Relationship between railroads and farmers

Farmers, Railroads, and Populists by Jasmine Barnes on Prezi

relationship between railroads and farmers

Railroads traditionally have played an important role in the farming industry. American Agricultural Economics Association: Impact of Railroad Contracts on. POPULISM and railroads have historically been depicted as mortal enemies. Kansas Populists claimed the rail rates farmers and shippers had to pay the relations between the people of Kansas and their railways appear to be on the. The Populist Movement was organized by farmers who had been suffering from low crop prices, high transportation costs and high debt.

Agriculture and railroading flourished as a pair. But they turned fallow together as well. For the better part of the 20th century, freight railroads were out-moded by trucks and small farms begat large agribusinesses that were increasingly marginalized by global competition.

Recently, however, both industries have experienced a revival of sorts. Domestic agriculture has been buoyed by a combination of forces: As growers and railroads explore new ways to expand their respective businesses and enhance products and services, they do so within basic constraints.

  • The Rail/Ag Connection: An American Revival

Agriculture is held captive by climate and land, while Class I railroads and shortlines are confined to point-to-point transport networks. Given their shared restrictions, a mutual dependency has naturally coalesced over time.

Louis-based multinational agricultural biotechnology corporation, the railroad is an extension of its business.

Dig a little deeper into U. The largest Class I railroads transport 24 percent of the soybeans, 43 percent of the soybean meal, 67 percent of the soybean oil, and 99 percent of the biodiesel produced in the United States. Other grain exports continue to increase as developing countries grow.

Farm products follow coal and chemicals as the third-largest commodity type moved by the railroads, accounting for 8. Expanding markets in Asia and other parts of the world are spiking export demand for U.

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Interest in renewable energy sources— ethanol and other biofuels— has similarly granted agribusinesses a new economic lifeline and revenue stream.

But while railroads have interests in other industries— energy, construction, and intermodal, as examples— growers and agriculture users in rural areas are largely reliant on the rails to move product efficiently and economically. Absent railroad competition, pricing traction has become a contentious issue between shippers and carriers.

And as both industries see new opportunities to grow, tension is building. The terms of the legislation allow for the Surface Transportation Board STB to become an independent authority sanctioned to mediate disputes between railroads and shippers, as well as monitor operational performance on the tracks. The proposed bill has drawn ire from railroads and praise from captive rail users. Carriers see government intervention as a step back in time that will negatively impact further investment in U.

Shippers, on the other hand, welcome oversight from the government to ensure their best interests are protected from arbitrary price increases.

relationship between railroads and farmers

Between andrail revenues on a per-ton basis dropped five percent for soybeans. From to the most recent data availablerail rates on a per-ton basis increased More telling, 41 percent of rail movements of soybeans 9.

The coalition, which comprises the United Soybean Board, the American Soybean Association, and nine state soybean boards, was established in to promote a cost-effective, reliable, and competitive transportation system that serves the agriculture industry. Steenhoek believes the new configuration of Congress following the elections will help the cause, and place pressure on railroads to be more transparent with regards to pricing negotiations.

Railroads, for their part, have collectively voiced opposition to such oversight, while individually maintaining a lower profile on the issue. While it remains a fluid situation, most carriers are focusing on purposeful investments in services, equipment, and infrastructure as a means of deflecting any criticism. If there is room for compromise between rail carriers and shippers, there are countless reasons why it should happen. As commodity producers and bulk volume transporters, their businesses fall in line like railroad ties on a long straightaway.

Railroading on the UP and UP One unique challenge both industries face today is the failing state of transportation infrastructure, especially in rural parts of the United States. This is where collaboration among shippers and carriers has moved past the current pricing impasse, a hopeful sign that both sides will eventually find common ground. For example, Union Pacific started running larger trains to processing facilities. We began using car grain shuttles to go point to point and meet demand.

This creates problems in terms of positioning railcars and containers. Union Pacific recently launched a plant-to-port transportation and transload service offering agricultural product transfers from covered hopper unit trains directly to containers at its Yermo, Calif.

The service includes double-stacked intermodal trains serving the ports of Los Angeles and Long Beach. Union Pacific provides door-to-door supply chain logistics services— including real-time product tracking, direct ocean carrier contact, and transload management— to help shippers manage a single freight movement through the carrier with one point of contact. The Debate about the Causes of Farm Unrest For a long time, a debate raged about the causes of farm unrest.

Historians could not reconcile the complaints of farmers with evidence about the agricultural terms of trade— the prices farmers received for their output, especially relative to the prices of other goods and services farmers purchased such as transportation, credit, and manufactures. Now, however, there appears to be some consensus. Before exploring the basis for this consensus, it will be useful to examine briefly the complaints of farmers.

What were farmers so upset about? Why did they feel so threatened? The Complaints of Farmers The complaints of farmers are well documented Buck, ; Hicks, and relatively uncontroversial. First, farmers claimed that farm prices were falling and, as a consequence, so were their incomes. They generally blamed low prices on over-production.

Second, farmers alleged that monopolistic railroads and grain elevators charged unfair prices for their services. Third, there was a perceived shortage of credit and money. Farmers believed that interest rates were too high because of monopolistic lenders, and the money supply was inadequate, producing deflation.

A falling price level increased the real burden of debt, as farmers repaid loans with dollars worth significantly more than those they had borrowed. Farmers demanded ceilings on interest rates, public boards to mediate foreclosure proceedings, and the U. Treasury to coin silver freely to increase the money supply.

Finally, farmers complained about the political influence of the railroads, big business, and money lenders. These interests had undue influence over policy making in the state legislatures and U.

relationship between railroads and farmers

In short, farmers felt their economic and political interests were being shortchanged by a gang of greedy railroads, creditors, and industrialists. The Puzzle of Farm Unrest Economic historians have subjected the complaints of farmers to rigorous statistical testing. Each claim has been found inconsistent to some extent with the available evidence about the terms of trade. Farm prices were falling, along with the prices of most other goods during this period.

This does not imply, however, that farm incomes were also falling. First, real prices farm prices relative to the general price level are a better measure of the value that farmers were receiving for their output. When real prices over the post-Civil War period are examined, there is an approximately horizontal trend North, Moreover, even if real farm prices had been falling, farmers were not necessarily worse off Fogel and Rutner, Rising farm productivity could have offset the negative effects of falling real prices on incomes.

Finally, direct evidence about the incomes of farmers is scarce, but estimates suggest that farm incomes were not falling Bowman, Some regions experienced periods of distress—Iowa and Illinois in the s and Kansas and Nebraska in the s, for instance—but there was no general agricultural depression. If anything, data on wages, land rents, and returns to capital suggest that land in the West was opened to settlement too slowly Fogel and Rutner, It is true that interest rates on the frontier were high, averaging two to three percentage points more than those in the Northeast.

Naturally, frontier farmers complained bitterly about paying so much for credit. Lenders, however, may have been well justified in the rates they charged. The susceptibility of the frontier to drought and the financial insecurity of many settlers created above average lending risks for which creditors had to be compensated Bogue, For instance, borrowers often defaulted, leaving land worth only a fraction of the loan as security.

This story casts doubt on the exploitation hypothesis. Furthermore, when the claims of farmers were subjected to rigorous statistical testing, there was little evidence to substantiate the monopoly hypothesis Eichengreen, Instead, consistent with the unique features of the frontier mortgage market, high rates of interest appear to have been compensation for the inherent risks of lending to frontier farmers.

Finally, regarding the burden on borrowers of a falling price level, deflation may have been not as onerous as farmers alleged. The typical mortgage had a short term, less than five years, implying that lenders and borrowers could often anticipate changes in the price level North, These appear to have the most merit.

As Robert Higgs shows, however, gains in productivity in rail shipping did not necessarily translate into lower rates for farmers and thus higher farm gate prices. Real rates railroad rates relative to the prices farmers received for their output were highly variable between and More important, over the whole period, there was little decrease in rail rates relative to farm prices. Employing different data, Aldrich finds a downward trend in railroad rates before but then no trend or an increasing trend thereafter.

The Causes of Farm Unrest Many of the complaints of farmers are weakly supported or even contradicted by the available evidence, leaving questions about the true causes of farm unrest. Most economic historians now believe that agrarian unrest reflected the growing risks and uncertainties of agriculture after the Civil War.

Uncertainty or risk can be thought of as an economic force that reduces welfare.

The Economics of American Farm Unrest,

Today, farmers use sophisticated production technologies and agricultural futures markets to reduce their exposure to environmental and economic uncertainty at little cost. In the late s, the avoidance of risk was much more costly.

As a result, increases in risk and uncertainty made farmers worse off. These uncertainties and risks appear to have been particularly severe for farmers on the frontier. What were the sources of risk? First, agriculture had become more commercial after the Civil War Mayhew, Formerly self-sufficient farmers were now dependent on creditors, merchants, and railroads for their livelihoods.

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These relationships created opportunities for economic gain but also obligations, hardships, and risks that many farmers did not welcome. Second, world grain markets were becoming ever more integrated, creating competition in markets abroad once dominated by U. Third, agriculture was now occurring in the semi-arid region of the United States. In Kansas, Nebraska, and the Dakotas, farmers encountered unfamiliar and adverse growing conditions.

Recurring but unpredictable droughts caused economic hardship for many Plains farmers.

relationship between railroads and farmers

Their plights were made worse because of the greater price elasticity responsiveness of world agricultural supply North, Drought-stricken farmers with diminished harvests could no longer count on higher domestic prices for their crops. A growing body of research now supports the hypothesis that discontent was caused by increasing risks and uncertainties in U.

First, there are strong correlations between different measures of economic risk and uncertainty and the geographic distribution of unrest in fourteen northern states between and McGuire, ;