Agriculture is Working on the Railroads
May 3, 2022 For many years, the agricultural community has worked hand-in-hand with rail carriers to keep the flow of products going. Recently, however, this relationship has been strained by some moves by the rail companies. And now, agriculture is bringing its concerns on this issue to the attention of the Surface Transportation Board (STB).
This all ties back to a decision made by Union Pacific back in early April. At that time, the rail carrier announced that mandated shipping reductions would result in nitrogen fertilizer shipment delays for the foreseeable future. Suppliers such as CF Industries were told to reduce their shipments on the railroad by 20%. The company also said it would be unable to accept new rail sales as well.
“The timing of this action by Union Pacific could not come at a worse time for farmers,” said CF Industries President/CEO Tony Will in a released statement. “By placing this arbitrary restriction on just a handful of shippers, Union Pacific is jeopardizing farmers’ harvests and increasing the cost of food for consumers.”
In addition to fertilizer, grain shipments are also being negatively impacted by these moves. In fact, in a testimony given before STB on April 26, National Grain and Feed Association (NGFA) President/CEO Mike Seyfert, echoed these worries. “Many NGFA members have a daily risk of slowing or shutting down operations due to reduced and inconsistent rail service,” said Seyfert. “Some individual NGFA member companies report losses and increased costs in the tens of millions of dollars and lost or reduced operating days totaling weeks. Depending on the market position of the grain industry participant, these extra transportation costs are either borne by the participant, reflected in the grain basis paid to the farmer, or passed onto the consumer.”
According to Seyfert, NGFA estimates the combined costs to the grain industry due to lost revenues and additional freight expenses in the first quarter of 2022 to be over $100 million.
The NGFA’s concerns over rail performance is not directed solely at Union Pacific, but several Class I’s, including BNSF.
For its part, BNSF said it is implementing several fixes to improve its network and customer service expectations.
Specifically, the rail carrier plans to hire an additional 1,000 Train, Yard and Engine (TY&E) employees this year, and also reactivate some equipment, including locomotives, from the company’s reserves, according to BNSF CEO Katie Farmer, in a letter to NGFA President & CEO Michael Seyfert.
The STB public hearing has now ended, with Chairman Martin Oberman promising “future action” to address agricultural concerns, including an update to the STB’s emergency service rules that would give the agency more power to pressure rail carriers to improve their service.
Meanwhile, in addition to the NGFA, the Agricultural Retailers Association has previously announced it was looking for the STB to offer some solutions for the ag industry when it comes to rail shipments.
As always, stay tuned for more updates as they become available.
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