The anticipated record harvest and already significant rail backlogs still resulting from last year have everyone wondering what’s going to happen going into this year’s harvest.
President Barack Obama and vice president Joe Biden met Sept. 8 with Secretary of Agriculture Tom Vilsack, who said he talked briefly about the rail situation and the potential lack of rail capacity to haul grain in light of an anticipated bumper crop in the upper Midwest. The Surface Transportation Board held a hearing Sept. 4 and heard testimony from and questioned rail executives as well as users.
Vilsack said he’s encouraged by Burlington Northern’s steps in aggressively pursuing a $5 billion investment in new locomotives, additional cars, more personnel and better track improvements. However, he said Canada Pacific “has a lot of work to do” to handle this year’s crop.
Stevan Bobb, executive vice president and chief marketing officer for BNSF Railway, noted in recent testimony that, as of August 31st, the BNSF Railway has added 339 locomotives out of a goal of 500 for the year, as well as hiring 2,419 employees of the planned 3,000 in its train, yard and engine service – and another 2,305 engineering and mechanical staff, thereby exceeding its goal of 2,000 for the year.
John Brooks, vice president for bulk market products for CP, said that CP handles only 20 to 23% of the region’s agricultural shipping but has moved 5% more than the 3-year average. This year CP will invest $400 million between Canada and St. Paul, Minn., - as well as attempting to hire 400 new employees, he said.
Vilsack recently directed Ed Avaolos, under secretary of Marketing and Regulatory Programs at the U.S. Department of Agriculture, to send a letter to the STB expressing concerns about the backlogs and what likely will be exacerbated by a record crop.
“Hopefully the Service Transportation Board which is now asking for weekly reports from these railroads will keep an eye on this and basically make sure that when it’s all said and done that these railroads are indeed prepared for what is likely to be a significant harvest,” Vilsack said.
Vilsack said the agency is “going to keep an eye on this” and plans to “keep the pressure on the railroads to make sure they’re ready, willing and able to handle what is likely going to be a very, very good crop.”
On Wednesday, the Senate Commerce, Science and Transportation Committee held a hearing on freight rail service.
Corn cash prices paid to farmers in South Dakota and the upper Midwest were at least 50-cents-per bushel lower or more because of this year’s rail situation. Wheat costs were 75 cents to $1.50 per bushel in lost opportunity to sell for immediate flour mill demand.
“In South Dakota, over 75% of the wheat, soybeans, sorghum, sunflowers and birdseed grains are exported by rail either to domestic markets or for export, making it crucial we find a solution,” said Jerry Cope, president of the South Dakota Grain and Feed Association and also the marketing manager for Dakota Mill & Grain.
Arthur Neal, deputy administrator transportation and marketing program at Agricultural Marketing Service, testified that the lack of rail capacity is having effects on other U.S. transportation modes. Ave. barge rate from Illinois River to Mississippi River for October delivery was 43% higher than 5-year average. October barge rate for St. Louis is 56% higher than 5-year average. Last time rates exceeded these levels was in 2008 when flooding interfered with barge logistics.
Sen. Jay Rockefeller, D-W. Va., the chairman, and Sen. John Thune, R-S.D., the ranking member, introduced legislation to reform the Surface Transportation Board and improve rail service beyond the Midwest.
Rockefeller and Thune said that the Surface Transportation Board Reauthorization Act of 2014 would increase the STB’s investigative authority to launch its own investigations before a complaint is filed; improve rate review timelines to make it easier for board members to communicate and improve alternative dispute resolution practices and more.