No Farm Benefit from Rail Mergers

March 14, 2000

The American Farm Bureau Federation says major rail mergers have reduced competition but so far have yielded no benefits for many agricultural shippers. The concentration may be extensive enough to have precluded meaningful shipping options for the agricultural community, says AFBF.

"We may have already allowed railroads to concentrate to such an extent that providing agricultural shippers with meaningfully competitive shipping options may no longer be possible," said Eric Aasmundstad, president, North Dakota Farm Bureau in testimony before the Surface Transportation Board.

Most agricultural shippers may no longer be able to obtain competitive shipping options, he added. "Future mergers will only make this worse. Too much rail consolidation is not a positive development. We are already past that point now, and new proposed mergers raise real concerns."

Often, said Aasmundstad, trains are not delivered to the loading point in a timely manner and then may not be picked up for days or weeks, causing missed connections with customers.

"Farmers and agricultural shippers must also absorb extremely high freight rates that railroad companies can demand due to their monopoly market power."

There were 42 class I railroads operating in the United States in 1980, and many agricultural areas were served by three or four railroads that could move grain and other bulk commodities to virtually any point to enter international markets.

Now, said Aasmundstad, "only two railroads carry the vast bulk of the traffic that moves west of the Mississippi River, and in my areas they do not compete with each other. It is likely any future merger will have international trade consequences, such as affecting the movement of grain, timber and other Canadian commodities into U.S. markets."

He added "meaningful competition" among rail providers would help alleviate the problem.