Checkoff study examines soy rail rates

Posted January 11, 2010

The U.S. railroad industry represents one of the most important methods of transportation for the soy industry, but lately it has presented some challenges to U.S. soybean farmers. Recently, the Soy Transportation Coalition (STC), with funding from the soybean checkoff, published "Railroad Movement of Soybeans and Soy Products," a comprehensive report that sheds light on the crucial role railroads play in the entire journey from farm to dinner plate.

The volume of soybeans, soybean meal and soybean oil moved by the rail industry; the leading destinations for those products; and the revenue and rates associated with those movements were topics investigated by the study. In particular, the analysis focuses on the volume of soybeans and soy products that are transported at potentially excessive rates, those states whose soybean industry is most dependent on rail and those railroads that transport the highest volumes of soybeans and soy products.

"The soy producer pays the freight in and out," says Roy Bardole, vice chair of the United Soybean Board International Marketing and Global Opportunities programs and a soybean farmer from Rippey, Iowa. "We understand that, and that's OK, as long as we aren't being singled out and have to pay more than our fair share. The study looked at who pays, how much do we pay, is what we pay fair and is it what everyone else is paying?"

The study found that 43 percent of rail movements of soybeans, or 9.2 million tons are transported at rates the U.S. Surface Transportation Board would classify as potentially excessive, resulting in a potential overcharge of $120 million in 2007.

"If you take $120 million in excessive charges and refund some of that to farmers you could make a difference to rural communities," says Bardole. "We're concerned about that and talking with Class I rails, trying to reduce what we're paying and make it a little more fair."

The report also shows that revenue among the largest Class I railroads from transporting soybeans and soy products has nearly tripled in 10 years, from $549 million in 1998 to more than $1.5 billion in 2008. BNSF Railway transports the largest volume of soybeans at 8.8 million tons in 2008. Union Pacific Railroad is the largest originator of soybean meal and soybean oil.

"The current and future vitality of agriculture is dependent upon a healthy, profitable rail industry," says Mike Steenhoek, executive director of the STC. "There needs to be a way for railroads and the soybean industry to achieve a better balance so that one is not profiting at the expense of the other."

The STC study can be found at www.soytransportation.org.

USB is made up of 68 farmer-directors who oversee the investments of the soybean checkoff on behalf of all U.S. soybean farmers. Checkoff funds are invested in the areas of animal utilization, human utilization, industrial utilization, industry relations, market access and supply. As stipulated in the Soybean Promotion, Research and Consumer Information Act, USDA's Agricultural Marketing Service has oversight responsibilities for USB and the soybean checkoff.

SOURCE: USB