Rail Project Could Cut Ag Subsidy Costs

A proposed Dakota, Minnesota & Eastern Railroad expansion could save federal taxpayers $240 million a year in reduced corn subsidy payments, according to a USDA analysis released Nov. 3.

The USDA report, entitled "Benefits from the DM&E Rail Expansion," says the added rail capacity would also cut farm program payments for soybeans, wheat and other grains. Rail competition lowers shipping rates, which increases profits to farmers, the report states.

"The presence of effective rail-to-rail, rail-to-barge or rail-to-truck competition is necessary to stimulate lower rail rates for shippers. When effective competition is present, rail rates are much lower. Generally, savings from lower transportation costs go directly to agricultural producers," it says.

U.S. Sen. John Thune, R-SD, says the report confirms the scope of the project. “We've said all along the economic benefits to South Dakota would be enormous, in terms of the jobs it would create. What this illustrates, too, is its importance to the ag economy," he told the Associated Press in a telephone interview.

If the estimated $6 billion expansion project goes through, the DM&E would become only the seventh large-scale Class 1 railroad in the country.

The plan is to upgrade its 600-mile line through Minnesota, South Dakota and Wyoming and add 260 miles of new track to Wyoming's Powder River Basin so it can transport clean-burning coal to power plants to the east, using several dozen trains a day. Transporting corn-based ethanol and other agricultural products also is part of the plan.

The federal government's Surface Transportation Board approved the proposal in February.

The Federal Railroad Administration has accepted public comments on the DM&E's application for a $2.3 billion loan. Next it will review the comments and issue a decision on the environmental aspects of the project. It then has 90 days to approve or deny the loan.

Editors note: Richard Brock, The Corn and Soybean Digest's > Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at

http://www.brockreport.com/brockreport.