March 25, 2023


Food Information

Wheat growers disenchanted with CP-KCS merger

3 min read

Advocates for the wheat business say the Floor Transportation Board’s approval of the Canadian Pacific Railway-Kansas Metropolis Southern Railroad merger was finished with out regard for the implications on agriculture shippers. In a joint statement from U.S. Wheat Associates and the Nationwide Affiliation of Wheat Growers, leaders of the 2 organizations referred to as on the STB to conduct extra rigorous oversite of rail charges and repair points going ahead.

“NAWG is disenchanted by in the present day’s STB announcement and maintains our issues that the merger of CP and KCS will impede competitors within the rail market and enhance rail charges,” NAWG CEO Chandler Goule mentioned. “With 50% of wheat being exported, wheat is closely reliant on rail transportation to maneuver throughout america. For the reason that merger was introduced in 2021, NAWG has filed 4 public feedback with the STB opposing the merger, citing a myriad of issues on the influence to competitors, unfair entry to competing wheat producing nations, and adjustments to tariff provisions that might influence wheat farmers.”

STB’s approval of the merger includes a seven-year oversight period in addition to different circumstances meant to guard employees, restrict environmental impacts and guarantee competitors. The board additionally famous that the 2 firms don’t have any monitor redundancies or overlapping routes. The one place they join is in Kansas Metropolis.

Nonetheless, wheat representatives level out that the merger leaves the U.S. with solely six Class I railroads. They contend that the market share held by these firms has critical implications for U.S. wheat’s competitiveness in comparison with different exporters.

“U.S. rail business consolidation has led to poorer, not improved, service for agricultural shippers,” USW president Vince Peterson says. “As well as, we see excessive disparity in charges for wheat shippers. Rail charges during the last decade have elevated exponentially and charges for wheat are larger than charges for different commodities even with related dealing with traits. These larger charges make U.S. wheat much less aggressive within the international market at a time when larger costs already harm our competitiveness.”

In accordance with Soy Transportation Coalition Government Director Mike Steenhoek, time will inform if the merger has unfavourable results. He says you will need to remember that the brand new Canadian Pacific Kansas Metropolis Railroad will stay the nation’s smallest Class I rail firm when it comes to income and monitor mileage. He additionally notes that the merger might have advantages.

CPKC would be the first railroad to offer a single-line service connection to Canada, the U.S. and Mexico. Some imagine that might lead to enhanced advertising and marketing alternatives in addition to higher entry to new geographic areas, significantly within the south central United States and Mexico.

“Each time a merger or acquisition amongst giant suppliers of a selected service happens – together with inside the railroad business – it’s wholesome to have some extent of concern given how mergers and acquisitions up to now have certainly resulted in a discount of rail service entry or elevated charges amongst agricultural shippers,” Steenhoek says. “As well as, a selected merger or acquisition typically conjures up and motivates further mergers and acquisitions. Will this acquisition lead to elevated power for additional consolidation amongst Class I railroads? I have no idea of many agricultural shippers who would welcome such a prospect. It clearly stays to be seen whether or not this can happen.”

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