Midwest corn harvest seen exacerbating rail, storage problems
© Copyright Agri-Pulse Communications, Inc.
WASHINGTON, July 23, 2014 - As growers look ahead towards a bountiful harvest in many parts of the Midwest, the potential for bumper 2014 crops coupled with still lingering rail problems moving last year's crop, could shape up as a major issue this fall.
Data from the Burlington Northern Santa Fe (BNSF) railway show that as of July 18, rail cars were an average of 23.7 days late across the nation, and 6,154 rail cars were past due. That's an improvement from June 13 (28.2 days late, 11,127 rail cars past due). However, farmers and others in the ag industry are doubtful this level of progress will be adequate to move enough grain from bins still holding crops from 2013.
Iowa farmer Daryl Haack said he's hearing from elevator operators that the rail industry as a whole is “just barely keeping up now,” which is especially concerning considering very little corn is being sent to market at present, with prices near four-year lows.
“If they're just barely keeping up now and farmers aren't selling corn, what's going to happen when (farmers) start selling corn,” Haack said. “Some of that's going to have to move.”
Haack - who sits on the federal Surface Transportation Board's (STB) Rail Energy Transportation Advisory Committee and the board of the Little Sioux Corn Processors ethanol plant in Marcus, Iowa - said this could cause a storage issue if market conditions don't improve and rail companies aren't able to move last year's harvest.
“I see more storage issues than rail issues unless the price starts coming up,” Haack said. “If the price starts coming up and people start wanting to move corn, then there's going to be rail issues.”
When a producer is using elevator storage to hold his grain, the elevator cannot move that grain until the farmer sells it. The December corn contract closed at just over $3.68 on Tuesday, and the cash price at the elevator is significantly lower in many parts of the country.
With much of last year's record corn crop of nearly 14 billion bushels still in the bins of producers and grain elevators, Haack said the corn will likely stay there until market conditions improve. And with another crop of close to 14 billion bushels predicted, farmers may keep holding tight to supplies.
“With the prices we've had the last two years, the farmers don't need money, they don't want to take the income if they don't have to, they may just pay storage,” Haack said. “(When) this year's corn wants to move, it's going to take rail cars. I see a problem coming down the road.”
Local demand for corn that could be shipped by truck rather than rail is unlikely to increase, farmers say. Feed use is down, with the pork industry hurt by the Porcine Epidemic Diarrhea virus (PEDv) and the cattle herd diminished by drought. Plus, the EPA is still deciding the 2014 volume requirement for the Renewable Fuels Standard (RFS).
Congress has also taken notice of the issue. Sen. Heidi Heitkamp, D-N.D., asked North Dakota State University to study the economic impact of the train delays in the state, and her office said a “conservative estimate” is that the state's farmers lost $66 million in revenue due to agricultural shipment delays between January and April of 2014.
On Tuesday, Heitkamp called on Canadian Pacific Railroad to provide information about how the company plans to handle the coming harvest after she had similar conversations with BNSF and the STB.
“(BNSF) has been very responsive to our request,” Heitkamp said in an interview with Agri-Pulse. “Quite honestly, we haven't gotten that level of response from Canadian Pacific.”
John Miller, vice president of BNSF Agricultural Products Group, told Agri-Pulse the company has made a record capital investment of $4 billion to improve the rail network and expand capacity. Miller also said the company has a program to purchase 500 locomotives and has hired more than 4,000 of a planned 5,000 new employees in 2014.
BNSF's progress in reducing the backlog of grain to be moved across the country is noticeable, but Miller said he disagrees with a call from the STB to focus on past due grain orders. He says BNSF will obey the order, but he doesn't think regulatory intervention is the best way to handle needs for improved service along rail lines.
“Altering our service priorities through regulation will potentially pit one region versus another, or even one commodity versus another, compromising the network and hurting the system overall,” Miller said.
The North Dakota crude oil boom has been blamed in some circles for the problems with train access, but Miller said BNSF hasn't been preferential to North Dakota oil over North Dakota grain, pointing out that only 4 percent of total BNSF traffic is crude oil. Heitkamp acknowledged that her state was “in a unique spot” because of the demand that could be generated from crude oil and grain, but said rail companies must follow common carrier laws.
“Part of their responsibility as common carriers (is) they have to figure out how to handle (the increased demand),” Heitkamp said. “They don't get to differentiate between ‘We're not going to haul this' or ‘We're not going to haul that.' This is part of their obligation.”
Heitkamp said she will continue to work on the issue and will keep pushing Canadian Pacific to comply on a similar level as BNSF because this is an issue that can't be overstated.
“We cannot have our producers experience what now is (more than $100 million) worth of losses and have that ignored,” Heitkamp said. “They have to have access to rails.”
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