2. Are prices with capped quantities built into these contracts?
3. Would a Class I railroad be legitimately applying a fuel surcharge to a customer’s invoice for higher fuel costs incurred by other carriers in a delivery chain (drayage truckers, shortline or switching railroads, etc.)?
1. I have no idea. I do not work for any railroads. I only base my statements on what I have been told over 41 years as a broker. So, I would ASSume they buy as much in advance to be able to lock in their profits. However, IF they think the price is high and going to be lower in the future they MAY not HEDGE all of their future needs.
2. ALL FUTURES contracts are for specific quantities shipped in a month in the future. Meaning they are buying #2 Commercial diesel in X amount of gallons delivered to the Port of NYC the month of June 2027(as an example).
Go to the CME or the NYME websites. I think diesel trades on the NYME. Agricultural products(like lumber and pork bellies) trade on the CME.
3. No, we receive a bill from the BNSF or the CN, UP, NS, CSXT, CPRS. Only for the portion of the freight that they haul including the switch to the final destination. The Switching Carriers get paid by the line haul carries as part of their agreement to move the cars around a local city. For example, the KO moves cars across Wichita. Customers served by the KO are open to switch with the UP or BNSF. The KO gets paid a standard amount per car to move it across the city. Same with the MNNR in the Twin Cities. Or any of the other short line carriers. They call this being open to reciprical switching. Anything not in the cities switching district is considered a LINE HAUL.
If the railcar is hauled by multiple Class I carriers then we will receive a bill from multiple railroads. For example, the last rail car I sold went from Bingen, WA on the BNSF to Henrietta, NY on the LAL. The leat expensive routing is through Chicago. The BNSF rate on a 73’ A Frame Flat car is $10316 plus a $.45 fuel surcharge per mile($1047). For a total of $11363. The CSXT rate is $3613. Plus a $.44/mile fuel surcharge for a total of $3870. The short line carrier(the LAL) is paid by the CSXT to bring it to its final destination just SE of Rochester, NY.
So, roughly 19% of the cost of the lumber is the freight to get it to its final destination. 8% of that $15234 freight bill is the current FUEL SURCHARGE.