News Column

Grain shipments still on hold as railroads struggle to keep up

July 4, 2014

By Tom Meersman, Star Tribune (Minneapolis)



July 04--Minnesota farmers and grain elevator operators are worried about millions of bushels of corn and soybeans from 2013 that still haven't shipped, even as this year's crop is in the ground.

An overburdened rail system has backlogged grain car orders and delayed grain shipments for months, and some of the worst problems are in Minnesota and the Dakotas.

Rail companies promised to do better when the issue surfaced in April, but state and federal officials want stronger assurances that railroads will catch up and that grain shipments will be more timely.

The federal Surface Transportation Board has ordered Canadian Pacific Railway and BNSF Railway Co. -- the two main rail firms that serve the region -- to provide specific details and target dates to ensure shipment of last year's crops before this fall's harvest.

"The Board remains very concerned about the limited time period until the next harvest, the large quantities of grain yet to be moved, and the railroads' paths toward meeting their respective commitments," according to the directive, issued two weeks ago.

It noted that despite some progress in reducing backlogs, railroad delays are causing "severe, negative effects" for farmers, including "elevators running out of storage capacity, risks of stored grain spoiling, and penalties incurred by grain shippers for products that are not delivered on time."

State officials also are concerned, and the Minnesota Department of Agriculture will host a half-day forum on the future of agricultural freight next week in Alexandria.

Bob Zelenka, executive director of the Minnesota Grain and Feed Association, said the rail backup has caused financial problems for grain elevators, and logistical troubles for grain handlers and traders.

Farmers typically store much of their own grain, but most eventually sell it to a grain elevator for temporary storage and shipment, Zelenka said. The elevators in turn sell the grain to an end user, perhaps on the West Coast for shipment to Asia, and order a train to move it by a certain date.

Zelenka said railroads seem to be more interested in moving oil from North Dakota than grain from farms. "We still have grain elevators that are several weeks behind on receiving their [rail]cars, while at the same time, every day, an oil train goes by the elevator, which seems to add insult to injury," he said.

The extra oil shipments have aggravated congestion in St. Paul and Chicago rail yards, Zelenka said, further delaying whatever grain trains are available to serve farmers.

"The way things stand right now, it's going to be nip and tuck as to whether railroads will be able to move last year's crop prior to new crops coming out of the field," he said.

Railroads under pressure

BNSF spokeswoman Amy McBeth denied that the oil industry is receiving preferential treatment.

"BNSF is not favoring crude shipments over other shippers like agriculture," she said in an e-mail. "This is a case of rapid growth for several commodities using parts of our railroad network that hadn't previously seen that kind of volume." Those cargoes included consumer products, coal and a surge in grain traffic at the end of 2013 caused by overlapping crop harvests, she said.

Railroads also have cited severe winter weather that forced them to run shorter trains, and increased backlogs and congestion.

Officials from BNSF and Canadian Pacific pledged to address the delays in letters sent to the Surface Transportation Board last week.

BNSF's associate general counsel, Jill Mulligan, said the railroad is hiring about 400 more train, yard and engine employees to work along the northern tier of states where grain shipments originate. It also is adding more than 200 locomotives and working to better streamline communication and coordination of train traffic, she said, and has invested $300 million in capital improvements along its northern corridor route during the past five months.

Canadian Pacific, which moves about 15 percent of the grain in Minnesota and the Dakotas, said it has increased its grain loading by 27 percent since April.

Canadian Pacific's president and chief operating officer, Keith Creel, estimated that "there may be a backlog demand of up to approximately 10,000 to 12,000 cars on our railroad," with an additional 2,000 expected in the next five weeks, "attributable to the 2013 crop year."

Congestion in the rail yards

Creel said Canadian Pacific intends to move 2,000 to 2,500 grain cars each week this summer, but noted that one of the continuing problems -- not within the railroad's sole control -- is "severe congestion/bottlenecks at St. Paul," and also in Chicago's rail yards.

Gary Purath, who farms about 1,400 acres near Red Lake Falls in northwestern Minnesota, said he's concerned not only about the availability of rail cars to ship last year's crops, but also about the skyrocketing price of freight.

Shipping costs have tripled in South Dakota in recent months, according to that state's corn growers association.

Elevator operators need to factor those costs into the price they offer farmers for corn and soybeans, Purath said, so growers receive less per bushel.

"It's a lose-lose operation for both grain elevators and growers," he said.

Tom Meersman -- 612-673-7388

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(c)2014 the Star Tribune (Minneapolis)

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Source: Star Tribune (Minneapolis, MN)


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