CP-KCS Merger Approval Disappoints National Wheat Organizations

Mar 16, 2023

By Mariah Wollweber

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.

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