CP-KCS Merger Approval Disappoints National Wheat

U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) are disappointed that the Surface Transportation Board (STB) has approved Canadian Pacific Railway’s merger with Kansas City Southern Railroad.

In public comments submitted to the STB on the proposed sale in February 2022, USW said the market power held by the Class I railroads has serious implications for U.S. wheat’s competitiveness compared to other major exporters. NAWG shared similar public comments with the STB in February 2022, which outlined how reliant wheat is on rail and how decreased rail-to-rail competition hurts shippers and growers alike. Now, this merger takes the U.S. rail system from seven to six Class 1 railroads.

USW and NAWG believe the STB has given a green light to rail consolation without regard for the consequences on agricultural shippers from lack of competition in the U.S. rail sector.

“U.S. rail industry consolidation has led to poorer, not improved, service for agricultural shippers,” said USW President Vince Peterson. “In addition, we see extreme disparity in rates for wheat shippers. Rail rates over the last decade have increased exponentially and rates for wheat are higher than rates for other commodities even with similar handling characteristics. Those higher rates make U.S. wheat less competitive in the global market at a time when higher prices already hurt our competitiveness.”

“NAWG is disappointed by today’s STB announcement and maintains our concerns that the merger of CP and KCS will impede competition in the rail market and increase rail rates,” said NAWG CEO, Chandler Goule. “With 50 percent of wheat being exported, wheat is heavily reliant on rail transportation to move across the United States. Since the merger was announced in 2021, NAWG has filed four public comments with the STB opposing the merger, citing a myriad of concerns on the impact to competition, unfair access to competing wheat-producing countries, and changes to tariff provisions that could impact wheat farmers.”

USW and NAWG believe the STB must conduct more rigorous oversight of rail rates and service issues going forward. The STB should also aggressively pursue policies designed to inject competition such as reciprocal switching – a proposal that the STB ironically shelved last year because Class 1 rail service was severely challenged for agricultural shippers.

We look forward to working with both the new CP-KCS railroad and the STB on addressing the disparities wheat shippers face going forward.