NASHVILLE, Tenn. (RFD NEWS) — A proposed merger between Union Pacific and Norfolk Southern is drawing scrutiny from agricultural groups concerned about transportation competition and costs.
Danny Munch, an economist with the American Farm Bureau Federation (AFBF), joined us on Thursday’s Market Day Report to discuss how the merger could mean higher prices and fewer options for farmers.
In his interview with RFD News, Munch explained how consolidation in the rail industry could further limit options for moving grain, fertilizer, and other bulk commodities across rural America. Freight rail remains a critical link in the agricultural supply chain, especially for producers located far from waterways or major processing centers.
“Most agricultural shippers, including 95 percent of grain elevators, are already captive shippers, which means they have no other shipping alternatives,” Munch says. “ If transportation prices are increased, a shipper must accept the new price or they’re unable to move their product to market.”
U.S. railroads move tens of millions of tons of corn, soybeans, and wheat each year from the Midwest and Northern Plains to domestic processors and export terminals. For many regions, rail service is not simply the lowest-cost option but often the only practical one.
“They have to look closely at competition, service, and impacts on shippers, including farmers,” Munch continued, “Right now, we’re still very early in the process. The initial application from UP and NS was actually rejected earlier this year for being incomplete. The railroads plan to refile by the end of April.”
Operationally, the proposed $85 billion merger would create the first coast-to-coast Class I railroad network in the United States. Supporters say a combined system could improve efficiency and reduce interchange delays, while critics argue the move would eliminate key gateways where shippers currently have limited carrier options.
Regionally, rail competition is already limited for agricultural shippers. Industry data show that roughly 95 percent of grain elevators are served by a single railroad, leaving producers dependent on a single carrier for most shipments. In those settings, transportation demand is highly inelastic, where farmers cannot easily reduce shipments or switch transportation modes when rates increase.
The Surface Transportation Board will review the proposal under its public-interest standard, with Union Pacific and Norfolk Southern expected to submit a revised merger application later this year. This follows the regulators’ rejection of an earlier filing as incomplete.
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