ARA Representing Ag Retailers Amid Union Pacific Shipment Restrictions
Last Friday’s news about the Union Pacific Railroad (UP) curtailing fertilizer shipments for certain customers creates additional pressure on a tight market as farmers and retailers struggle to obtain fertilizer supplies for the spring season. The announcement by UP selectively reduced service to certain customers which included several fertilizer manufacturers, without apparent regard for existing contracts or the essential nature of timely fertilizer deliveries.
In a public statement on their website, CF Industries observed that the timing of this decision “could not come at a worse time for farmers.” With the prospects of a global food shortage looming due to Russia’s invasion of Ukraine, any action that artificially restrains America’s ability to produce food is short-sighted from a global food security perspective. Reduced logistical capacity is likely to cause added chaos in an already stressed U.S. fertilizer market.
CF’s statement further noted that the announced change by the UP would “ … result in nitrogen fertilizer shipment delays during the spring application season and that it would be unable to accept new rail sales involving the Union Pacific for the foreseeable future.”
Domestic producers of nitrogen products, especially urea ammonium nitrate (UAN), were already logistically challenged to meet all the domestic demand for UAN in 2022, and this situation has the potential to make it much worse. It is ARA’s understanding that UP has subsequently negotiated some flexibility back for fertilizer suppliers during the spring season, though there are still likely to be impacts to fertilizer customers.
The situation highlights three urgent matters that need attention by the federal government:
- Rail reform to restrain monopolistic behavior of railroads needs to be acted upon by the Surface Transportation Board (STB) at the earliest opportunity. ARA along with several other agricultural shipper interests will be submitting a letter this week laying out specific recommendations that would improve the position of agricultural shippers. A public hearing of the STB on this topic is scheduled for April 26 and 27. Information on viewing or commenting was provided to ARA members in our Retailer Fact$ newsletter yesterday.
- The situation also highlights the need for access to multiple sources of fertilizer products for farmers and the ag retailers who serve them. U.S. import duties on UAN fertilizers from Trinidad and Tobago have priced those supplies out of the market when imported product typically accounts for 85 percent of the UAN used on the east and west coast. By preventing access to imports, these duties make domestic users totally dependent on domestic producers and domestic logistics to secure their supplies of fertilizer. UP’s decision to cut back available logistics in an already-tight supply situation underscores the cost and risk of leaving these duties in place. The Biden Administration should use every authority at its disposal to suspend these duties at least until the market returns to more normal conditions, and ARA has made that recommendation.
- Increasing the supply of domestically produced fuel, especially natural gas, would reduce the cost of a critical input in the nitrogen fertilizer production process. Greater access to domestically-produced petroleum products and expanded biofuel usage would influence fuel supply and demand – and therefore prices at the pump.
Subscribe Today For
