NGFA testifies on opportunities for growth in freight rail

(Posted on 19/09/24)

The President and CEO of the National Grain and Feed Association (NGFA), Mike Seyfert, has testified before the Surface Transportation Board (STB) in the USA, highlighting growth opportunities in the freight rail industry through effective policy measures and the expansion of domestic production.

The NGFA, established in 1896, consists of grain, feed, processing, exporting and other grain-related companies that operate facilities handling U.S. grains and oilseeds.

“USDA’s forecast for growth in grain production and steady export share of grain demand has the potential to provide opportunities for rail freight growth,” Seyfert said. He pointed out that U.S. grain production has nearly doubled over the past four decades. According to USDA projections, corn, soybean, and wheat production is expected to increase from 21 billion bushels in 2023 to 23 billion by 2033, with grain exports rising from 4.5 billion to more than 5.5 billion bushels over the same period.

“In addition to the organic rail freight growth in moving grain products through increased production, I believe there is room to grow market share for grain and grain products through sustained efforts by the Class I railroads to improve service and become more cost-competitive against other forms of transportation,” he said. “These efforts can be helped by sound rail regulatory policy and commercial practices.”

In addition, Seyfert emphasized the importance of continuing open lines of communication between agricultural shippers and the Class I railroads, all six of which are valuable members of NGFA and important partners of its shipper and receiver members.

NGFA recommended several key policy actions to the STB to support growth:

Rules for financial penalties: Seyfert called for rules that would allow rail customers to impose financial penalties on railroads for the inefficient use of private railcars. “Financial penalties are used by rail carriers to incentivize shippers to more quickly load and unload trains,” Seyfert noted. “To the extent the Board can introduce reasonable incentives for both sides, our shipper/receiver members believe it would lead to more reliable freight rail service and one could argue that freight rail growth would follow.”

Reciprocal switching to enhance competition: NGFA urged the STB to adopt and continually update rules for reciprocal switching to increase competition. Although the Board recently issued a final rule for reciprocal switching when service is inadequate, NGFA believes that more robust competition will result in higher volumes of grain moved by rail.

Defining the common carrier obligation: NGFA recommended defining the common carrier obligation to establish a regulatory framework that all industry participants can rely on.

Seyfert also emphasized that domestic grain processing offers significant opportunities for freight rail growth. Rail spurs being built next to new grain processing facilities signal a growing relationship between agriculture and rail, and NGFA anticipates this growth will continue, he said.

While the rise in grain production and exports creates promising prospects for U.S. rail freight, Seyfert acknowledged increasing global competition. Investments in production and supply chains in Brazil and Russia have enhanced their competitiveness in the global grain market, underscoring the need for competitive rail access and an efficient U.S. rail system.

Over the last ten years, production of corn, soybeans and wheat has increased by 65 percent in Brazil and 76 percent in Russia and a large majority of the new production has entered the export market.

“I do not know what the future holds for other grain exporters, such as Brazil and Russia, but I would not bet against the American farmer and agribusiness and our nation’s ability to compete,” Seyfert concluded. “I believe there will be opportunities for rail carriers and the grain industry to continue partnering to export more grain and grain products.”

Seyfert’s remarks were delivered during the STB’s “Growth in the Freight Rail Industry” hearing held on Sept. 17.