Freight railroads are a vital component of the U.S. agricultural supply chain. Shippers of bulk commodities such as grain, oilseeds, fertilizer, feed ingredients and food products rely on rail for long-distance movement where trucking is cost-prohibitive and waterways are unavailable. In recent years, farm and food products have consistently accounted for roughly one-fifth of total U.S. rail tonnage, reflecting agriculture’s dependence on a rail network that connects rural production regions with domestic processors and export markets.
In 2023 alone, U.S. railroads carried more than 80 million tons of corn, 26 million tons of soybeans and nearly 26 million tons of wheat, much of it originating in the Midwest and Northern Plains and moving toward coastal ports or major processing hubs. For many regions, particularly those far from navigable waterways, rail is not simply the lowest-cost option. It is often the only viable one.
Against this backdrop, Union Pacific and Norfolk Southern have proposed an $85 billion merger that would create the first coast-to-coast Class I railroad in U.S. history. The combined system would span roughly 50,000 route miles across 43 states, linking the dominant western and eastern rail networks into a single carrier. Proponents describe the transaction as an “end-to-end” merger that would streamline operations, reduce interchange delays and improve service efficiency.
However, the economic implications of such a consolidation extend beyond operational integration. For agriculture and rural America, the central question is not whether railroads could operate a larger network, but how further concentration would affect pricing power, service reliability and accountability in markets where shippers already have limited alternatives.
Market Concentration and the Loss of Competitive Discipline
The U.S. freight rail industry has undergone decades of consolidation. Since deregulation under the Staggers Rail Act of 1980, the number of Class I railroads has fallen from more than 40 to just six. Four carriers now account for nearly 90% of total U.S. rail freight revenue, a level of concentration well above thresholds typically considered “highly concentrated” under federal antitrust guidelines.
Empirical measures make this consolidation clear. One commonly used yardstick is the Herfindahl–Hirschman Index (HHI), which adds up the market shares of all major firms in an industry to show how concentrated a market is. Lower values indicate more competition, while higher values signal that market power is concentrated in fewer hands. For Class I railroads, the HHI rose from 589 in 1978, a level consistent with a competitive market, to more than 2,200 by the mid-2000s, well above the U.S. Department of Justice’s threshold for a highly concentrated industry. Subsequent rail mergers have only reinforced this structure, leaving much of the eastern United States effectively served by a CSX–Norfolk Southern duopoly and much of the West dominated by Union Pacific and BNSF.
A combined UP–NS system would further tighten this landscape. Based on USDA and Surface Transportation Board (STB) data, the merged carrier would account for roughly 44% of total originated carloads across major commodity groups and more than one-third of all grain rail movements nationwide. In practical terms, this would leave large portions of the country dependent on a single railroad for end-to-end service, eliminating key interchange points, such as Chicago, St. Louis or New Orleans, where shippers previously could bargain between UP and NS.
For agricultural shippers, concentration matters because rail competition is already limited at the local level. Approximately 95% of grain elevators are served by only one railroad. In these settings, competitive discipline does not come from the ability to switch carriers, but from regulatory oversight that substitutes imperfectly for market forces.
Read more on the AFBF Market Intel page: https://www.fb.org/market-intel/proposed-rail-merger-comes-at-farmers-expense
