The grain transportation story continues to focus on railroads. Improvements have been seen in railroad performance that many in the agricultural sector described as abysmal over the winter, but movement still is far from normal. While railroads are making big investments to improve service, the grain industry is more concerned about what is being done “now” in delivering fertilizer for spring planting and ahead of this summer’s winter wheat harvest and especially before the fall row crop harvest.

“Winter is finally behind us, and with the advent of spring railroad service is improving,” said Jay O’Neil, senior agricultural economist at Kansas State University’s International Grains Project. “Service is not back to normal yet, but the railroads are catching up. This is true for U.S. carriers, but substantial nagging issues remain up north with the Canadian railroads. Canada still has record crops to move in 2014, and no one knows how they’re going to do it.”

While the harsh winter and last year’s large harvest, including record large U.S. corn and Canadian wheat crops, after drought-reduced U.S. production in 2012, were key factors in poor rail performance, many in the trade contend those factors only exacerbated the root of the problem that first surfaced last fall, which they say was the railroads’ focus on moving energy products and material related to the output of shale oil at the expense of agricultural products. While statistics support the large increase in movement of petroleum products, railroads also noted increased movement of coal (after earlier declines) and intermodal as well as of grain from a year earlier.

Rail service has improved in recent weeks, but traders are quick to note it still is far from “normal” for the season. As of early May, one trader said rail performance in the Upper Midwest bulk sugar industry still was only a half to a third improved from the poorest times during the winter, while a grain trader noted deliveries in the Upper Midwest still were running about four weeks behind schedule.

“I’m confident the grain industry no longer knows exactly what ‘normal’ should look like,” Mr. O’Neil said.

Rail freight costs have come down significantly from a few weeks back, but also remain well above year-ago levels.

“During the week ending April 24, average May non-shuttle secondary railcar bids/offers per car were $875 above tariff, down $1,625 from last week and $875 higher than last year,” according to the U.S. Department of Agriculture’s May 1 Grain Transportation Report. “Average shuttle secondary railcar bids/offers per car were $850 above tariff, down $650 from last week and $954.50 higher than last year.”

Mr. O’Neil’s observations of rail car rates supported the U.S.D.A. data.

“BNSF Railway Co. and Union Pacific Railroad rail car values have substantially declined from their January-April peaks,” Mr. O’Neil said. “If you look at the forward bids in the BNSF secondary market, you will see that rail users are bidding over $1,500 to $2,000 per car for next year’s fall harvest period. Fall harvest bids for UPRR cars are currently in the $500 to $1,000 per car range.”

“This is far above car values in previous years and is certainly not a vote of confidence from the industry,” Mr. O’Neil said. “Many fears remain.”

A drought-reduced hard red winter wheat crop may take some of the pressure off the railroads as harvest begins in a few weeks. Recent crop tours resulted in production forecasts that are the lowest since 1957 for Oklahoma and since 1996 for Kansas.But rail movement of grain so far this season has been up sharply from 2013, mainly due to last year’s record large corn crop and this year’s strong export sales of corn and soybeans.

U.S. railroads originated 21,582 carloads of grain during the week ended April 19, up 4% from a week earlier, up 38% from a year ago and 11% above the three-year average, the U.S.D.A. said in its most recent Grain Transportation Report. Cumulative rail deliveries of grain to U.S. ports for the year through April 23 totaled 148,138 carloads, up 56% from the same period last year.

Year-to-date grain export shipments through April 17 totaled 95,145,000 tonnes, up 39% from a year earlier, the U.S.D.A. said, with all wheat (including durum) at 26,594,000 tonnes, up 19%, soybeans at 41,717,000 tonnes, up 23%, and corn at 26,834,000 tonnes, up 121% (reflecting lower exports in 2013 due to the drought-reduced 2012 corn crop).

Combined inspections of corn, wheat and soybeans for export in January-March of 2014 were up 39% from the same period in 2013, were up 12% from the five-year average and were the highest since 2011, the U.S.D.A. said. First-quarter export inspections of corn were up 134% from the first quarter of 2013. Soybeans were up 43% and wheat was down 22%. U.S. wheat exports have been limited by strong domestic prices, due in part to higher freight costs related mainly to railroad logistics problems, trade sources have maintained, while world wheat supplies are record large, and prices offered by foreign competitors generally have been well below U.S. offers in many tenders.

Although grain shipments via Class 1 railroads are up sharply from a year ago, movement is below expectations given past performance after previous grain harvests, the U.S.D.A. said. Oct. 1, 2013, through March 31, 2014, grain movement was 42,000 carloads behind 2009-10 and 111,000 carloads behind 2007-08, years of similar large harvests of corn, soybeans and wheat 
(combined), the U.S.D.A. said.

Several major grain and agricultural companies said weather and logistics negatively affected financial performance during their most recent reporting periods. Net earnings for Cargill dropped 28% in the third quarter ended Feb. 28 due in part to weather-related disruptions to railway service in North America, the company said. Archer Daniels Midland Co. said its ag services business generated weak results due in part to logistics and weather challenges in the United States. And Ingredion Inc. saw earnings per share drop 32% in the first quarter ended April 30 due in part to higher-than-expected weather-related costs.

Railroad companies also saw lower earnings as a result of the delays, but first-quarter conference calls indicated nearly all beat the reduced expectations, according to Progressive Railroading.

“Problems associated with deteriorated rail service include grain shippers paying up to $6,000 (record high) to obtain empty rail cars, grain piling up on the ground outside elevators awaiting rail transportation and some grain shippers either paying ocean vessel demurrage charges or missing vessels that departed before the delayed grain shipments could be loaded,” the U.S.D.A. said in a recent Grain Transportation Report. Anecdotal reports indicate some of the grain piled outside due to full storage bins, typically the first to be loaded onto trucks and rail cars, has spoiled over the winter due to the slow rail service.

The poorest rail performance in years, if not ever, prompted many complaints from users to railroads and to the Surface Transportation Board (S.T.B.), the U.S. regulatory agency that oversees railroads. In Canada, where rail performance may have been even worse than in the United States, the Canadian government on March 7 announced an Order in Council under section 47(1) of the Canada Transportation Act setting minimum volumes of grain that Canadian National Railway Co. and Canadian Pacific Railway Co. were required to move. Under the Order, the railways were required more than double grain shipments over a four-week period, or incur fines, and report grain shipments to the Canadian Transport Ministry weekly. While rail service has improved in Canada, like U.S. service, it still is not “normal,” according to Upper Midwest traders.

There has been no such broad action in the United States, but the S.T.B. has received an earful from rail users. At an April 10 public hearing, the National Grain and Feed Association, in a statement endorsed by six other agribusiness organizations, called on the S.T.B. to act to improve rail service.

“The sheer gravity, magnitude and scope of rail service disruptions now being experienced are unprecedented, and have ripped through all sectors of grain-based agriculture,” the N.G.F.A. said, adding that several member companies reported added logistics costs of $10 million to $20 million from October 2013 to March 2014. The N.G.F.A. said rail logistics problems forced some grain processing and exporting capacity to be idled, mills to temporarily shut down, and shift to more costly long-haul trucks to move grain, among other measures. The association also noted a pressing need to deliver fertilizer ahead of planting in the Upper Midwest.

The N.G.F.A. called on the S.T.B. to increase monitoring and to require Class 1 rail carriers to report and make publicly available several specific service-related metrics, including real-time data on train velocity (speed) and cycle times. The N.G.F.A. also said the S.T.B. should require affected Class 1 carriers to consistently disseminate to customers the status of service and train orders, adding that some railroads, including the BNSF and CSX, “are doing a commendable job in this regard.”

In its latest “podcast,” the BNSF Railway acknowledged ongoing delays as well as noting improvements in service.

“We continue to see improved performance,” said John Miller, BNSF group vice-president, agricultural products. “Gains may be bumpy and uneven, but we will continue to gradually improve service.”

Mr. Miller said agricultural velocity in April was 9% faster than in March, and system-wide turns were 2.6 trips. Agricultural volume in the prior two-week period was the best since October 2013 and fertilizer volume was the best since May 2013, he said. There were 14,451 past due rail cars in the BNSF system as of May 1, with about half of those in North Dakota. Rail cars averaged 26.4 days late, ranging from 32.5 days in Montana to 19.8 days in Minnesota, he said.

With planting season at hand, Mr. Miller said as of May 1 the BNSF would continue to focus on unit fertilizer trains across the system.

“We are confident we will get this product to market,” he said.

While the frustration and news has focused on railroads, transportation and grain movement in particular obviously includes trucks, barges and ocean freight (containers and bulk vessels) as well.

The harsh winter also affected river and lake transportation, with the Great Lakes shipping season and the upper Mississippi river both opening later than normal. The upper Mississippi river opened to barge traffic on April 16, the U.S.D.A. said, well behind the average start date of March 22 due to historic ice thickness on Lake Pepin, south of Red Wing, Minn. Despite the icy delays to barge movement on the Upper Mississippi and Illinois rivers during the winter, total first-quarter barge grain tonnage was 22% above the three-year average due to increased movement on the Ohio and Arkansas rivers, the U.S.D.A. said.

Upper Mississippi barge supplies have increased significantly in recent weeks in part because of upbound fertilizer movement, the U.S.D.A. said, resulting in barge freight rates declining from winter highs. During the first quarter barge rates for export grain on the Mississippi river at St. Louis were $18.23 per ton, and on the lower Illinois river were $26.17 per ton, both about 40% above the three-year average, the U.S.D.A. said.

Ocean freight, meanwhile, remains a relative “bargain” due to ample capacity. Ocean freight rates for bulk grain declined monthly through the first quarter of 2014, the U.S.D.A. said, although rates remained above first quarter 2013 levels. The U.S.D.A. terms current ocean freight rates as moderate and suggested rates may increase in 2014 due to increased shipping demand, although excess vessel capacity remained.

Containerized U.S. export shipments of grain in 2013 increased 22% from 2012 and were record high, the U.S.D.A. said. Distiller’s grains accounted for 50% of total containerized shipments, and soybeans accounted for 25%. The increase in container demand, especially in the last quarter of 2013, was due in part to comparatively high bulk freight rates, the U.S.D.A. said.

“Container shipping line capacity is, and will continue to be for some time, excessive,” Mr. O’Neil said. “Dry-bulk shipping rates will surely improve (increase) long before container rates do. This will likely widen the spread between the two modes and move some additional grain demand over to containers in 2015.

“Ocean freight rates remain mostly stable, and vessel owners are anxiously awaiting the market turnaround. Cargo demand simply has not risen to levels necessary to soak up the excess vessel supply and create support in the market. It will likely be early 2015 before substantial change will be felt in these markets; 2014 is not turning out to be the turnaround year many expected.”

The trucking industry, meanwhile, has benefited from the railroads’ malaise as grain, sugar and other shippers in some cases sought additional trucks to move products the railroads couldn’t. Due to the small, independent nature of most trucking firms, especially bulk grain and product haulers, those benefits largely are not measurable. Truckers still had to contend with high fuel costs, although most of that typically is passed on to the shippers in the form of a fuel surcharge. The U.S. average highway diesel fuel price was $3.964 a gallon the week ended May 5, up about 12c from a year ago, according to the U.S. Energy Information Administration. Since railroad fuel surcharges also are based on the E.I.A. highway diesel price, higher fuel costs further raised rail costs for shippers.

Although there was increased use of trucks in the agriculture sector, the harsh winter negatively affected the trucking industry overall, with the American Trucking Associations’ monthly Truck Tonnage Index down 5.2% in December and January with the index down 2.5% in the first quarter.

The U.S.D.A. in March said a national, simple and cost-effective rail rate mediation/arbitration system was needed to provide a fair and impartial forum for all grain producers and shippers. While that doesn’t address the cause of the service problems, it at least may provide a better recourse for recovery of losses. What meaningful regulatory change will result from this year’s railroad shipping debacle remains an unknown.