The Surface Transportation Board (STB) has adopted for first-quarter 2025 the rail cost adjustment factor (RCAF), which is defined as “an index formulated to represent changes in railroad costs incurred by the nation’s largest railroads over a specified period of time.”
The STB is required by law to publish the RCAF on at least a quarterly basis. The Association of American Railroads (AAR) each quarter computes three types of RCAF figures and submits them for STB approval:
- Unadjusted RCAF: “an index reflecting cost changes experienced by the railroad industry, without reference to changes in rail productivity.”
- Adjusted RCAF: “an index that reflects national average productivity changes as originally developed and applied by the ICC [Interstate Commerce Commission; the STB’s predecessor], the calculation of which is currently based on a five-year moving average.” According to the STB, the five-year moving geometric average of productivity change for U.S. Class I railroads from 2018-2022 is 1.011 (1.1% per year).
- RCAF-5: “an index that also reflects national average productivity changes; however, those productivity changes are calculated as if a five-year moving average had been applied consistently from the productivity adjustment’s inception in 1989.” According to the STB, the RCAF-5 for first-quarter 2025 uses a productivity trend for the years 2018-2022, which is 1.011 (1.1% per year).
While STB Chairman Robert Primus earlier this month complained of what he called “a recent troubling trend of the substandard data associated with AAR’s RCAF,” the Board, in a Dec. 20 decision (scroll down to download), reported that “AAR’s calculations have been examined by the Board’s Office of Economics, and the Board finds that AAR has complied with agency procedures.” The STB adopted these RCAF figures for first-quarter 2025: unadjusted RCAF, 0.944 (down 1.8% from fourth-quarter 2024’s 0.961); adjusted RCAF, 0.367 (down 2.1% from fourth-quarter 2024’s 0.375); and RCAF-5, 0.347 (down 2.0% from fourth-quarter 2024’s 0.354).
Table A shows the index of railroad input prices, unadjusted RCAF, adjusted RCAF, and RCAF-5 for fourth-quarter 2024 and first-quarter 2025:
Table B shows the third-quarter 2024 index and the RCAF calculated on both an actual and forecasted basis (the difference between the actual calculation and the forecasted calculation is the forecast error adjustment):
