USDA/USDOT Study Reinforces Vital Link Between Rail, Agriculture

Financial Health of Nation’s Railroads Supports America’s Leading Role in Global Marketplace

WASHINGTON, D.C. – April 28, 2010 – The Association of American Railroads (AAR) today said the U.S. Departments of Agriculture (USDA) and Transportation (DOT) study on rural transportation shows how the vital link between railroads and agribusiness supports the U.S. economy, and our nation’s economic recovery.

“USDA took a comprehensive look back and reinforced what railroads are seeing in the marketplace — since deregulation, the health of railroad industry has improved, in turn benefiting America’s farmers and rural areas,” said AAR President and CEO Edward R. Hamberger. “Railroads provide that vital link for our nation’s grain and coal to be sold on the global marketplace, and our efficiency and cost-effectiveness make that possible.”

USDA noted that since the railroad industry was partially deregulated in 1980, rates for most shippers fell. However, the report also noted findings from the recent independent Surface Transportation Board study from Christensen Associates that showed recent price increases for some customers were in line with overall increases in the cost of doing business. While rail rates in recent years have gone up, the increase pales in comparison with other price increases farmers have seen from other inputs, particularly fertilizer costs, up 304 percent, fuel costs up 244 percent and seed costs up 154 percent. (See Chart)

“As USDA said, rail is the most cost-effective mode of transportation available to many agricultural producers. So maintaining a healthy rail industry is vital to meeting President Obama’s goal of doubling exports,” Hamberger said, noting that carloads of grain have been on the increase for the past five straight months. “Without railroads bringing America’s high-quality, low-priced grain to the global market, we’ll never achieve the President’s goal and continue on our road to economic recovery.”