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 Rail backups in the Midwest are particularly acute with farmers
expected to harvest record large corn and soybean crops over the
next two months and move much of that grain to market.
The rail sector has promised to spend $26 billion this year to
improve service but Senator Jay Rockefeller, chairman of the Senate
Commerce Committee, was not placated.
"You pretty much get what you want and stop what you want around
here," said Rockefeller, a West Virginia Democrat in his final
months in office. He accused the rail industry of having undue
influence with Washington regulators and lawmakers.
"You are doing a great job for your shareholders. What about these
folks?" Rockefeller said, referring to officials from the farm, auto
and chemical industries who also testified at the hearing.
Automakers are spending tens of millions of dollars a month to avoid
snarls on the tracks for their cargoes, said Shane Karr of the
Alliance of Automobile Manufacturers.
Meanwhile, the massive grain harvest could exceed permanent storage
bins by about 694 million bushels this harvest season, or about 3.5
percent of expected totals, said Arthur Neal, who analyzes market
and transportation issues for the Department of Agriculture.
That glut could fill roughly 174,000 jumbo hopper rail cars with
South Dakota, Indiana, Missouri and Illinois, among the states most
impacted, he said, adding that much of last year's crop is still
lying around.
"It is critical to move as much of the 2013 grain crop as quickly
and efficiently as possible," Neal said.
The grain glut is causing snarls along train lines controlled by
BNSF Railway Co [BNISF.UL] and Canadian Pacific Railway Company
[CPCPR.UL] and driving up other transportation costs.
Barge rates along the Mississippi and Illinois rivers, for instance,
are about 50 percent higher than the five-year average.
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Higher costs for agriculture deliveries could push some foreign
buyers to turn away from United States producers, warned Senator Amy
Klobuchar, a Minnesota Democrat.
"We have to find a way out of this," she said.
Ed Hamberger, president of the Association of American Railroads,
said operators aim to strike a balance between delivering good
service and satisfying investors.
When Rockefeller accused the rail sector of profiteering, Hamburger
said operators deliver a return on invested capital about half the
average for Fortune 500 companies.
If the railroads were financially weaker it would be more difficult
for them to draw investment used to improve service, he said, while
acknowledging that service can be improved.
"For a not insignificant group of rail customers, rail service in
recent months has not been of the quality they have come to expect,"
Hamberger told the committee. "Rest assured, railroads are working
tirelessly to remedy these challenges."
(Additional reporting by Karl Plume in Chicago; editing by Matthew
Lewis and Cynthia Osterman)
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