By Bruce Abbe

Precision scheduled railroading (PSR). Some feel it will be a boon for the railroads by improving efficiencies and lowering costs. Yet, it’s been a boondoggle for many rail shippers so far over the last three years that it’s been implemented in one form or another by more class one railroads.

Time will tell if PSR will live up to the promises railroads have been making. More observers, including some shippers, are coming around to the idea that maybe service will eventually improve, while others believe it will be the cause of uneven and deteriorating service for different rail shippers and it’s not the right route for rails to travel.

U.S. House transportation hearing

On July 25, a U.S. House Transportation and Infrastructure subcommittee held a roundtable in Washington, D.C., to hear from rail shipper customers and industry associations to highlight challenges faced by farmers, manufacturers and energy companies whose rail service have been impacted by precision scheduled railroading.

Perhaps the overriding complaint was the lack of collaboration between the railroads and their customers when they set out to redeploy their physical assets: rail cars, engines and related equipment, and reduce their labor needs and costs while pursuing leaner, streamlined service.

The shippers also voiced strong complaints about service delays and hiccups when PSR is initially implemented that led to them to get hit with skyrocketing overcharges for demurrage and storage of rail cars that they believe is solely the responsibility of the railroads.

PSR got its start and name under the late Hunter Harrison several years back when he took the helm of Canadian National (CN) railroad and embarked on a fierce cost cutting program, shedding assets and service frequency while pursuing increased fluidity. Some believe the changes were necessary. Operating profit improved, but service took a hit. After Harrison left CN, the new administration set about restoring service and trying to rebuild a reputation for doing so.

After hedge fund investors took control of CN’s main competitor, Canadian Pacific (CP) railroad, Harrison was brought on as CEO and set about leaning up CP’s operations while emphasizing the more lucrative long haul with unit trains. CP even sold off assets, including engines at a time when the Bakken Oil Field boom was taking place and its main U.S. competitor, BNSF railroad, was adding equipment to meet oil and frac sand shipping demand. After the hedge fund investors sold off their stock and Harrison departed, CP’s new management has been working to restore service levels and take back some of the intermodal business it had lost to CN.

Harrison next came out of retirement to take over leadership at CSX, one of the two main class one, eastern U.S. railroads. CSX moves to cut and reform its operations proved to be more difficult in the more fragmented geography the railroads in the East tend to operate on, and many shippers were irate and fearful of losing service. The U.S. Surface Transportation Board (STB) heard numerous complaints and engaged CSX on its PSR steps.

More recently, Union Pacific (UP) railroad, the largest U.S. railroad that serves the western half of the country embarked on its version of PSR, rolling out a range of operational changes, including eliminating some “hump yards” that switch rail cars between rail lines and trains where it was believed operations can be sped up without them.

Intermodal container service, generally less impacted by PSR operational reforms, did undergo changes by UP when it announced it would discontinue managing the interconnecting handoff of containers shipped west to east and back requiring a connection to an eastern railroad.   Shippers or their logistics firm providers will need to manage trucking containers from UP rail yards on the west side of Chicago to a CSX or Norfolk Southern rail terminal on the east side of the Chicago metro area.

MARS conference examines PSR

In truth, PSR is a very general term and is different from one railroad to the next in terms of how it is executed.

PSR and its impact on shippers was the focus of the Midwest Association of Rail Shippers (MARS) annual summer meeting two weeks ago attended by the Specialty Soya and Grains Alliance (SSGA) staff.

Keynote speaker James Squires, president and CEO of Norfolk Southern (NS) railroad, told the large crowd of rail shippers that NS chose to hold back and watch how PSR was executed by other railroads and is taking a different approach.

“The chainsaw method…” to PSR doesn’t work. NS, he said, has adopted a different approach by engaging and involving its shipper customers in planning its version of precision scheduled railroading. He believes it is paying off and will yield benefits for both the railroad’s operating bottom line and shippers in the resulting efficiencies.

A panel of four major, large volume rail shippers that work with more than one railroad had a bit different story about their experiences with PSR.

Rob Cook, senior manager of rail operations at Bunge, noted the supply of rail cars got so pinched down during PSR implementation they had to bring on their own supply of cars when the rails reduced the cars they would supply. Customer support was lacking.

Another manufacturer shipper was concerned about the break up of the large unit trains they had geared their operations to serve. Their customers were used to handling the larger trains.

Precision scheduled railroading “is not very precise” at destinations and origins – that last mile of service” – said another shipper. Customer service was bad. Local crews were reduced.

Few people understood the “accessorial” and demurrage charges that the railroads began to charge. When the group was asked what could be done to make PSR better, Cook said he’d like to see “reverse demurrage,” whereby the railroad had to pay when its equipment didn’t show up on time when ordered.

All of the shippers urged more collaboration in planning a major overhaul of rail operations.

The first three months of PSR implementation was described as “chaos” by more than one shipper, but improved after three months. The general prediction was after one year of adjustment operations will be better and the results better known.

BNSF takes a different track

Precision scheduled railroading also frequently came up at the MARS winter meeting in Chicago in January 2019. Matt Rose, BNSF’s long serving chairman and CEO, was honored at that event for his service leading the other main western U.S. class one railroad, which had led the way in terms of continuing to reinvest profits into the track, assets and operations. Rose was asked during a sit-down keynote interview what he thought of PSR. BNSF has rejected that approach, Rose said emphatically. Operations at BNSF are continually evolving but finding a way to expand and improve service should be the priority focus for the long term, rather than embarking on any whole-sale slashing of operations in the name of efficiency.

Let SSGA know your thoughts

SSGA would like to hear from any members who have felt the impact of any PSR rail operational reforms affecting your business, or if you have views or news about rail service that we should know about. Contact Bruce Abbe at bruce@abbecommunications.com or Eric Wenberg at ewenberg@soyagrainsalliance.org

Bruce Abbe is the Strategic Advisor for Trade and Transportation for SSGA. Reach Bruce at 952-253-6231 or drop him a line here.

By Michael Angell for Freight Waves

Union Pacific’s (NYSE: UNP) intermodal rail service saw average speeds sink to a two-year low in the second quarter, with shippers and intermodal marketing companies reporting extensive delays in getting their freight from the railroad.

The service hit came during an overall lull for West Coast container imports. And many of the delays were due to the extreme rains and flooding that hit the U.S. Midwest.

But shippers also say the railroad’s efficiency drive may have also contributed to the service deterioration.

Union Pacific’s Chief Executive Lance Fritz said that overall volumes are tracking 4 percent lower in the second quarter. Fritz blamed the poor weather and trade uncertainty as the main reasons for the lower volume.

High winds and severe rains forced Union Pacific to run shorter trains at slower speeds, so cargo has not been as quickly throughout its system in the last few months.

In a June 24 customer update, the railroad said “flooding conditions continue to impact operations across the southern portion of our network… These outages have caused network delays due to terminal and main line congestion with trains holding in multiple locations. Customers with shipments around the affected areas can expect delays of 48 to 72 hours.”

The weather’s effect on the network can be seen in performance statistics. Union Pacific saw average train speeds for intermodal cars reach two-year lows during the second quarter, hovering just over 26 miles per hour in parts of April. In the two previous years, Union Pacific intermodal cars saw weekly average speeds north of 30 miles per hour.

Average speeds picked up to just under 29 miles per hour by mid-June.

Source: Surface Transportation Board

A Union Pacific spokesperson said up to eight subdivisions were impacted by flooding through the last week of May and that it worked with customers to prioritize trains and direct shipments away from flooded areas.

Extreme flooding also contributed to ingate suspensions at intermodal facilities in Chicago, St. Louis and Houston.

But other performance indicators showed declines in service ahead of the poor weather. The weekly average number of intermodal cars that have not moved in 48 hours or more spiked to as high 500 in 2018.

Source: Surface Transportation Board

In June, Mediterranean Shipping Company (MSC) said BNSF would replace Union Pacific for its intermodal rail service out of marine terminals in Los Angeles and Long Beach.

A shipping line executive who was not authorized to speak publicly said the change stems mostly from MSC’s alliance partner Maersk already using BNSF on those lanes. But he said that shippers, as well, have asked for changes.

Speaking on condition of anonymity, a logistics executive who ships with Union Pacific out of the Midwest said working with the railroad has been a “has been a challenge to deal with.”

The big challenge is keeping up with the changes wrought by Unified Plan 2020, the railroad’s version of performance scheduled railroading. The railroad is in the process of consolidating six intermodal ramps in Chicago by closing two and limiting shipments at two others.

“We are facing long lift times at the yards they do still have open for our truckers, and the equipment they have in their facilities is down to bare bones – hardly anything available when we go in for empties,” the logistics executive said.

Union Pacific also halted some services as a result  of changes in its intermodal interchange agreement with CSX for cars destined for east of the Mississippi. Those changes “limited the options they have to reroute when faced with the recent weather issues as well,” the executive added.

One intermodal carrier executive who spoke on condition of anonymity said Union Pacific’s Marion intermodal yard near Memphis presented severe problems for shippers. A lack of chassis in that particular location forced containers to be stacked, which created longer than expected turnaround times for drivers.

“The container stack became known as ‘the wall,’” the executive said. “Union Pacific told you it’s here and available. But it would take forever to dig out of the pile.”

But he added that BNSF also had its own share of troubles at Chicago intermodal ramps. He said chassis shortages at the yards forced containers to be grounded, resulting in higher dwell and detention time for drivers.

“The turn times went from 30 minutes to a couple of hours,” the executive said.

“The Union Pacific and BNSF both had substantial flooding, so everything was backed up three to four days,” he said.

In a statement, the railroad said the ongoing rollout of Unified Plan 2020 will “help our intermodal service become more consistent and reliable.”

By Bruce Abbe

Ag shippers currently face a myriad of issues and challenges in intermodal container transportation, from trucking costs, port congestion, coming cost increases from the pending low sulfur fuel mandate, demurrage and detention penalties, and more. Those attending last week’s national Agriculture Transportation Coalition (AgTC) Annual Meeting in Tacoma, Wash., heard a very sobering take on the “elephant in the room” for exporters – the unknowns and dim prospects surrounding the future of trade between the U.S. and its largest ag export customer: China.

AgTC’s annual meeting drew a record crowd of nearly 500 ag export shippers, forwarders and logistics officials. Among them were 18 member companies of the Specialty Soya and Grains Alliance, including SSGA board members Bob Sinner of SB&B Foods, Darwin Rader of Zeeland Farm Services, and Bruce Abbe, past president of Midwest Shippers Association (MSA). Among other current SSGA or past MSA members with multiple staff in attendance were: MacMillan-Piper, Inc., Northwest Seaport Alliance, Professional Export Services, GlobeRunners, Inc., Fr. Meyer’s Sohn NA, LLC – FMS Logistics, Scoular, Laufer Group international, Tacoma Transload, Inc., US Nisshin Shokai, Ltd., Norseman, Toyota Tsusho America, Inc., International Feed, Double River Forwarding LLC, Bluegrass Farms of Ohio, Inc., Ray-Mont Logistics America and Fornazor International.

Erin Ennis, senior vice president of the US-China Business Council (USCBC), told attendees she wished she could bring a more positive message about the prospects for improved trade with China, but international trade industry observers remain very much in the dark about where talks stand. Current posturing of the Trump Administration and its China counterparts does not bode well heading into the next scheduled meeting at the G20 summit in Tokyo at the end of this month.

USCBC works on trade policy on both ends, seeking improved trade flows and fair business operating environment by both the U.S. and China’s government.

Ennis, a ten-year veteran at USCBC and previous staff member at the U.S. International Trade Commission and on Capital Hill, made several observations.

“China has yet to feel the pain of the U.S. tariffs,” she said.

Currency valuation changes have helped minimize the cost impact of the tariffs in place since 2018 so far. But the threatened, pending increases will have an impact if they go through.

“China is preparing for a no deal scenario,” Ennis said.

President Trump has likewise indicated no rush to compromise on the remaining issues under negotiation – some, notably intellectual property and technology rights, that are serious, thorny matters to agree on.

Due for a reset?

Ennis believes that regardless of who won the last election, the U.S. and China would still be in a trade dispute. The relationship between China and the U.S. “was due for a reset,” and there is wide spread views among trade observers from both political perspectives that China is a bad actor. She believes “there has been uniform support for the Administration’s tactics.”

Currently, roughly $267 billion in Chinese goods exported to the U.S. are subject to 25 percent tariffs from the first three lists of products that have been posted since last fall. In addition, some $17 billion in steel and aluminum imports are subject to tariffs. Negotiations are to begin again and if there is no agreement, the Trump administration said it will go forward with tariffs on the remining $300 billion in imported products from China.

Retaliation

If that happens, China will unquestionably retaliate. Ennis estimated that China has retaliated from past Trump tariffs at about 85 percent of reciprocal tariffs at the 25 percent tariff level. Although some ag exports got hit twice so in reality it’s a 50 percent tariff, she indicated. China has also intimated it could take “qualitative,” in addition to “quantitative retaliatory moves.”  Qualitative generally means unspecified challenges on issues like delays and product inspection hold-ups at the ports.

It is unclear how far apart the negotiators are over the intellectual property rights issue, she said.

“Economists say this uncertainty and threats of higher tariffs on trade between the U.S. and China is accelerating the chance for a global recession,” Ennis said.

While some economic forecasters have projected 2020 for a recession, without an agreement and with big increased tariffs on the remaining trade between the two countries, a recession could start in the third or fourth quarter of this year.

In response to a question, Ennis said over the past 16 months China has reduced tariffs on products imported from other countries than the U.S. – consumer products mostly.

“Until there is an agreement, U.S. products will be at a disadvantage,” she said.

Ennis also said we’re not yet at a point of no return, no progress … but as long as the U.S. tariffs are in place, China will have to retaliate.

What does this mean for U.S. agriculture? The hard facts are that as long as the tariffs are in place, you will be priced out of the China market.

For more coverage of the AgTC meeting and the China trade presentation, visit here.

BUENOS AIRES, ARGENTINA — A nationwide strike in Argentina protesting austerity measures under President Mauricio Macri brought the country’s airports to a standstill and halted work at key grains ports on May 29, according to a Reuters report.

The strike, called by the country’s main unions, comes as center-right leader Macri tumbles in the polls ahead of presidential elections in October, his popularity with voters hurt by high inflation, job losses and a weak peso.

According to Reuters, Argentina’s airports were shut down as a result of the strike, while grain exports stopped at the ports in Rosario, one of the most important agro-industrial regions in the world.

In February 2018, trucker owners went on strike briefly to attempt to force the adoption of minimum grain hauling rates, halting exports at the Port of Rosario.

That strike also affected the operation of grain mills in the Santa Fe province, where 80% of the country’s agricultural exports are processed, transported and loaded onto ships.

With 6.8 million tonnes of soybean exports in 2018-19, Argentina ranks third in that category behind Brazil and the United States, according to the U.S. Department of Agriculture.