With low crude oil prices putting a major dent in BNSF Railway’s shipping demand, the freight railroad has cut its price for shipping grain by $100 a carload.
BNSF also cut the rates $75 per carload for shipping pulse crops, such as peas and lentils.
BNSF’s total carloads for coal are down 32.2% year-to-date through March 21, 2016, for petroleum they are down 26.57%, and for metallic ores, carloads are down 32.53%. The drop in shipping volume has the railroad idling hundreds of locomotives.
BNSF’s drop in rates has especially benefits Montana’s farmers. Lola Raska, the Executive Vice President of the Montana Grain Growers Association, noted that the cut in shipping costs helps the farmers that held on to their wheat in the hopes that demand would firm up.
Approximately 80-percent of Montana’s wheat is moved by rail for export.
In November 2015, Combined U.S. rail grain shipments hit their highest levels in five years, and the number of days behind schedule dropped dramatically.
At its low point in June of 2014, the average delay for grain shipping for BNSF was a whopping 32 days, but that delay has now evaporated due to the drop in carloads of coal, petroleum, and metallic ores, and through improvements in track and signalling that the railroad made in 2015.
© 2016 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.