One of the key indicators of how our overall economy is doing is the Dow Transportation Index. Made up of airlines, marine transport, trucking, railroad, and other transport-related companies, these components are all sensitive to changes in the economy.
Here in Washington state, and Spokane in particular, there is a long and continuing relationship with the rail segment of that Index. We can see the reality of that, as hundreds of cars roll through daily over our bridges and through the switchyards, filled with the pieces and parts of what's needed to keep our global economy going.
Railroads move the majority of materials throughout our country across 150,000 miles of track. Transporting goods via rail, in bulk and over distance, is cheaper than by truck. However, the stuff must still get to someone's door and that's where the trucks come in. It's this combination that has led to the growth and development of the intermodal segment of the rail business; those truck trailers you see on rail flatcars.
(Did you know that, 100 years ago, railroads were the equivalent of today's high-tech growth companies? Eighty years ago, the largest publicly traded company in the U.S. was The Pennsylvania Railroad.)
Locally, our state is a global gateway, connecting Asian trade flows from ports in Seattle and Portland to the U.S. economy, Alaska to the lower 48 states, and Canada to the West Coast. Second, the state's manufacturers and farmers rely on the rail freight system to export their products to domestic and international customers.
Here in Washington, according to Laura Kingman at the Washington state Department of Transportation, we have 3,166 miles of railways. These are served mainly by the Burlington Northern Santa Fe Railroad (BNSF) and the Union Pacific (UNP), along with 17 shortline railroads.
The DOT also showed that shipments terminating, originating, and within Washington all have increased. Flows increased from origins in Montana, North Dakota, and Saskatchewan. Outward bound traffic increased to destinations in British Columbia, Oregon, California, as well as with goods that eventually end up in Asia. Not surprisingly, farm products continue to be the primary commodity of rail freight in the state, comprising 41 percent of the traffic.
If you've been at a crossing at the wrong time, you know that Spokane remains a busy crossroads daily. BNSF's former Great Northern, Northern Pacific, and Spokane, Portland & Seattle Railway routes all run through here. Union Pacific's line from Oregon to Canada also passes through, and we're the connecting point for the Spokane and Portland sections of Amtrak's Empire Builder passenger train.
Traffic on the BNSF is comprised mostly of freight, intermodal, grain, and coal trains. On the Union Pacific, the biggest factors are freight, potash, grain, and coal trains. Speaking of coal, it accounts for 45 percent of carload traffic in the U.S. Seventy percent of coal shipments to power plants are done through railroads, including those long coal trains you see coming through a couple times a week. Entire loads are being delivered to the Portland General Electric generating plant in Boardman, Ore.
Tracking railcar loadings is a hugely useful economic indicator, as the vast majority of all our basic materials and parts move around the country by rail. How these are trending can give you an early and ongoing look at how the overall economy is doing. New reports are issued weekly but for some reason don't get the same public attention as some of the other indices. What is important is that, on a year-over-year basis, the change in rail traffic is starting to re-accelerate again. This is potentially a significant development.
According to Dr. Ed Yardeni, a leading Wall Street economist, while there is still much anxiety out there about the economy's "stall speed," rail freight traffic seems to be picking up.
Through the week of July 7, using 26-week averages to smooth out minor fluctuations, he found that total railcar loadings, excluding coal, have rebounded back to a cyclical high. The same can be said for car loads, excluding coal. Also, total intermodal loadings are approaching last year's cyclical high. Excluding trailers, intermodal loadings of containers is back at a new cyclical high. Finally, loadings of both motor vehicles and lumber products rose to new cyclical highs during the first week of July, auguring well for the auto and housing industries.
We have a couple unique shortline railroads in our area. One is known as the Washington Grain Trainyou may have seen its grain hopper cars with their colorful graphics as part of a larger UNP or BNSF train. This isn't a railroad, per se, but rather a financially self-sustaining fleet of about 120 grain hopper cars that transport wheat and barley from grain elevators in eight cities in Eastern Washington to export facilities in Kalama, Tacoma, Seattle, and Vancouver, Wash., and Portland.
The other is the former Palouse River and Coulee City (PCC) rail line. It's a 300-mile direct freight rail system that provides services to shippers, manufacturers, and farmers.
It's made up of three separate railroads located in Grant, Lincoln, Whitman and Spokane counties.
From the hundreds of railroads that existed even 80 years ago, there are now only four major U.S. companies and one Canadian company that are available to investors. They are CSX, the former Chessie System, Kansas City Southern (KSU); Norfolk and Southern (NSC); the Union Pacific (UNP); and the Canadian Pacific (CP). The Burlington Northern Santa Fe (BNSF) is owned by Warren Buffet's Berkshire Hathaway firm.
As you're driving along the highway and see a train, or are waiting at a crossing while all the rail cars go by, remember that our railroads remain as a key component of our economic growth and development. Those steel rails remain as the arteries of our economy.
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