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Wheat industry shines light on rail shipping challenges

PhilAugustavo /Getty images Railroad cars on tracks
SHIPPING PROBLEMS: The U.S. winter wheat crop is nearing harvest in the Great Plains. The U.S. wheat industry depends heavily on rail shipping to move the crop from farms and local elevators to domestic customers and export elevators. That is why U.S. Wheat Associates (USW) and its Transportation Working Group have coordinated with other organizations to highlight the challenges rail shipping has faced.
U.S. Wheat Associates: With harvest on the horizon, grain rail shipping faces problems.

In recent months, U.S. grain rail shipping has faced a host of service-related challenges, ranging from delayed cars to metered traffic and dramatic spot-freight-market increases. Those service problems reached such elevated levels that the U.S. rail regulatory body, the Surface Transportation Board, stepped in.

The STB will now require the four largest rail carriers to submit a host of documents and conduct biweekly check-ins with the agency until service levels are restored.

The U.S. wheat industry depends heavily on rail shipping to move the crop from farms and local elevators to domestic customers and export elevators. USDA reports that railroads ship 25% of all U.S. grains; that is why U.S. Wheat Associates and its Transportation Working Group have coordinated with other organizations to highlight the challenges rail shipping has faced.

New requirements

The move by the STB shows the agency is taking rail shipping concerns seriously. Carriers now must develop service recovery plans and submit regular progress reports. The regulator will also require all Class 1 railroads to report on customer-centric performance metrics and employment data for a six-month period. According to their published decision, the STB’s actions are “to promote industry-wide transparency, accountability, and improvements in rail service.”

The challenges with rail service are clear. The American Farm Bureau Federation put together an extensive report showing the severity of the shipping disruptions. For example, in the year after the first quarter of 2021, unfilled grain car orders went up 47%. The number of grain cars that were at least 11 days overdue went up 107%. Rates in the secondary rail market increased, and rail delivery speeds declined during the same period.

Threats of service cuts

In mid-April, the Union Pacific Railroad announced that it would start metering traffic if shippers did not voluntarily reduce their freight-car inventories. In a statement, UP said it had “experienced some setbacks — including numerous service interruptions, crew shortages … and delays to our network.” UP added, “Additional inventory has led to more congestion in yards, an imbalance of our resources, and further slowdown of our operational performance.”

In response, CF Industries, a major fertilizer producer, said such actions by the railroads would put crops at risk by curtailing fertilizer shipments ahead of the spring planting season.

Addressing the negative impact

In March 2022, the National Grain and Feed Association urged STB to address the “significant rail service disruptions” which have negatively impacted the nation’s supply chains. Following that letter, STB was quick to react, and it scheduled public hearings that were held in late April. Those hearings featured shippers, rail labor unions and rail company executives.

The Agricultural Transportation Working Group, a representative body made up of agriculture-oriented trade groups, including USW, sent a letter to STB on April 21 and urged an immediate resolution to the “current nationwide freight rail service challenges.” The group urged STB to take appropriate measures that would “deter, and hopefully prevent future service failures,” which include the establishment of reciprocal switching rules.

Additionally, USW filed joint comments to the STB hearing with the National Association of Wheat Growers and the North American Millers’ Association. The USW Transportation Working Group, led by Jim Peterson, North Dakota Wheat Commission policy and marketing director, also met with each member of STB to share concerns regarding the current railroad challenges and to point out the benefits that competition-inducing policies provide, such as reciprocal switching.

A welcome sign

The orders issued by the board last week are a welcome sign that rail customers, like wheat farmers, are being heard. U.S. Wheat Associates commends STB’s initial steps and fast action, and encourages further measures to improve rail logistics and hold railroads accountable to their customers.

Anderson is a U.S. Wheat market analyst.

Source: U.S. Wheat Associates is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. Michael Anderson is a USW Market Analyst

                                                                                                                                       

 

 

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