WASHINGTON (B)--Representatives of two major U.S. farm groups urged railroad regulators March 10 to impose strict customer service conditions and proceed with caution when considering all future North American railroad mergers.

The U.S. Surface Transportation Board should help assure competition on U.S. railroads by thoroughly evaluating the economic health of railroads proposing mergers, analyzing the impact of mergers on federal transportation policy, and ensuring that shippers that experience rail delays can be compensated, National Grain and Feed Association (NGFA) President Keith Kendall said March 10 in an address to the board.

Farmers are uniquely vulnerable to high freight rates and poor rail service, Kendall said, noting that an average of 40% of all U.S. grains are shipped by rail, while in some parts of the Western U.S. that figure could be as high as 75%.

"Shippers tend to be decentralized," Kendall said. "Grain elevators are not factories.

Nor are they portable. They are located where grain is produced."

Kendall was speaking during the fourth and final day of hearings on the future of the North American freight railroad system. The hearings were prompted by a December 1999 announcement that Burlington Northern Santa Fe Railroad and the Canadian National Railroad were intending to merge. The two railroads have not yet submitted their merger application to the board.

One way of handling complaints by farmers and other grain shippers against railroads would be to institute an arbitration process similar to the one the NGFA uses to adjudicate grain trade disputes, Kendall suggested to the board.

"It has been one way of disciplining the markets," he said of the trading arbitration system.

North Dakota Farm Bureau President Eric Aasmundstad said the American Farm Bureau Federation was concerned that there may already be too much concentration in the U.S. railroad business, and that rates charged to farmers and other shippers may already be too high.

Aasmundstad said that it costs $1.13 per-bushel for a Montana farmer to ship wheat to Portland, OR, on the BNSF, while a Nebraska farmer can ship wheat on the same railroad to the same port for 99 cents per-bushel. The Montana farmer pays a higher price because he is a captive shipper, Aasmundstad said.

"It is hard to see how further rail mergers will serve the interests of agricultural shippers in gaining more competition," Aasmundstad said.

The Farm Bureau opposed the 1996 Union Pacific-Southern Pacific merger because of concerns over rail freight rates, Aasmundstad said. Regulatory reform requiring railroads to assist customers during freight bottlenecks may not suffice should further rail mergers ensue, he added.

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