Warren Buffet's extortion charge

[Hobbyfarmer]

Shipping corn from here to Hereford Texas on Buffet rail is $1.00 a bushel.

Problem is they suddenly have a shortage of locomotives. Seem to all be hauling coal from the west and oil from the Dakota's.

To get a train of hopper cars takes a surcharge (READ THIS AS EXTORTION CHARGE) of 60+ cents bushel of capacity. Makes it cost $1.60+ a bushel to ship it to Texas from here More yet to Mexico (have to load the cars lighter for the Mexican RR's)

If we were able to ship on Union Pacific just the freight rate without the extortion charge.

40+ miles to the UP railroad = undoable.  

[buckfarmer]

Are you saying you can't haul 40 miles for $.60?

[Hobbyfarmer]

Ok here is the corn, it has already been delievered here, not like there is an option by anybody to deliever it anywhere else at this point. About 4000 truck loads + or -

A unit train = in the 400,000 bu range, wheres the advantage to move this by truck for this terminal to a locaton they do not own and load a train? and do it in a timely manner. It WILL eat up that 60 cents. NO advantage for them to give it to trucking and handling as opposed to Berkshire Hathaway. Just a cool $250,000 payoff per train in ADDITION to the published rate.

Just love those new TV ads about the BNSF railroad that have been running on TV lately.

Btw there is about 9 train loads here in these two piles.

Two weeks ago they loaded a unit train of beans, it sat on the siding for 5 days before a set of locomotives showed up and pulled it down the tracks. Starting to become more like SA.

The pacific NW has logistic problems too. The new ship load out facitity up there can only unload one train a day due to longshoreman vandalism problems. They only run a train in there in daylight unlaod it and get it out of there before dark. They don't have the track /siding facilities to get even two in and out. Pretty third world conditions. Maybe Palouser can shed light on this?

[k-289]

Consolidation is supposed to be good - ask your coop --- and for your info in the Powder basin coal fields they load in excess of 9 unit trains per day so guess which wheel secures the grease ---

[rayjenkins]

you gotta Gavilon jacket and cap, too??

bet they aren't telling you about the times that rail cars trade at negative values and they GET PAID to take them!

hey, it's a market.....allocating a scarce resource (freight)

the BN was so slow last summer they offered us a freight rate to haul corn 475 miles for about what it costs to get it trucked from Creston to Eddyville...100 miles

things change....

[4wd]

Well Hobby, maybe that is why there so many piles around like the one you pictured. Local Co-Op here has 3 outdoor "arenas"  and a large parking lot across the street all full of corn and no trains.The mgr told me they are really concerned about what to do with all the Jan corn contracted to be delivered as they have no where to put it. You know what that means!

If you want to compare trucking to rail, even with the surcharge ($1.60/bu total), they are getting $1440 for a 900 bu load to Herford. How much a mile is that? Would you want to run a truck load of corn down there and come back empty for that?  They got us, and that is why the charge. 

The only thing I can say is hurry up Keystone pipeline, although I wouldn't be suprised that by now Buffett has invested in that also.

[hardnox604008]

Hi Ray,

Deconstructing that, I assume that there is considerable risk in having made a delivery commitment and having not fixed the freight?

In that case I'd assume the best option is to try to arbitrage your way out of the position although I'm guessing that's almost guaranteed to hurt the hoped for margins also?

Unless you get lucky, I guess.

[sd/pa]

If the cost is prohibitive to ship by truck on good roads in the Midwest, how do the Brazilians use trucks to become last year - I think- the world's biggest corn exporter? Just wondering...

[sw363535]

cheap labor

[too close for comfort]

Plus, they are selling to China for a $1.00/bu less