NAPOLEON, N.D. – Leo Piatz could be considered one of the winners in North Dakota’s rail deregulation.
He is manager of the South Central Grain Co-op elevator that over the past decade has expanded into a super-elevator, affiliating with two smaller area elevators to form a behemoth that handles eight million bushels annually.
It can handle the large unit trains the railways now offer at a bargain tariff.
It is playing by the new rules and apparently winning.
So why is Piatz so glum, planning an early retirement in part because he is having a difficult time handling the pressure?
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Rail car supply, he says. Rail cars.
“The system is terrible right now. We have a hard time getting guaranteed cars and when we do, we have to pay a premium,” he said.
It is a complaint heard at elevators across the state.
With the demise of regulations and no effective overseer of the system, the railways have the upper hand.
Tariff rates meted out
The two – Burlington Northern and the CP Rail-owned Soo Line – make a fleet of cars available at a basic “tariff rate”.
However, the only cars they guarantee for delivery at a specific time are cars in special auction pools. Elevator operators bid premium prices above the basic tariff rate to get a guarantee of delivery.
Last summer, after missing out on cars for a month because he did not bid high enough, Piatz bid enough to get guaranteed cars for September, but at a premium of up to 15 cents per bushel.
“That comes right off what we pay the farmer for his grain,” he said. “It is hard to run a turnover-based business without a guaranteed supply of cars.”
It is one of the side effects of deregulation – the railways are in the car-allocation driver’s seat. Some of the larger companies like Cargill Grain have talked about buying a fleet that will be dedicated to their use.
Smaller, local, independent elevators do not have that option.
Sign of the times
John Mielke, executive director of the North Dakota Public Service Commission which sometimes acts as a go-between in farmer disputes with carriers, said it is a sign of the times.
“Rates aren’t really an issue these days, since grain companies factor them into their local grain prices,” he said during an interview in his government office in Bismarck.
“Car supply is the major issue we have been confronted with in the past five or 10 years.”
Mielke has some sympathy for the railway strategy of rationing cars in peak times.
“You don’t build a church to accommodate Easter Sunday and you don’t build a car fleet to satisfy peak demand.”
He also notes that under deregulation, there are very few constraints on the railways.
It the west-central North Dakota town of Buxton, Kerry Rice knows all about it.
He manages the Farmers Union elevator there and has been successful in diversifying the business.
He offers a variety of services to farmer customers and often trucks grain to destination.
Still, the lack of reliable car spotting irks him.
“We couldn’t get any cars for August,” he complained late in the month.
“It’s ridiculous. There is no way to hold them accountable for their service.”
