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Rail Report - Summer 2005

Kansas City Southern Acquires Transportacion Ferroviaria Mexicana

Kansas City Southern Railways (KCS) has completed its acquisition of Transportacion Ferroviaria Mexicana (TFM). With this acquisition, KCS, TFM and Texas Mexican Railway now operate approximately 6,350 route miles under common overall leadership, reports the Grain Transportation Report, the publication of the USDA’s Transportation and Marketing Programs/Transportation Services Branch. TFM will remain a Mexican corporation with Mexican leadership.

USDA said that it supported the transaction because U.S. agriculture will benefit from increased railroad competition in the Central Plains to the Mexican corridor. Cross-border rail deliveries to Mexico last year accounted for more than 17 percent of all U.S. rail deliveries to ports and export destinations, the USDA reported. As of mid April, year-to-date 2005 U.S. to Mexico cross-border grain rail movements are up 88 percent over the same period in 2004. Mexico has increased grain imports by 83 percent over the last 10 years, reports the USDA.

GROWMARK, Central States Enterprises to Form Joint Venture

GROWMARK and Central States Enterprises (CSE) are forming a joint venture to send grain grown in Iowa directly into markets in the West, Southwest and Mexico. CSE/GROWMARK, LLC, will go into effect October 1, 2005.

“Through this venture, GROWMARK grain member cooperatives in Iowa will originate farmers’ grain and have access to rail cars and markets on the Union Pacific Railroad headed for points west and southwest of the Corn Belt. The corporation will lease the rail cars,” says Larry Keene, GROWMARK director of grain risk management and value enhanced services. “By working with CSE, we will assure access to markets that require the control of rail cars and freight costs at competitive prices. In turn, CSE is assured of a reliable source of grain for rail shipment.”

CSE, Heathrow, Florida, specializes in railroad logistics capabilities and access to end-user grain markets throughout the U.S. “This association and new venture will give Central States an additional tool to use in arbitrage and spreading with other markets,” says Ken Cupples, CSE’s executive vice president. “We look forward to adding value and working with the Iowa elevators.”

GROWMARK field staff will work with Iowa grain elevators to originate the grain needed. CSE staff will handle the logistics of the rail shipments and work to create additional demand for Iowa grain.

“This agreement is designed to serve GROWMARK grain member cooperatives in Iowa because of the market dynamics within the state. There is an increasing amount of Iowa grain being directed to the Southwest. We want to capitalize on this trend by assuring the availability of transportation for our grain members,” Keene adds.

BNSF Announces Change in Fuel Surcharge

Burlington Northern Santa Fe (BNSF) Railway Company officials have announced that beginning on January 1, 2006, BNSF will start assessing fuel surcharges on a mileage basis, reports the National Association of Wheat Growers (NAWG). The current fuel surcharge is assessed as a percentage of a customer’s freight transportation bill.

The mileage-based fuel charges will apply to all movements that originate and end on BNSF. The surcharge will also apply to some movements involving BNSF and at least one short line, reports the NAWG.

The surcharge table based on On-Highway Retail Diesel Fuel prices, with mileage calculations based on Household Good Carriers Mileage Guide, will reflect fuel intensity on movements of carload and agriculture products, coal and taconite, and intermodal double stack containers.

USDA Reports Rail Costs Increased 11 Percent In Fourth Quarter

The March 3 issue of USDA’s Grain Transportation Report reported that the cost of moving corn by railroad from Minneapolis, Minn., to the Pacific Northwest increased from $35.71 to $39.68 in the fourth quarter, an increase of 11.1 percent compared to the third quarter. While service problems continued for western railroads, demand for rail service to the Pacific Northwest was up approximately 20 percent compared with the fourth quarter of 2003.

Union Pacific Railroad Investing $1.3 Billion in Track Improvements

Union Pacific Railroad is spending $1.3 billion this year on track improvements across its 33,000-mile system. It will be removing and installing 4.4 million ties, and spreading 6.8 million tons of rock ballast to ensure a stable roadbed. It also will be replacing 1,055 miles of rail and surfacing 7,800 miles.

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