Big Sandy farmers worry about rail service

Some Big Sandy-area farmers are worried their local grain elevator may lose rail service.

Farmer Thad Willis said he has heard rumors that Burlington Northern Santa Fe Railway is planning to no longer send trains to the Archer Daniels Midland-Cenex Harvest States elevator in Big Sandy.

"It's huge. It doesn't just affect us," he said.

Another Big Sandy farmer, Montana Grain Growers Association president Lochiel Edwards, said the railroad seems to be pushing for all grain to be loaded at high-speed shuttle loader facilities like the ones installed in the last few years in Harlem, Havre and Rudyard. They are designed to rapidly load 110-car grain trains.

"What we've got here is a situation where BN figures they're going to haul the grain anyway, and they're going to the shuttle loaders," he said. "The Big Sandy elevator is in jeopardy."

BNSF spokesman Gus Melonas said the railroad has not made any decision about the status of the Big Sandy line. The railroad has not filed to abandon the line, he said.

The railroad doesn't comment on possible future actions, he added.

"BNSF provides local service on an as-needed basis in Big Sandy," Melonas said. "The future is driven by requests for service."

Randy Olstad, general manager of the Big Sandy elevator and two ADM-CHS elevators in Havre, said the Big Sandy elevator hasn't requested rail service since October because it's cheaper for ADM-CHS to ship the grain by truck to Havre.

Melonas said BNSF doesn't discuss rates for specific customers, but that the railroad offers a variety of rates for a variety of grain services. The rates for service to Big Sandy are the same as rates for the same size train in Havre, he said.

He said BNSF does offer incentive rates for 110-car trains at all 10 high-speed shuttle loading elevators in Montana, and in other states.

"The incentive is to use shuttle facilities," he said.

BNSF's published rates for shipping grain from Havre or Big Sandy to the West Coast lists a cost of $3,136 a car for 110- to 120-car trains, or 93 cents a bushel. The cost for 52- to 109-car trains is $3,291 a car or 98 cents a bushel.

Big Sandy typically uses 52-car trains.

Olstad said BNSF offered the elevators incentives to use the high-speed shuttles in Montana in addition to its published rates. The rates ended up being about 12 cents a bushel lower than a 52-car train rate, and he can have the grain trucked to Havre at about 11 cents a bushel, he said.

Having the grain in Havre gives the elevator other advantages, such as more control over the mix and quality of the grain in each shipment, he added.

Jim Christianson, executive vice president of the Montana Wheat and Barley Committee, said it's unusual that shipping by truck would cost less than shipping by rail.

"Steel on steel has always been cheaper than rubber on asphalt," he said. "It appears as though they (BNSF) are doing everything they can to reduce traffic on the line, which would give them ammunition to post an abandonment."

The Wheat and Barley Committee is a research organization funded through an assessment on wheat and barley sales. Its board is composed of Montana wheat and barley producers appointed by the governor. The director of the state Department of Agriculture, the dean of Montana-State University's University's College of Agriculture and a representative of the Montana grain industry are nonvoting members.

Terry Whiteside, transportation consultant for the Wheat and Barley Committee, said railroads typically charge rates on branch lines like the Big Sandy line to make sure trucks can't beat their rates.

"If that has suddenly changed, the question is why," he said.

Christianson said even if the Big Sandy elevator stayed open and shipped the grain by truck to a high-speed elevator, the chance of the elevator staying open for long is slim. Most elevators in Montana that have shipped to other elevators have failed, he said.

Farmers start to ship the grain farther to rail service themselves unless significant savings are passed on to them by the elevator, he said.

On top of the cost to ship the grain to the elevator, the farmer ultimately pays whatever it costs to ship the grain to market, Christianson said, adding that most Montana grain is exported and ends up being sold on the West Coast.

The price the elevator pays the farmer is based on the price at the market minus the cost of the transportation. But it is the elevator that actually pays the railroad, he said.

"The producer ends up paying for freight but never writes the check to the railroad," he said. "The railroad doesn't have to deal with the farmer; it deals with the elevator."

Big Sandy farmer Dan Kidd, a director of the Wheat and Barley Committee, said losing the Big Sandy line would be symptomatic of the decrease of the number of places from which to ship grain out of Montana. That decrease is a problem for farmers, he said.

"Any time you lose competition, it ultimately is not beneficial to the producer," he said. "It's not a healthy trend. It's a very unhealthy trend."

Christianson said the competition by elevators has dropped significantly since he started working for the committee about 26 years ago.

At that time, Montana had more than 400 elevators in operation. Now there are 10 elevators in the state capable of moving 70 percent to 80 percent of the grain produced here, he said.

Fewer elevators means producers have to pay to ship the grain farther, on top of paying some of the highest rail freight rates for grain in the country, he said.

"The noose has just gotten tighter and tighter on the transportation situation in Montana," he said.

Edwards said the potential problem is twofold. When a community loses its elevator, that hurts the local economy, he said, as well as increasing local producers' costs.

It also causes problems with increased traffic on the highways, increased need for highway repairs due to the higher traffic, and higher congestion at the diminishing number of elevators, he said.

The elevators with high-speed loading may produce savings for the railroad, but he hasn't seen that passed on to the farmers yet, Edwards said.

"Somebody's going to save money and somebody's going to have to pick it up," he said. "BN is saving money by using the shuttle loading. The farmer is making it up."

Kidd said a bill in Congress could help the Big Sandy elevator stay in business.

Sen. Conrad Burns, R-Mont., sponsored the Railroad Competition Act of 2003. Sen. Max Baucus, D-Mont., is one of seven co-sponsors in the Senate. Rep. Denny Rehberg, R-Mont., is one of nine co-sponsors of the House version of the bill, sponsored by Rep. Richard Baker, R-La.

The bill addresses issues in areas with low rail competition, including providing binding arbitration for freight rates, requiring that railroads quote rates for different areas they serve, and requiring periodic studies of the level of rail competition.

If the bill is passed and implemented quickly enough, it might let the Big Sandy elevator negotiate a reasonable freight rate, Kidd said.

"It may not solve all the problems, but it is an opportunity," he said.

Whiteside, whose transportation and marketing business is located in Billings, said Burns' bill is designed to do one thing: "It is designed to bring competition back to the rails in the United States. It won't solve every problem but it will go a long way to level the playing field."

Edwards said he thinks passing the bill would help the Big Sandy elevator and area farmers.

"I think it would have a huge impact on it. That's what that bill is all about," he said. "I think that bill was custom-made for situations like this."