Ask The Experts: April 3, 2019

Tony Hatch
Independent Transportation Analyst and Consultant

Q:  Why were intermodal volumes down in February and how will the weather influence investor commitment?
A:  IANA released its intermodal volumes for February and, like the AAR’s, it wasn’t pretty: Domestic down 4% (containers down 5%!), international down 2.4%. There’s a lot going on, of course – weather, trade, Chinese New Year, the economy (February manufacturing down 0.4%) – but truck tonnage (not units) was up 5.4% for last month. On the weather, there has been the usual investor over-focus on the near-term effects of the flooding in the Midwest….but it has been bad, in Nebraska and now Missouri. The FRA declared it an “Emergency Event” – for me it will be a good, if early, test of rail resiliency.

Q:  What is the latest in agriculture trade?
A:  Ag transport news – three kernels from the past week:

  1. Louis Dreyfus, the trading house and breeding ground for many rail/Ag managers, reported a turnaround positive earnings result, showing that the volatility, especially in soybeans, has been good for at least somebody….

  2. China’s trade fight extended to Canada – with a ban of canola imports (a $C2.7B product).  What a world….

  3. Last week’s congressional hearing revealed US grain share lost to Japan due to the US opting out of TPP (share lost to Australia, among others)….

Q:  How will U.S. railroads be impacted by the new developments in Mexican policy?
A:  AMLO turns his sights on the rails? A long political tradition in Mexico has been to blame the “Yanqui” (not always without cause, to be sure), and especially the “Yanqui railroaders”, before the revolution and the subsequent nationalization. I am not suggesting that’s what’s happening when the Mexican competition commission (“COFECE”) published a preliminary report on “effective competition in the market of freight railway….services regarding certain chemical/petrochemical products….in the southern region of Veracruz” – but the “straw dog” effect cannot be dismissed entirely. KSU reassured investors (if not editors) in a dense, legalese press release, that the worst case impact concerned only $3mm in revenues….

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Alison Babcock