Two weeks ago, during a landmark U.S. Department of Agriculture (USDA) and Department of Justice (DOJ) workshop outside Des Moines, Iowa, Montana Attorney General Steve Bullock firmly put Montana at the forefront of the fight to restore competition in agriculture.
"Agriculture ranks as one of the top sectors of most state economies," Bullock said in his testimony before Agriculture Secretary Tom Vilsack and U.S. Attorney General Eric Holder. "And while the agricultural heritage of each of our states differs—sometimes dramatically—the concerns about market concentration, transparency and effective regulation cross geographical boundaries, and are shared concerns irrespective of the crops we produce and the animals we raise."
Those crops and animals have come to be controlled by frighteningly few corporations. Bullock noted that in 1984, Montana had nearly 200 grain elevators, but today there are less than 50. Nationwide, he said, the top four beef packers now process 85 percent of our beef and the top four pork packers around 65 percent of our pork. And he said only a handful of multinational corporations, most notably Monsanto Co., dominate the seed industry.
Bullock played a prominent role at the agencies' first-ever joint workshop on the issue, a discussion Holder called a "milestone event" in his opening remarks. Bullock authored comments detailing areas of major concern in agriculture markets; 15 other state attorneys general also backed his testimony.
Ag groups roundly praise Bullock for his ongoing efforts. Jeri Lynn Bakken, an organizer with the Western Organization of Resource Councils, says it's "huge" that Bullock spearheaded collective action by state attorneys general.
"He just hit the nail on the head for what we have had to deal with out here on concentration [of market power], railroads—all of these issues," she says.
The Montana Farmers Union, the Montana Grain Growers Association and the Montana Wheat & Barley Committee also back Bullock in, as Kim Falcon of the Montana Wheat & Barley Committee puts it, "looking out for the best interests of Montana producers."
Producers in Montana are perhaps most fed up with Burlington Northern Santa Fe Railway (BNSF). The company controls about 95 percent of the rail lines in the state, the highest percentage in the country.
"That dominance manifests itself in almost everything that the farm producer does," says Billings' Terry Whiteside, consultant to the Montana Wheat & Barley Committee and chair of the Alliance for Rail Competition (ARC).
Whiteside, the state's foremost expert on railroad competition, says BNSF's market power allows them to charge producers exorbitant shipping rates. For example, among the five states shipping the largest volume of wheat—Montana, North Dakota, South Dakota, Kansas and Nebraska—Montana shippers, on average, pay the highest rail rates, whether calculated per car or per ton, Whiteside says. In 2007, according to his figures, the average railroad wheat revenue per car was $3,451 in Montana, the highest in the country.
In 2006, Whiteside calculates, the ratio of railroad revenue to the variable cost of shipping Montana wheat was 253 percent—also the highest in the country. (When Congress partially deregulated railroads in 1980, it chose 180 percent as the percentage above which "captive" shippers could challenge their rail rates as unreasonable.)
"If we can bring reasonable rate levels and good service levels to Montana—and that's really what the goal of the attorney general is—farm producers have more money to spend," Whiteside says. "Agriculture makes the economy hum in Montana. [BNSF] is overcharging by 20—30 percent...That would be money in the pockets of farm producers, money in the mainstream of Montana. It would mean more kids are going to college. It would solve a lot of problems, like provide more tax revenues for the Legislature. There are a host of things that should make people want to care [about railroad competition]."
In his comments to the USDA and DOJ, Bullock recommends Congress repeal the railroad companies' antitrust immunity and reform common carrier regulation.
"Given the deregulation of the railroad industry over the past three decades, it is imperative that antitrust fill the gap left by regulators," Bullock wrote. "The States recommend repeal of railroad antitrust exemptions paired with effective regulatory reform to prevent abuse of captive shippers served by a dominant railroad."
A recently introduced bill takes a step in that direction. Senate Bill 2889, the Surface Transportation Board Reauthorization Act, sponsored by John D. Rockefeller, D-W.Va., and supported by ARC and many producer groups, seeks to increase railroad competition and improve federal oversight.
BNSF declined to comment on Bullock's recommendation and Rockefeller's bill, deferring to the Association of American Railroads (AAR), the main industry trade group based in Washington, D.C. AAR spokeswoman Holly Arthur argues that incremental rail rate increases in recent years are in line with overall increased costs.
"On S. 2889 specifically," Arthur adds, "we continue to have concerns about certain provisions in the bill, particularly the nature and scope of the antitrust provisions that may be added at a later date."
The USDA and DOJ plan to hold four more workshops on the lack of competition in agriculture—in Alabama, Wisconsin, Colorado and Washington, D.C.—before the end of the year.
"I have heard from farmers and ranchers in my home state," Bullock said in Iowa, "that they feel like this has been a long time coming—but I hope we can all agree that these workshops promise a renewed commitment."