Commentary
CN-IANR Merger Proposal: ‘Value Add’ for Ag
Written by Mike Schwark, Iowa Rancher and Owner of Schwark Seed
Mike Schwark (Photograph Courtesy of Mike Schwark)
To be competitive and profitable, agricultural producers across the country are focusing on their cost of production, managing margins, and being forward-thinking on their grain and livestock marketing. In Iowa, and most any state, a piece to the puzzle that literally links all of these is rail.
Currently under review, and already deemed “minor” by the Surface and Transportation Board (STB), is the CN acquisition of Class II regional Iowa Northern Railway (IANR). This combination will be a value-add for producers and the rail supply chain in general.
According to the Association of American Railroads, railroads haul approximately 1.6 million carloads of grain and farm products in a typical year. The U.S. Department of Agriculture (USDA) notes that railroads are responsible for well over a third of U.S. grain export movements. These statistics put in perspective how important freight rail is to agriculture—and add to the importance of an efficient rail network.
Feed and commodity movement on rail has a tremendous impact on keeping the supply chain healthy. In the midwestern states, such as Iowa where my farm is located, corn takes the lead as the highest-volume grain carried by railroads. These grains don’t serve a single purpose. Rather, they have multiple uses—from mainstays in our diet to serving as the raw material for ethanol production and providing essential feed for livestock, which is crucial to my industry sector.
As a producer, I feel the direct and indirect impact when freight rail is functioning with efficiency. Among other advantages in the proposed CN–IANR combination: Streamlining the carrier network will increase speed to market and reduce carrying costs. For producers, the transport of goods with these efficiencies in place positively impacts profitability from being a direct supplier of the commodity. Indirectly, the ripple effect leads to lower input costs, such as livestock feed, which is a major factor in managing margins.
I fully support opportunities to improve markets and lower costs of production. It’s a win we need in ag right now.
Further, a key factor in this proposed merger will be the larger market access available to producers. There will be more opportunities for Iowa’s agricultural and biofuels products to reach new markets and destinations by leveraging CN’s national rail network. The transaction will create new single-line options that will benefit Iowa shippers and also preserve joint-line options between IANR and other rail carriers. The seamless integration and added opportunities can only boost the grain and livestock markets, and farmers and ranchers know that a competitive market leads to a healthy, robust industry.
This past month, the USDA and the National Grain and Feed Association (NGFA) submitted STB filings expressing their stances on the merger. NGFA noted that it does not oppose the merger, but provided suggested conditions should the STB approve the transaction. Of note, USDA shared that it “appreciates the Applicants’ commitment to maintain existing gateways on commercially reasonable terms,” in addition to making a couple of suggestions. It is reassuring to know that the USDA and NGFA, two major presences in the ag industry that represent both public and private entities have made it clear they do not outwardly object to this transaction.
In this industry, I fully support opportunities to improve markets and lower costs of production. It’s a win we need in ag right now. This acquisition lends itself to these improvements for our industry and livelihoods, and we’re eager to see it approved.
Mike Schwark is an Iowa rancher and the owner of Schwark Seed, representing Golden Harvest in Northern Iowa.
