Transportation: The Great Boxcar Shortage

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The Interstate Commerce Commission, ordinarily a pretty lethargic outfit, loudly cried crisis a couple of weeks ago. There was such a severe shortage of plain railroad boxcars that the ICC felt it necessary to issue emergency orders in an attempt to get produce and products moving again.

In the Midwest, mountains of grain lay aging in elevators for lack of boxcars to move the stuff to market centers. In the Far West, the area hardest hit by the boxcar shortage, at least 15 lumber mills have had to shut down temporarily because their production was far outdistancing their ability to transport. Similarly, because plywood plants cannot ship, the price of standard-grade plywood has jumped by more than one-third (from $62 per 1,000 sq. ft. to $86) in two months.

Peculiar Arrangement. U.S. railroads presently own nearly 600,000 boxcars, and are retiring 30,000 cars more a year than they are replacing. Beyond this rate of attrition there is an even bigger reason for the boxcar shortage. It is one of the most peculiar industry arrangements in the U.S.

Railway companies have their own trade association—the Association of American Railroads. Under association rules, all lines must lend their boxcars to other companies if the demands of traffic so require. But, also under association rules, if the borrowing company wants to keep a boxcar for a while, it need only pay a nominal daily "rental" fee of something less than $3.

The Western railroads get the worst of this arrangement. In the U.S., the heaviest flow of bulk-product rail traffie moves from West to East, as Western states ship their grains and other raw materials eastward for finishing. Once a Western-owned boxcar has ar rived in, say, New York, an Eastern operator simply takes it over and keeps it—paying that nominal rental fee dictated by the Association of American Railroads. The two lines currently hardest hit by this system are the Great Northern, which owns 22,800 boxcars but now has only about 48% of that number on its own tracks, and the Northern Pacific, which owns 20,000 with 40% out of hand.

Low-Rent Imprimatur. The Interstate Commerce Commission, well aware of the perennial boxcar shortages, has long fought the low-rental rules laid down by the Association of American Railroads' imprimatur. Indeed, a bill giving the ICC greater rate-setting leeway last year passed the Senate, now is stalled in the House. Still undaunted, the ICC ordered that all railroads receiving boxcars from the Great Northern or the Northern Pacific promptly unload them and return them to their corporate owners within 24 hours. If the receiving rail lines ignore this order, the ICC will probably have to go into the courts.