Union Pacific 2007 Annual Report Download - page 28

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24
Agricultural – Price increases were the primary drivers
of agricultural commodity revenue in 2007, partially
offset by a decline in volume levels. Shipments of
whole grains used in feed declined as barge operators
captured more shipments destined for export from the
Gulf Coast due to both favorable barge rates and
improved navigation conditions on the Mississippi
River. Conversely, wheat and food grain shipments
improved as a strong wheat crop generated record
shipments to the Gulf Coast for export. Shipments of
ethanol, a grain product used as an alternative fuel and
fuel additive, and its co-products (primarily livestock
feed) also increased substantially.
Price increases, volume growth, and fuel surcharges increased agricultural commodity revenue in 2006 versus
2005. Whole grains increased as strong gulf exports and higher freight charges for barge traffic shifted feed
grain shipments to rails. Shipments of ethanol and its co-products (primarily livestock feed) also experienced
strong growth, reflecting continued demand in this growing industry. Conversely, wheat shipments declined
due to extremely low crop production levels in 2006 primarily due to drought conditions in wheat producing
states. Price and fuel surcharge increases improved ARC in 2006.
Automotive – Price increases drove the growth in
automotive revenue, partially offset by lower finished
vehicle shipments. A decline in vehicle production
levels primarily drove the volume decline. Conversely,
automotive parts shipments grew due to increased
volumes from domestic manufacturers, new business
acquired in the middle of 2006, and our new
intermodal train service between Mexico and
Michigan.
Price increases, volume growth, and fuel surcharges
increased automotive commodity revenue in 2006 over
2005. Shipments of finished vehicles grew as higher
manufacturer inventories at the end of 2005 translated
into record volume growth in 2006. Shipments remained relatively strong through the second quarter due to
the production ramp-up of new models at plants served by us. Automotive parts shipments also grew due to
conversion of traffic from trucks, new business growth, and production increases at several assembly plants
served by us. Fuel surcharges and price increases drove the ARC improvement.