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New Rail System Aims To Increase Indiana Exports To Asia

A new rail hub in Indianapolis will increase Indiana's exports.

Indiana ships a wide variety of products overseas. Everything from auto parts, medical supplies, pharmaceuticals, corn and soybeans. Together exports bring in more than $34 billion to the state economy, and Indiana is hoping to increase those exports with a new rail hub debuting today.

The new Indiana Rail Road Company facility in Indianapolis allows businesses to bring their goods into the rail yard, where they will be loaded into large box containers, put onto trains and shipped out of the state.

It promises to cut shipping time to Asia by about a week—from 25 days to 20 days.

President and CEO of the Indiana Rail Road Company Thomas Hoback says this is significant for Indiana exports.

“It’s going to make importers more competitive, it’s going to reduce their transit times,” Hoback said. “They won’t have as much money tied up in inventory. But it’s certainly going to make Indiana manufacturers, exporters more competitive going overseas as well.”

How The Rail System Works

So how exactly is the rail going to do this? It’s easiest to understand when you begin at the ground level.

As harvest season begins in Indiana, millions of bushels of soybeans and corn are being prepared for sale. Jim Lankford, owner of Lankford Farms in Martinsville is in the middle of harvesting his crop. Once he’s done, he’ll sell it to processors and distributors.

Under the previous system, the distributor would likely use a truck to drive Lankford’s crops up to Chicago. The load might sit there for several days while it’s being sorted along with other products from the Midwest. Then, it would be loaded on a train to the West coast where it would be put on a ship and taken to Asia.

With the new rail, the distributor can take the crops directly to the rail yard in Indianapolis. The load will be put on a train there and shipped directly to the west coast, bypassing the bottleneck in Chicago.

Shorter shipping times and lower costs could increase demand for Indiana products – and that could benefit many Hoosiers, including Lankford.

“All the soybean producers in Indiana very well could [supply more Soybeans to Asia] because the markets, and the prices and so on normally has a bearing on how many soybeans we plant versus other crops and the better the price or demand for them my soybean acreage could increase,” Lankford said.

Then, there are the middlemen. Owner of Merchandise Warehouse Tom Siddiq is one of those middlemen, and his company stores products from Indiana and other Midwestern manufacturers. The new rail hub is located right across the street ­– a selling point for both customers and consumers.

“As a consumer it should lower your costs because everything that you buy has some transportation cost built into it,” Siddiq said. “So if you can control that it’s cheaper as well. In addition to that consumers are concerned about going green. Well rail is a very green option. The CO2’s are significantly lower than transporting by truck.”

China: The “800 Pound Gorilla”

In all of this, businesses are focusing on one part of the world – Asia.  The U.S. imported more than $300 billion worth of goods from Asia in 2012, mostly technology such as smart phones and tablets. Cutting down on importing costs could decrease the prices Hoosiers are paying for those products.

And when it comes to exports, China buys seven times more Indiana products now than it did a decade ago. According to Director of Economic Analysis at the Indiana Business Research Center Timothy Slaper, much of that can be attributed to Indiana’s agriculture industry.

“We export about $1.7 billion worth of soybeans alone from the state. If you look at the U.S. as a whole China represents 60 percent of the U.S. market, which is again huge so you’re looking at a huge market for agricultural projects and one in terms of Indiana almost dwarfs other export categories.”

There are also medical devices, medicines and car parts, and the companies that make them are vying for a piece of Asia’s growing economy.

“Really China is the 800 pound gorilla, because there growth has been almost 20 percent in the last 10 years and that’s an average annual rate and it’s increased almost five fold in the last 10 years,” Slaper said. 

But Indiana isn’t the only one trying to tap into the Asian market. Other states have had rail systems like the one in Indianapolis for years, and they’re also constantly seeking ways to make their systems more efficient and cost effective.

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