When brothers Bob and Ira Hudson went into the grain business in 1950, it hardly occurred to them how dependent they were on the Illinois Central Railroad.
The railroad provided the cars to ship to distant markets the soybeans the Hudsons purchased from local farmers. And as business flourished, the Hudsons built grain elevators along the tracks, further coupling their prosperity to the railroad.
But in 1975, the railroad (by then the Illinois Central Gulf) "quit giving us the equipment," says Ira Hudson. The freights continued to rattle through the quiet rural community on their route between Chicago and Cairo, but the supply of grain hopper cars virtually vanished.
The Hudsons luckily found a way out: the Ohio River. Today three- quarters of their grain goes to market by barge. But their experience is a reminder that the tension between farmers and railroads that spawned prairie rebellions a century ago still exists.
Inadequate rail transportation today is one of the leading problems in U.S. agriculture. The days when hopper cars were idle for months at a time appear to be over. Shortages have been chronic since 1972.
In the weeks ahead, an unprecedented 130 million tons of grain from the new harvest will start moving off farms toward export, and while the rivers have taken a larger and larger share of the load, the railroads still are the center of the system.
The flood of exports "will test our transportation system to the limits of our capability," says Agriculture Secretary Bob Bergland. "For the most part, our railroad management doesn't know how to run railroads."
John Michael of the Interstate Commerce Commission calls the situation "grim. . .not very good and getting worse."
The situation appears especially perilous for hundreds of small grain elevators located far from the rivers.
Testifying recently in Wichita at hearings of the Carter administrations rural transportation task force, the Kansas City Board of Trade's Jon Hansen painted a bleak picture.
Hansen said that 93 percent of the 703 Kansas communities with grain elevators are served by a single railroad.
"If deregulation of the railroads ever became a reality, it would not be mandatory for trains to stop and set out cars of fertilizer and fuel, or pick up cars of grain. In many cases the trains would go through towns so fast they would blow the pigeons off the roof tops," he added.
Federal officials say that the problems experienced by the Hudsons have already driven some small companies out of business.
Bob Hudson says that in April and May he got only three of the approximately 80 cars he asked Illinois Central Gulf for. Recently the supply has improved somewhat, but most of the cars have been leased from private owners or hired by the Hudsons' customers.
Renie Einbinder, a spokesman for the Chicago-based Illinois Central Gulf, adknowledged that there was a car shortage. "I'm not denying there are problems," she said, However, she said that between July 27 and Aug. 2 the Hudsons had received 14 cars and that additional cars had not been sent because the Hudsons had canceled their request for more hoppers. Einbinder said Illinois Central Gulf was told there would be no need for for the cars for two weeks because grain prices were declining.
Einbinder said the line has allocated $33 million in its current fiscal year for the purchase of 800 new jumbo hoppers. However, she said that of the 3,717 jumbo hoppers in the railroad's fleet now, only about 1,500 are being used for grain.
The Hudsons say that big grain companies, which buy from small dealers, have been offering to supply hopper cars -- but only in return for a discount of 20 cents a bushel on the grain. This comes to about $660 for a carload -- substantially above the going rate for leasing grain cars on the private market.
Compounding the difficulties is the railroad's bewildering rate structure.
A major market for the milo the Hudsons buy from local farmers is on the Texas Bulf Coast. But those export terminals are reachable only on the tracks of the Missouri Pacific. The catch is that the "MOP'S" yards are five miles away in Cairo. The Hudsons say the Illinois Central Gulf charges $192 to haul a carload of grain those five miles. The rest of the 1,000-mile trip costs some $1,200, which means the short-haul rate is 38 times as expensive.
ICC officials say $192 seems high for a five-mile trip. But they add that short-haul rates are usually expensive and that these rates are approved by the ICC.
Illinois Central Gulf headquarters in Chicago did not respond to queries about the rate structure.
"Basically, the railroads run our business." says Ira Hudson. "They tell us when we can get cars, when we can ship our grain."
The extent of the problem -- as well as the underlying causes -- are a matter of intense controversy among government officials, railaroad companies and their competitors in the barge and trucking industries.
According to the ICC'S John Milchael, only occasionally since 1972 have the railaroads had grain cars to spare, and at no time since 1977 have they caught up with requests for cars.
The daily shortage of jumbo grain hopper cars is 24,000, though this can be misleading because rail customers often inflate their requests for cars.
Railroad spokesmen acknowledge that there have been breakdowns in service, but they contend that poor railroad management is not necessarily to blame. They say the ICC'S regulation of rates discourages innovation, and they insist that part of the problem is beyond railroad control.
Farmers once sold their crops as soon as they harvested them, and railroad companies could prepare for these periods of heavy demand. But in this decade farmers have invested billions of dollars in on-farm storage facilities and now market their crops all through the year. The growth of on-farm storage has given growers much more flexibility in deciding when to sell, but it has complicated the task of forecasting surges in transportation needs. These can be brought on by rising farm prices or farmers' springtime needs for cash to pay income taxes or buy seeds.
Railroad spokesmen say further that the rails are carrying more grain than ever.
Officials of the Minnespolis-based Burlington Northern Railroad say the company has acquired 6,400 grain hoppers at a cost of $150 million since 1970, and has budgeted $90 million for 2,100 more in 1979.
The Burlington Northern, Illinois Central Gulf and other big grain carriers say that the advent of "unit trains" -- shuttles of 100 cars or more that ply between inland terminals and the ports -- have made grain handling much more efficient.
But the Hudsons have been haggling with Illinois Central Gulf for cars this summer, unit trains allocated to some of the world's biggest grain companies hurtle back and forth between New Orleans and terminals in the farm belt.
Contrary to the view of many small grain dealers, Burlington Northern's Wayne Hopkins reported last week that only 650 of the BN'S 17,000 cars in grain service are assigned to unit trains.
"You can see that the vast majority of BN cars in grain service are in single-car use," he said. "The idea is to use a fluid pool of single cars to help meet local harvest needs and balance that with unit trains meeting important export demand."
Illinois Central Gulf said about 20 percent of its cars are in unit trains.
The suspicion remains strong among small grain dealers that the big grain companies get the cars and advantageous special rates was well.
"The ICC just doesn't have any idea of what is really going on," said one such dealer.
Under the Interstate Commerce Act, railroads are required to provide adequate service, but they are not required to meet every request for a car.
In principle, the ICC prevents discrimination through its power to regulate the rates charged by the railroads for hauling the cars between two points. In practice, the cost of such point-to-point hauls differs widely depending on the number of cars and such factors as whether the customer is providing some of his own cars.
Of the 172,000 cars in the nation capable of carrying grain, 71,000 are owned not by the railraods but by huge grain companies, other shippers or even private investors. Railroads compensate customers for supplying their own cars. Another reason why transportation costs vary is that the rates for leasing grain cars aren't regulated. The results of all this are variations in the actual costs of transporting commodities by rail.
Railroad spokesmen maintain that more deregulation is needed to make the system more efficient.
"If we had the freedom to adjust the prices based on the situation at hand, I think we could adjust seasonally," says Dan Lang of the Association of American Railroads.
That is a view strongly challenged by many small grain dealers, who say that farmers ultimately would be the losers. Deregulation would permit railroads to abandon less "efficient" lines and to alter rates without ICC approval. Critics say this would hasten economic concentration in both the rail and the grain industries -- a process that small dealers say is already well under way.