November 6, 2006
Ag Coalition Wants STB To Amend Excessive Rail-Rate Challenge Proposal
Forty national and state agricultural organizations, including the American Soybean Association, are urging the federal Surface Transportation Board (STB) to revamp what they consider to be “a flawed proposal that would make it virtually impossible for agricultural shippers to challenge excessive rail freight rates.” In a joint statement filed last week, the groups representing agricultural producers and commercial shippers, receivers and exporters of grains, oilseeds and grain products said the STB’s proposal to amend its so-called “simplified guidelines” for challenging unreasonable rail rates would instead deprive shippers of meaningful access to regulatory relief and place them in an even more untenable situation than exists currently.
The organizations noted that agricultural products have been subjected to an increasing number of double-digit rate increases in the past two years, which magnifies the need for agricultural shippers to have access to an expeditious, cost-effective and fair regulatory process for challenging unreasonable rates. Further, a recent study by the Government Accountability Office (GAO) found that the increases that have characterized rail rates for agricultural products since 185 were atypical from the rate reductions that have occurred for coal, motor vehicles and other nonagricultural shipments.
“[We] recognize that economically healthy freight railroads are in the interest of all who require their services,” the agricultural groups said. “But the need for the railroads to earn adequate revenue should not be viewed in a vacuum or elevated above the right of shippers to effective regulatory relief when charged unreasonably high rates.”
The agricultural groups were responding to a July 28 proposal issued by the STB that would amend its so-called “simplified guidelines” to address small rail rate cases. The agency was ordered to develop such guidelines by Congress in 1995 when it enacted legislation creating the STB as a successor to the former Interstate Commerce Commission. Congress mandated that such guidelines govern rate cases that are too expensive, given the value of the freight rate, for shippers to utilize a full “stand-alone” cost methodology normally required when challenging a rail freight rate.
The full stand-alone cost methodology in essence requires shippers to research and document the cost of building an entire new railroad over the same route as the challenged rate. The stand-alone cost method is a prohibitively expensive exercise – typically costing between $3.5 million to $5 million – which has discouraged shippers from challenging unreasonable freight rates because the cost and time of bringing a case would far outweigh the potential financial returns.
The STB in 1996 issued what it termed “simplified guidelines” for addressing small rail rate cases. However, because of those guidelines’ complexities and costs, only one case has been brought challenging an unreasonable freight rate over the ensuing 10 years. That case ultimately was settled before litigation at the STB could be completed. But the agricultural organizations said the STB’s proposed new revisions to its “simplified” guidelines are “highly restrictive” and would make regulatory relief to challenge unreasonable rates “virtually nonexistent” for all but a few facilities shipping “miniscule” volumes of grain and grain products.
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Biofuels To Absorb Large U.S. Soyoil Stocks
Current high U.S. soyoil stocks should not be seen as bearish for global prices as brisk U.S. biofuel demand means they are unlikely to be exported, Hamburg-based oilseeds analysts Oil World said. According to Reuters, Oil World said: “The bulk of U.S. soyoil supplies will be absorbed on the domestic market, driven by expanding biodiesel production.” Analysts concluded that the world market “currently depends mainly on South American soyoil, at a time when production in Argentina and Brazil is declining seasonally.”
Brazil Farm Lobby Asks Lula For Ag Policy Changes
Dow Jones Newswires reports that one of Brazil’s most influential farm lobbies, the Brazilian Rural Society (SRB) has called on re-elected president Luiz Inacio Lula da Silva to revamp the nation’s agricultural policy in his second term. In a news release, the organization said that the next four years under Lula, if it is to be friendly to agribusiness, needed to focus on eight areas dear to the sector and considered overlooked by Brazil’s most powerful commercial farmers.
Of the eight, SRB called for policies that would inhibit the strengthening of the local currency against the dollar and also includes tax breaks and continued interest rate-cuts. Brazil’s high interest rates –– currently at 13.75 percent per year –– make for attractive bond investments for international investors used to single U.S. Treasury Bonds.
SRB also asked for the government to merge the Agrarian Reform department with the Agriculture Ministry, for changes in environmental legislation and faster approval of new crop technologies for commercial use.
U.S. My Be Willing To Make Additional Farm Subsidy Concessions
The Bureau of National Affairs (BNA) reports that the United States has privately signaled to some of its key trading partners that it is prepared to make further concessions on reducing its allowed farm subsidies in order to jump start the suspended Doha Round of trade talks. U.S. officials have indicated they are willing to consider reducing their standing proposal for a $22.4 billion annual cap on overall U.S. trade-distorting domestic support down to $17 billion. A U.S. trade source told BNA the move should make it possible to re-launch the Doha negotiations in January.
Soy Complex Higher As Corn And Wheat Markets Support Soybeans
The soy complex closed higher on November 2. Surging prices for corn and wheat supported active buying in soybeans. Also, the idea that soybeans need to stay up with the other grains helped support the soybean market and a surge higher in palm oil added to the gains. Expectations for a higher yield have traders predicting a bearish upcoming USDA report.November bean futures closed up $1.19, finishing at $238.19; January was $1.10 higher, closing at $242.97; and March gained $2.66 ending at $248.11. December meal was up $2.43, closing at $215.28; January was $3.09 higher, finishing at $215.94; and March was up $2.98 to finish at $218.26. December oil closed $0.66 higher to finish at $606.27; January was up $0.66, closing at $613.54; and March increased $0.22, ending at $621.26.
