Ag Retailers Flag Rate, Service Risks in UP-Norfolk Southern Merger

Will the Union Pacific-Norfolk Southern merger raise ag equipment shipping costs?

Yes. The Agricultural Retailers Association says the proposed merger will reduce competition and increase transportation costs for fertilizer, seed, feed, and farm equipment moving by rail. The group represents more than 5,000 retail locations supplying U.S. farms and ranches.

Concentration Already High, Merger Adds Pressure

Daren Coppock, ARA president and CEO, wrote that the four U.S.-based Class I carriers already control 90% of rail freight traffic. That concentration lets railroads set terms and drive up costs, he said. Freight rail rates have risen more than 40% over the past 20 years, adjusted for inflation, about 70% faster than truck rates. Critical fertilizer inputs such as anhydrous ammonia have risen more than 200% since the mid-2000s.

Both Union Pacific and Norfolk Southern say the merger will speed traffic by eliminating railcar interchanges, improving efficiency for shippers and growing volumes on the domestic rail network. Coppock countered that past mergers produced service disruptions and consistently reduced competition, resulting in higher transportation costs and less negotiating leverage for agricultural shippers.

Captive Shippers Face Worst Exposure

The issues hit hardest for captive ag shippers, those served by just one railroad. Coppock said those shippers end up in a worse place than where they started after mergers. Two-thirds of the fertilizer for U.S. crops moves by rail. One covered hopper moves as much as 3.4 trucks, at three times the fuel efficiency per ton-mile of other modes.

Coppock said the proposed merger directly threatens the ability of ag retailers to operate and, by extension, impacts farmers and the food supply for all Americans. He added that if the Surface Transportation Board is not hearing alarm bells, it should be, because this is going to be a big problem.

What This Means for Equipment and Input Costs

Ag retailers move farm equipment, fertilizer, chemicals, and fuel by rail. Higher rail rates and service disruptions translate directly to higher landed costs for tractors, implements, and bulk inputs at rural dealerships and co-ops. Retailers with no alternative rail carrier have no negotiating leverage when rates climb or service degrades. The ARA's concern is that the merger will accelerate both trends, squeezing margins for small-town equipment dealers and input suppliers already facing inflation and geopolitical price pressure.

Coppock's comments were published in trade journal Agri-Pulse. The Surface Transportation Board is reviewing the merger proposal.