Report on Febr 26 Meeting with BNSF

Twenty TEGMA member representatives and guests met with key staff from the Burlington Northern Santa Fe Railway's Ag Products staff at the company's Fort Worth headquarters on February 26.  A list of the attendees is attached.  The agenda included these topics:

1. Operations and equipment issues.
2. Demurrage, storage, and extended services.
3. U.S. economic outlook.
4. Grain marketing issues.

 The following are highlights from the meeting.

 Operations and Equipment Issues

• Shuttles represent 70 percent of the BNSF's grain business.
• Velocity is improving.  For the third week in a row, they have reached 2.9 trips per week.  Velocity in 2008 was up 8.4 percent from 2007.  For 2009 to-date, velocity is up 6 percent compared to 2008.
• Averaging a pick-up time of 7.5 hours after notification the shuttle is ready for release (dwell hours).
• On time performance in 2008 was just under 75 percent.
• New customer communication initiative is resulting in better coordination and less duplication of effort.
• Planning a new pilot program to create greater incentive to companies for improved origin performance.

Demurrage, Storage and Extended Services

• Goal is to maximize efficiency of cars in service.  The goal is not to see how much demurrage can be collected.  Cost control is an imperative.
• The dwell hours (loading/unloading time) is sharply lower for private cars, suggesting there are still efficiencies to be gained in this area.

U.S. Economic Outlook

• Economy is on life support.  The economy depends on credit and consumer spending.  Banks have sharply curtailed lending, bring much economic activity to a halt.
• Housing starts are down 80 percent and have not yet hit the bottom.  Fewer housing starts means less lumber to move by rail.  Auto production is down over 60 percent.  Retail sales were off by 9 percent in the fourth quarter of 2008.
• Japan's exports are down 50 percent.
• Not quite a depression yet, but it could be.  Twenty percent probability for a deeper and longer recession.  The government bailout may be distasteful, but there is little alternative.
• Diesel fuel cost down sharply.
• West Coast container exports down 30 percent in December 2008.
• 2009 GDP for U.S. estimated at a negative 2.7 percent.  China's GDP for 2009 is estimated at over 6 percent and this strength is critical to the global economy.  While China's GDP is a strong positive, it is off from much stronger numbers.
• AAR estimates rail volume is a negative 16.1 percent for January 2009.  BNSF traffic is not down as sharply as is the case for other carriers.  Coal volume remains very steady.
• BNSF management guiding principles for managing this business cycle
• Continue maintenance capital program
• Service
• Customers
• Investors
• Reduce expenses
• Equipment
• People
• Maintain financial flexibility
• Position for eventual recovery

Grain Marketing Issues

• Shuttle capacity - expect another 8 to 9 shuttle facilities to come on line in 2009.  Very pleased with investments companies are making to be part of the BNSF shuttle program.
• Fleet - there are 11,000 grain cars in storage and 35,000 freight cars in storage.  There are 700 locomotives in storage.  The BNSF total grain car fleet is 30,000 cars.
• Cost controls - 2,500 employees have been furloughed.  There will be no merit salary increases this year.
• Exports seem to be coming back.  Shipments to Mexico are down.
• Very focused on fine tuning forecasts.  When corn does begin to move will there be quality issues from storage?  Hope poultry industry has bottomed-out.  Dairy animal numbers will likely continue to decline.
• Want to be positioned to move the grain when it is ready to move.
• Recent shuttle auctions have been for two-year commitments; will be one-year auctions, as well.

Enclosure:  BNSF Meeting Attendees