Railroads gaining steam on grain backlog, but harvest woes mount
© Copyright Agri-Pulse Communications, Inc.
WASHINGTON, Sept. 10, 2014 - A rail backlog that has kept grain bins full in the Dakotas, Montana and some adjacent states is improving, but rail companies still have a long ways to go.
Observers point to a variety of causes, including a shortage of rail cars, locomotives and crews to run them, as well as the North Dakota oil boom. According to numerous reports the backlog has left some of the 2013 grain harvest stuck in storage across the upper Midwest, particularly in North Dakota, even as the 2014 corn harvest is getting underway.
Last week, the federal Surface Transportation Board (STB) held a field hearing in Fargo, North Dakota, featuring nine panels of witnesses as well as remarks from elected officials in North Dakota, South Dakota, and Minnesota.
Burlington Northern Santa Fe and Canadian Pacific, the two main rail providers in the region, have been filing weekly reports to the STB. On Friday, BNSF reported 2,231 orders past due with an average of nearly nine days late. On July 18, BNSF reported 6,154 past due orders, down from 11,127 on June 13, with an average of at least 23 days late.
Progress from CP is more difficult to gauge. Recently, CP instituted a new ordering system for rail cars, which some lawmakers say is resulting in reports that show improvement that is not warranted. In a release on his website, Rep. Kevin Cramer, R-N.D., said the reduction in CP's open request “appears to be primarily the result of orders being canceled, rather than fulfilled.” CP's report to the STB said as of Sept. 5, customers had removed 23,968 open requests from their system, and 6,762 requests remain open.
North Dakota Wheat Commission Administrator Neal Fisher said the marked difference in progress between the two different companies has not gone unnoticed.
“We have two major railroads out here, and I'd have to say that I think one of them is performing better than the other,” Fisher said in an interview with Agri-Pulse, noting the efforts of BNSF. “The answers the CP give don't seem to be quite as satisfying just yet.”
Fisher said local producers and rail companies had previously been working toward improving North Dakota's system together. On one hand, producers and local cooperatives made improvements in consolidating smaller elevators and improving grain loading systems. On the other hand, rail companies have made improvements in recent years in terms of improved rail car velocity and getting grain out faster. “We always ask the question: Who made whom efficient here?”
The corn and soybean harvests will likely begin in earnest in North Dakota in late September or early October, but 2014's spring wheat harvest has been the latest on record. USDA's weekly Crop Progress Report said just 42 percent of the state's spring wheat was harvested as of Sept. 7, compared to the 74 percent five-year average.
Aside from local issues of grain storage and decreasing cash prices, rail backlogs are also causing problems for domestic and international customers. While increased freight costs are typically passed on to the producer, National Grain and Feed Association President Randy Gordon said some customers in the Pacific Northwest have absorbed some transportation-related costs by bidding higher on available grain, “thereby reducing, to some extent, the basis impact on producers.”
Internationally, Fisher said importers “get nervous” when they see difficulty moving a crop, which he said is damaging the reputation of North Dakota's wheat crop.
“This has always been the most reliable supply center of the world (for wheat),” Fisher said. “If (importers) start looking to Canada or Australia or to someone else, that's a habit a producer doesn't want to have them get into.”
Looking forward, USDA is not backing down from predictions of another solid crop in the region and across the country, which means already occupied grain storage space will soon be needed for 2014's harvest. In an e-mail to Agri-Pulse, Gordon expressed concern that rail problems that are slowly but surely being alleviated may come up again.
“There is no question that shippers of grains, oilseeds and other agricultural products - and many farmers - are starting from behind this year in terms of moving out last year's crop,” Gordon said. “Given the likely prospect of another bin-busting crop this year, we expect rail service to be bumpy and uneven, and very challenging for the remainder of this crop year and well into 2015.”
Gordon said this only further illustrates the need for infrastructure improvements that could help with future bumper crops.
“Producers, the grain, feed and processing industry, and indeed shippers of non-agricultural products all need a national commitment to invest in transportation infrastructure if America's tremendous productive capacity and job creation is to have a chance to attain its full potential,” Gordon said.
The Senate Commerce Committee has scheduled a hearing today at 2:30 p.m. EDT entitled “Fright Rail Service: Improving the Performance of America's Rail System.” The committee's website says the hearing will focus on rail service issues throughout the country, including congestion and locomotive and railcar shortages.
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