Old tensions resurface on US Rail


The US rail network seems to have avoided strike disruption and is also moving away from the congestion seen through 2021 and much of 2022. However, things are still not perfect in American rail.

Reports in the Wall Street Journal and other media sources are describing conflicts between rail companies and their customers, such as Foster Farms, a large poultry farm in California. Foster Farms are complaining of poor service from Union Pacific, asserting that the rail company has not delivered consignments of corn used as animal feed, resulting in a possible need to kill a proportion of its flock.

Foster Farms has complained to the Surface Transportation Board, which in-turn has ordered Union Pacific to “deliver specific train sets of animal feed to Foster Farms on the time schedule specified by UP in order to avert a potential significant loss of livestock in California.” Union Pacific appears to admit that it is failing to deliver consignments, however it blames the extreme weather several weeks ago for the disruption.

Problems between Foster Farms and Union Pacific are more long-standing, with Foster Farms having complained to the Surface Transportation Board in June about the quality of service.

Friction between rail providers in the US and its customers date-back a number of years, after rail companies adopted a series of policies designed to work their assets more intensively. This resulted in fewer dedicated services and less flexible schedules for shippers.

Indeed, it is tempting to suggest that the congestion seen across the US rail network, but especially those parts of the system serving marine container traffic, was in-part due to the effects of such policies, with infrastructure designed to work at high levels of utilisation during periods of normal demand unable to adapt to the unusual conditions of 2020-2022.

This is a strategic issue for rail freight in the US. There is a tension between the need for rail companies to work their fixed assets as intensively as they can and shippers desire for service quality. Of course, the means of resolving this is through market mechanisms. However, the vaguely monopolistic nature of rail provision makes this more difficult. This leads shippers to resort to the Surface Transportation Board. This can hardly be viewed as a satisfactory long-term solution.

Author: Thomas Cullen

Source: Ti Insight


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