April 26, 2022
- Chairman Oberman, Vice Chairman Shultz, and Members of the Board—the Department of Agriculture appreciates your holding this hearing and for the opportunity to provide a perspective on the challenges the agricultural sector faces with respect to rail transportation. I’m Dr. Jewel Bronaugh, Deputy Secretary of Agriculture.
- At USDA, we work every day to build more, better, and fairer markets that enhance competition, support resiliency, and create economic opportunity across America’s agriculture and food supply chains and in our rural communities.
- Unlike other industries, these producers grow and raise their products where the land and climate make sense to do so. They are unable to move their operations closer to end markets, many of which are far away. For many, rail transportation is the only shipping method available for agriculture’s long-distance, high-volume shipments. Because agricultural shippers operate on thin margins in hyper-competitive global markets, efficient and reliable rail service is essential.
- When railroads charge unreasonable rates and provide poor service, farmers struggle to make ends meet; consumers pay higher prices at the grocery store; and the United States becomes less competitive on the global market.
Rail Service Has Not Been Adequate
- In recent months, rail-service complaints have grown in number and urgency. USDA’s Agricultural Marketing Service has been at the table providing technical expertise on the significant rail-service issues faced by agricultural stakeholders for many, many years. As Deputy Secretary, I am here today to emphasize just how serious these issues have become for our farmers and ranchers.
- Unfilled grain car orders are the highest on record, highlighting how poor rail service has halted the movement of grain. Agricultural shippers are paying thousands of dollars extra per car just to get service, easily representing a 50-to-100 percent increase in cost.
- Elevators are full and so can’t purchase more grain from farmers, and livestock operations are unable to receive the grain they need for feed. We’ve even heard that some producers have been so close to being unable to feed their livestock and poultry that they were preparing to depopulate their animals, something a farmer should never have to do. At the same time, ethanol and biodiesel facilities report slowdowns and even shutdowns due to delays in their outbound train service—delays which impact the entire supply chain from farmers selling grain to customers buying fuel.
- Union Pacific recently announced a cut back in the number of cars it has online, and we’ve heard reports that the railroad has asked fertilizer shippers to reduce their volumes by 20 percent. USDA understands that, with limited capacity, some traffic must be prioritized, and that reductions in the number of cars online may help the system move. However, fertilizer and agricultural commodities are not the commodities to de-prioritize, especially as we enter the growing season.
- Not only are rail service disruptions impacting the American public and our agricultural stakeholders, they are also directly impacting USDA’s ability to hire and retain grain inspectors and carry out our responsibilities under the U.S. Grain Standards Act. Because the grain industry can’t track their trains in real time, companies are forced to “guess” when to request grain inspection personnel to arrive onsite, resulting in changing start times and staff being placed “on call” for hours. It is difficult to retain employees under such erratic conditions.
- USDA believes the Board has a responsibility to course-correct the railroad industry to focus on fulfilling their common carrier obligation. Railroads must provide quality, timely, low-cost service.
STB Can Help
USDA encourages the Board to consider both immediate and long-term solutions.
In terms of immediate steps:
- I want to express my sincere appreciation for the Board’s recent decision to update the emergency service rules, which will enable shippers to more quickly and directly get relief when they aren’t receiving adequate and timely service.
- USDA also appreciates the Board’s request that railroads provide detailed plans to improve service and share their expected timeline for recovery, and I encourage the Board to collect weekly reports from the railroads to ensure they follow through with those plans.
- Additionally, STB should use all authority it has in the short-term to incentivize the railroads to provide better service. We cannot continue a system where the railroads face no consequences for providing unpredictable service, and shippers—and ultimately farmers, ranchers, and the American public—pay for it when things go wrong.
In the longer term, we suggest three things:
- First, USDA encourages the Board to clarify railroads’ common carrier obligation. Without transparent guidelines from the Board on what kinds of requests and levels of service qualify as reasonable, the task of judging whether service is adequate passes exclusively to the railroads, which is unacceptable.
- Second, to directly incentivize the railroads to provide better service, the Board should provide quick, effective, and low-cost methods for shippers to obtain relief from poor rail service. This effort should include finalizing the reciprocal switching rule and the Final Offer Rate Review proposal and considering penalties for their inefficient use of privately owned railcars.
- Third and lastly, STB should expand its service data collection to shed more light on rail service issues, including first-mile/last-mile data, so that shippers have better tools and more information to use in working with the railroads to improve their service—and so that the Board itself has better visibility over the problems shippers are facing.
- Each of these suggestions are solutions that USDA has long promoted in proceedings before the Board, some of which have been open for years. Now is the time to move from deliberation into action to make a real difference for agricultural shippers, and ultimately for farmers, ranchers, and consumers.
- In closing, USDA appreciates the Board holding this hearing and for this opportunity to provide a perspective on behalf of agricultural rail shippers.
- We commend the Board and its staff for the work you’ve already begun.
- USDA stands by to assist the Board’s efforts in any way possible. Thank you for all you do.