FARGO, N.D. — As the spring wheat harvest in the Upper Midwest passed the half-way point and the huge if not record fall crop harvest loomed, growers, grain shippers, railroad executives and politicians gathered to voice their views and concerns on whether the railroads will be able to provide adequate service during the what always is the busiest time of the year. The occasion was the convening in Fargo on Sept. 4 of the Surface Transportation Board’s first-ever field hearing in North Dakota, the state at the center of the rail service controversy.
North Dakota Governor Jack Dalrymple told the S.T.B. commissioners that North Dakota agriculture was sustaining heavy financial losses due to “substandard” shipping service by the Burlington Northern Santa Fe and Canadian Pacific railroads. Governor Dalrymple pointed to a North Dakota State University study that indicated railway shipping delays have resulted in at least $67 million in lost farm income on crops sold by North Dakota producers between January and April 2014. The study also found the potential for an additional $95.4 million in lost income from the sale of grain stocks still on farm.
“Although Canadian Pacific and B.N.S.F. have worked to reduce their backlogs in providing needed rail cars, our farmers, elevator operators and food processors report that they still are waiting on cars for shipment,” Mr. Dalrymple said. “With harvest now under way, we need the railroads to step up and meet their responsibility to provide the shipping service needed during this especially busy time of year.”
The governor’s office noted that in June the S.T.B. required the B.N.S.F. and the C.P. to begin providing weekly updates on efforts to reduce shipping backlogs. In its report dated Aug. 29, the B.N.S.F. said it had 1,016 past-due rail cars in North Dakota, averaging 10 days late. The C.P. reported 7,535 open requests for rail cars in North Dakota, averaging 13 weeks late.
North Dakota Agriculture Commissioner Doug Goehring told the S.T.B. commissioners, farmers, processors and commodity shippers wanted to know that the chronic cycle of rail car shortages and rail delays can be broken.
“I’m not telling railroads how to run their businesses,” Mr. Goehring said. “I’m telling them they have businesses here in North Dakota that they need to serve.”
Mr. Goehring said 82% of North Dakota grain and oilseeds move via rail with a significant portion of these shipments traveling nearly 1,500 miles to the Pacific Northwest, a distance that requires timely shipping.
He said unprecedented shipping delays have created a problem that leaves farmers with the only option of storing their crops, which he said was “an unacceptable solution.”
“Both B.N.S.F. and C.P. need to prioritize grain and oilseed shipments,” Mr. Goehring said. “For example, soybean shipments have a very small window to meet marketing demand in Asia and Southeast Asia. These products must be shipped between October and February, demonstrating the need for certainty in our rail service because we cannot store our way to prosperity.”
Mr. Goehring said B.N.S.F.’s recent efforts to add locomotives and employees, lay new track and improve communication with the agriculture community are appreciated, but that much more must be done.
“I am more disturbed when I hear stories about individuals who haven’t seen grain cars from the C.P. in months; it is clear that the backlog is not the only problem,” he said.
Mr. Goehring said the bad situation may become desperate in coming months.
“Planted acres in North Dakota for corn, soybeans and wheat are at record-breaking or at near record levels this year,” he said. “This should be good news. Instead, it is increasing producer anxiety because these products could be trapped within the system on farms or in elevators. The fact that more than 15% of our 2013 crop is still in storage compounds the problem.”
Mr. Goehring urged the S.T.B. to take strong action.
“With 2013 crop still needing to be moved and this year’s harvest fast approaching, we need to know that plans are in place so we can enter the 2014-15 marketing year with confidence,” he said.
Robert Zelenka, executive director, Minnesota Grain and Feed Association, told the commissioners about a study by the University of Minnesota that estimated rail service delays have cost Minnesota soybean growers $18.8 million from March to May 2014. The study indicated during the same span, the delays resulted in the losses of $72 million for corn growers and $8.5 million for Minnesota’s spring wheat growers.
“Minnesota country elevator rail users have also lost millions of dollars as a result of poor service being provided by the B.N.S.F. and C.P.,” Mr. Zelenka asserted.
Mr. Zelenka said, “Grain shippers are not asking to receive preferential treatment, but grain shippers don’t want to be disadvantaged, either.”
He said the unprecedented growth in oil rail traffic has exacerbated an already difficult rail logistical situation, especially given oil traffic seemed to receive priority over grain shipments.
“While grain elevators have waited weeks and even months to receive service, with the severe winter being blamed by the rail carriers as the main culprit, oil trains seem to have been moving steadily throughout the winter and spring, unabated by weather or other constraints, such as, a shortage of crews and/or locomotives,” he said. “While we have seen some improvement in services and can appreciate the move by both carriers to invest in infrastructure improvements to address the congestion problem, service delays continue, and we still have an estimated 100 million to 150 million bus of commercially and farm stored grain to move in the next 30 days, to create space for new crop.”
He commended the B.N.S.F. for its recent transparency and for developing a strategic plan addressing the past due issue and their performance.
“This plan seems to be paying off,” he said. “However, concerns still exist about a congested network and the time it will take to make the necessary B.N.S.F. infrastructure improvements to speed up the system.”
Mr. Zalelenka said the C.P. was not as transparent as the B.N.S.F., and he opined recent Canadian government actions appeared to have forced the C.P. to reallocate locomotives and grain hopper cars to the Canadian side of its business.
Lance Peterson, a soybean farmer from Underwood, Minn., and a director of the American Soybean Association, said, “The rail problems of the last year have grain shippers trying to figure out how to navigate through this year. In many cases, shippers have spent millions of dollars in premiums on initial rail car auctions to access rail cars for the coming year. Based on expected car movement, this amounts to an approximate $700-per-car premium just to access the cars. If grain movement is not adequate, shippers will be forced to look to the secondary market to acquire additional cars. The asking price for October/November shipments is currently more than $4,000 per car. It is imperative that rail movement is adequate and timely.”
The B.N.S.F. on Sept. 3, on the eve of the S.T.B. field hearing, said it has moved a record volume of grain out of North Dakota this year. In four out of the last five months, agricultural volume shipped in the four-state region on the B.N.S.F. surpassed previous peak levels, it said.
Rail traffic in and out of North Dakota increased 144% on the B.N.S.F. since 2009, the B.N.S.F. statement continued. Last year, North Dakota provided 20% of all new volume on the U.S. rail network, the railroad added.
The B.N.S.F. said it was ready for this year’s harvest and will have the resources in place to move record bushels. The railroad said it will offer more capacity for movement of grain than ever before and will run the highest number of shuttles ever during the peak season of October through March. Grain volume transportation capability will increase 10% to 15% as a result of the increased shuttles it will offer.
The railroad said past due car orders for its North Dakota agricultural customers decreased steadily from 8,164 in March to less than 1,000 currently. Shuttle trips to the Pacific Northwest, where most grain products in the region are shipped, hit the goal of 2.5 trips per month for the last four weeks, B.N.S.F. continued.B.N.S.F. said it would continue to make improvements as more capacity projects come on line. It said this year it was spending $390 million in expansion and maintenance in North Dakota, and cumulatively, B.N.S.F. will have spent almost $1 billion in expansion and maintenance in the state since 2009.