A “perfect storm” last year slowed agricultural transportation by rail, barge and ship. The challenges included a long, cold, snowy winter; high-yielding crops that increased what needed to be moved; and labor issues stretched on at West Coast ports.
For this year, there are some improvements but major issues that slowed ag transportation in 2014 still remain.
Rail carriers, especially in the Northern Plains and Canadian Prairies, had the foremost problem of moving grain and fertilizer efficiently last year. DTN Cash Grains Analyst Mary Kennedy said 2015’s outlook will depend on if we see more efficiency for moving agricultural products.
“The problems last year caused cash markets in the upper Midwest to fall apart, because elevators were full while waiting for their overdue cars and could not or would not contract grain for shipment,” Kennedy said. “Farmers ended up losing hundreds of thousands of dollars, because they had to sell deferred grain, which carried a cheaper basis.”
Kennedy added that elevators also lost money from the lack of rail cars. When the secondary freight market hit historical prices because of car backlogs, many elevators couldn’t pay the high costs, she said.
Compared to the serious disruptions that plagued grain shippers during the fall and winter of 2013-2014, rail service improvements occurred during the 2014 harvest and are expected to continue in 2015, especially with some of the western carriers, according to Randy Gordon, president of the National Grain and Feed Association (NGFA).
A combination of factors contributed to the improved service, he said. The railway companies are investing more into their track and terminal infrastructure, hiring additional crew members, and procuring more locomotives. Also, not as much grain has come on the market so far this year because of lower grain prices compared to last year. Farmers are storing more grain in on-farm storage and commercial storage, Gordon said.
Still, there remains strong demand for rail from other industries.
“Given continued improvements in the overall economy, there is continued strong demand for rail service by not only ag but by coal, crude oil, intermodal and other products,” Gordon told DTN.
While grain shipments by rail fell from 50% in 1980 to around 28% today, billions of bushels of grains and oilseeds still are shipped by rail, according to the NGFA. Some crops are more dependent on rail than others, with 72% of U.S. wheat and 56% of U.S. barley shipped by rail.
NCGA reports agriculture now depends on six U.S. Class 1 carriers to haul the majority of grains and oilseeds and four of those six typically originate more than 80% of such traffic. This is up from 1980 when they only made up 53%.
With issues with slow rail service in the upper Midwest last spring, the Surface Transportation Board (STB) began weekly reports to gauge how much progress railroads were actually making to improve rail car delivery time. On Dec. 30, 2014 the STB issued a proposal of new regulations for permanent weekly reporting. The current reports were only on a temporary basis with no expiration date.
“Based on the board’s experience with the reporting to date, the board is now moving forward with a rulemaking to determine whether to establish new regulations for permanent reporting by the members of Class I railroad industry, the Class I carriers operating in the Chicago gateway and the Chicago Transportation Coordination Office (CTCO) through it Class I members,” the STB Board said in its proposal.
Comments are due on the proposal by March 2, 2015, while reply comments are due by April 29, 2015.
The NGFA supported rail legislation introduced in 2014 by Sens. Jay Rockefeller (D-WV) and John Thune (R-SD). This legislation would allow the STB to initiate investigations of rail practices on its own, something it cannot do today. The STB can only investigate in response to filing of shipper complaints.
In addition, this legislation would require the STB to report quarterly to Congress and enable STB members to communicate with one another about proceedings and issues “to provide for a more informed and deliberative process,” NGFA reported. Currently, STB board members cannot communicate with each other unless a public meeting is called.
Gordon said more-transparent rail service performance data is important. The information is important for shippers to plan their logistics to serve domestic and export markets, as well as for the STB, Congress and others to track how well carriers are operating.
“The NGFA is not asking for agricultural shipments to have preferential treatment over other products, but we also don’t want to see ag disadvantaged at the expense of other, more profitable traffic either,” he said.
In an ongoing illustration of railcar need, weekly reports show the railcar shortage. In the weekly STB update on Jan. 28, the BNSF reported that cars owed in North Dakota were at 2,671 for the week ending Jan. 24 versus 2,704 the prior week and days late were at 17.9. Cars owed in Montana were at 1.097 owed versus 969 the prior week and days late were 19.3. Cars owed in Minnesota were at 256 versus 259 the prior week and were 19.9 days late.
In its weekly STB update on Jan. 28, The Canadian Pacific (CP) reported that North Dakota was owed 165 cars versus 742 the prior week, Montana was owed zero cars versus 77 the prior week and Minnesota was owed one car versus 77 the prior week. The CP told the STB that car orders were down likely due to lower cash markets.