to choose from.

Whiteside says railroad companies faced a major crisis in the 1980s, and many went bankrupt. In response, they called for fewer regulations. Since then, he maintains rail companies have held contradicting opinions on government's role.

Whiteside has heard railroads argue in Washington that government intervention is necessary to ensure they have adequate revenue.

"In other words, to keep their earnings up, they want government intervention, but at the same time, in the same proceeding, they'll argue that no government intervention is necessary to limit in any way their monopoly power," he states.

A major development is on the horizon. In 2015, Congress passed the Surface Transportation Board (STB) Reauthorization Act.

Whiteside says the bill will change the agency so that its main mission is to maintain competition.

The STB currently is in rule making proceedings and farmers' unions across the country are watching the process closely.

"They'll have investigative powers, they'll improve structure within the STB and, most importantly, their focus will be on trying to establish competition where competition doesn't exist today," he states.

Eric Tegethoff, Public News Service - ND