Union Pacific 2011 Annual Report Download - page 27

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27
Agricultural Products – Fuel surcharges, price
improvements and modest volume growth increased
agricultural freight revenue in 2011 versus 2010. The
federal mandate for higher levels of ethanol in the
nation’s fuel supply and new business increased
shipments of ethanol by 10% in 2011 versus 2010.
Strong export demand for U.S. wheat via Gulf ports in
the first half of 2011 was the primary driver of a 6%
increase in wheat and food grains shipments for 2011
compared to 2010, despite a 19% decrease in
shipments in the second half of 2011 when U.S. grain
exports declined. Poor wheat production in some
foreign markets drove the export demand during the
first six months of the year.
Higher volume, fuel surcharges, and price
improvements increased agricultural freight revenue in 2010 versus 2009. Increased shipments from the
Midwest to export ports in the Pacific Northwest combined with heightened demand in Mexico drove
higher corn and feed grain shipments in 2010. Increased corn and feed grain shipments into ethanol
plants in California and Idaho and continued growth in ethanol shipments also contributed to this
increase. In 2009, some ethanol plants temporarily ceased operations due to lower ethanol margins,
which contributed to the favorable year-over-year comparison. In addition, strong export demand for U.S.
wheat via the Gulf ports increased shipments of wheat and food grains compared to 2009. Declines in
domestic wheat and food shipments partially offset the growth in export shipments. New business in feed
and animal protein shipments also increased agricultural shipments in 2010 compared to 2009.
Automotive – Higher volume, core pricing gains and
fuel surcharges improved automotive freight revenue
from 2010 levels. Although higher production and sales
levels during 2011 contributed to volume growth, the
disaster in Japan partially offset the increase in
shipments. The disruption caused by this event
reduced parts shipments in the second quarter and
shipments of international vehicles in the second and
third quarters. Finished autos shipments were up 7%
in 2011 from 2010, aided by a 14% increase in the
fourth quarter as the U.S. light-vehicle sales rate was
the highest since the second quarter of 2008.
Increases of 37% and 24% in shipments of finished
vehicles and automotive parts in 2010, respectively,
combined with core pricing gains and fuel surcharges,
improved automotive freight revenue from relatively weak 2009 levels. Economic conditions in 2009 led to
poor auto sales and reduced vehicle production, which in turn reduced shipments of finished vehicles and
parts during the year.
Chemicals – Volume gains, fuel surcharges and price
improvements increased freight revenue from
chemicals in 2011 versus 2010. In mid-2010, we
began moving crude oil shipments from the Bakken
formation in North Dakota to facilities in Louisiana.
This new business, along with shipments from the
Eagle Ford shale formation in south Texas,
contributed to a 37% increase in shipments of
petroleum products during 2011. Strong domestic
demand and robust spring planting increased fertilizer
shipments by 9% versus 2010. Additionally, improving
market conditions increased demand for industrial
chemicals during 2011, driving volume levels up
versus 2010.
2011 Agricultural Revenue
2011 Automotive Revenue
2011 Chemicals Revenue