The Dakota, Minnesota and Eastern Railroad’s (DM&E) proposed upgrade and expansion could result in $240 million in farm program savings according to a new United States Department of Agriculture (USDA) report. The South Dakota Corn Growers Association (SDCGA) welcomes the report’s findings for producers and as work begins on the next farm bill in 2007.
“This information not only demonstrates benefits to ag producers but the DM&E expansion’s advantages will play a pivotal role in the next farm bill, saving taxpayers money,” said Reid Jensen, president of the SDCGA. “The expansion and upgrade is a logical step in creating greater independence for ag producers.”
The recently released study examines what healthy rail competition would do for Minnesota and South Dakota corn prices. When effective competition is present, rail rates are much lower and those savings from lower transportation costs go directly to agricultural producers in higher grain prices.
As a result of lower costs and better grain prices, payments from two federal farm programs would be reduced by an estimated $240 million a year on corn raised in Minnesota and South Dakota alone. The two farm programs USDA considered savings to were Counter-Cyclical Payments and Marketing Assistance Loan payments.
If increased rail competition boosted the price received by corn producers in Minnesota and South Dakota, these higher prices would raise the national average price received for corn. Using the past two years as examples, this increase in the national average price received for corn would have reduce counter-cyclical payments paid to all corn producers by as much as $75 million in each of those years, saving taxpayers $150 million.
In addition, based on the conditions described above, increased rail competition leading to higher prices paid to corn producers served by the DM&E could potentially reduce marketing assistance loan payments for corn by as much as $165 million, if corn prices in the future fall below the loan rate. These savings to the federal government could be even greater when factoring in other crops grown in the state.
“South Dakota farmers’ future livelihood depends on the DM&E’s expansion project,” said Jensen. “Increased prices at the farm gate will provide producers a more direct, independent way to secure income from their products. The SDCGA believes the DM&E expansion is one of the biggest opportunities for economic growth that will positively impact producers, our state and our country.”