Inconsistency in the grain handling industry, specifically as it relates to rail transportation, was a topic of extensive discussions throughout 2014.
The Surface Transportation Board received numerous complaints about service problems in the rail industry, and held a public discussion back on April 10, 2014 to discuss the challenges shippers face and some possible solutions to improve efficiency. The discussions continued through October, but the cause of the problems and potential solutions depend on whom you talk to in the industry.
Agriculture is looking for more consistency in grain handling, and the railroads say they’re listening (photo from exactrix.com)
“Personally, I think they have some infrastructure problems,” said Kurt Glinn, a transportation coordinator for the Aurora Cooperative in Aurora, Nebraska. “There are some holes in their infrastructure that they haven’t serviced before. For example, in South Dakota, there are smaller operations that are basically land-locked.”
He said larger co-ops like Aurora, have a big advantage when it comes to loading grain cars.
“Two of our shuttle locations have a natural rail loop,” said Glinn, “and it runs in a full circle. So when the train gets on there, they leave the locomotive hooked up and it goes in a full circle. You load it, and then they come back and get it 10-12 hours later. It takes a lot of ground to do that. Both sit on 75 to 80 acres, and there is some industry in there, but it takes that big of a footprint.”
The Aurora, Nebraska Co-op is a larger business that has adequate access to railroads and grain cars, but there are plenty of others that may not even get rail service, because some tracks have been abandoned (photo from Auroracoop.com)
He added, “There are also lines across the country that they’ve flat out abandoned.”
At least one of the major rail carriers, Burlington Northern Santa Fe (BNSF), is committing large amounts of capital to improve some of the infrastructure challenges.
“BNSF is planning on $6 billion dollars in capital expenditures to improve operations in 2015,” said Amy Casas, Director of Corporate Communications for BNSF. “It’s a direct reflection of our pledge to meet our customers growing freight demands. The plan includes $2.9 billion dollars to replace and maintain the core rail network and its related assets.”
While the projected improvements will take place across the country, not all states appear to be struggling with grain handling transportation issues.
Amy Casas is the Director of Corporate Communications for the BNSF railroad (photo from linkedin.com)
“We actually have more than adequate supplies of rail cars and service for our grain shippers,” said Tom Tunnell, the President and CEO of the Kansas Grain and Feed Association. “Our current condition shows empty elevators waiting for the winter wheat harvest.”
He said recent rainfall is welcome, but it’s creating delays in winter wheat harvesting.
“As a result, we don’t have any transportation issues right now,” said Tunnell. “We don’t have anything to ship until they cut it. We also anticipated the harvest and emptied our storage, so whatever is cut early will be retained at the elevator because we can store it.”
Although things look good so far this year, Tunnell said they have had some big grain handling challenges in recent years.
Tom Tunnell is the President and CEO of the Kansas Grain and Feed Association (photo from ksgrainandfeed.org)
“We had a lot of grain on the ground about 18 months ago,” said Tunnell. “The cost to get rail cars was extremely high, way above normal. The premiums were in the thousands of dollars per car range, but all that’s gone away. We’re back down into a more normal range.”
Fewer rail cars means more demand and higher prices. Amy Casas said one of the improvements BNSF intends to make should help lower prices come fall harvest.
“In 2015, we plan to acquire approximately 7,800 more rail cars,” said Casas. “Of that total, about 900 will be the new cover-hopper grain cars. We also plan to acquire more than 300 locomotives this year too.”
Kurt Glinn said the ethanol industry may have lowered demand for shipping grain, but thanks to advances in seed technology, demand for grain shipping may be on the rise again, hence the need for more cars.
“When ethanol came in over the last 15-20 years,” said Glinn, “I think the railroad saw a decrease in their business. Because of the ethanol industry, there was less grain to be shipped due to ethanol plants using a lot of corn.
“Now, we’ve got better hybrids, agronomy practices, herbicides and stuff like that,” said Glinn. “We’re raising more corn per acre than we’ve ever raised before, so even with ethanol usage, we have a lot more corn to ship than in recent years even with the same number of acres planted. There’s more grain and the railroad is struggling to keep up.”
Tom Tunnell said railroads are also struggling with increasing demand for cars because of the Bakken oil field in North Dakota.
Ag experts say the Bakken Oil Fields may have taken some railroad cars that otherwise would have shipped grain (photo from deq.mt.gov)
“Much of the railroad’s equipment was taken by the efforts in the Bakken oil exploration in North Dakota,” said Tunnell. “It was taking up a lot of the railroad’s interest and time as well. However, since that time, oil prices have gone down and that situation doesn’t exist anymore.”
Glinn has a similar perspective on the railroad hauling oil out of the Bakken. “To me, personally, I think they would rather haul oil than grain,” said Glinn. “That’s just a personal opinion.”
Glinn said he thinks the shipping challenges can get better, but it will take some time.
“I think they’ve got some logistical problems,” said Glinn. “I think in the next few years we’ll see these shuttle loaders that can load 110-120 cars will improve things. The railroads would like to see more of these. Railroads want more efficiency. They want to pick that train up in 15 hours and move on.”
The price of corn’s steep drop may have played a role in some of these challenges.
“If the price of corn stayed at $7 a bushel, the railroad would have been very grain efficient,” said Glinn. “If you cut that price by 60%, and then you start whacking it another 15 cents a bushel for increased freight to compete with oil or the refrigerated cars to haul fruits and vegetables, they can’t do it.”