Railroad Strike Days Away? Here’s What it Means for Agriculture

The looming strike is despite the majority of unions reaching tentative agreement with the rail companies, but the unions not on board are essential to the operation of the nation’s rail system. 
The looming strike is despite the majority of unions reaching tentative agreement with the rail companies, but the unions not on board are essential to the operation of the nation’s rail system. 
(Lindsey Pound)

Nearly 60,000 union rail workers could go on strike starting Friday. The looming strike is despite the majority of unions reaching tentative agreement with the rail companies, but the unions not on board are essential to the operation of the nation’s rail system. 

The impending rail strike has been a possibility for months and would be the first in nearly three decades. Despite the Presidential Executive Board (PEB) releasing recommendations as part of the ongoing collective bargaining process, the cooling off period will end Friday, opening the door for a strike to take place. 

“As we're sitting here, nine unions and the railroads have come to agreement on terms. A ninth one is tentative, but it looks like it's very promising,” says Ken Erikson with S&P Global Commodity Insights. “That leaves us with three unions that need to finish negotiations with the railroads. And those three are the largest ones, representing roughly 50 to 60,000 employees. So, three outstanding, where the clock is ticking very fast. And there's a lot of concern about you know, what are the final details is going to be the pays understood and a few other things. But it's a matter about requirements of working on the job and such like that.”

As first reported on Monday, rail companies were already preparing for a possible strike and putting a halt to grain shipments as early as today, according to National Grain and Feed Association (NGFA). 

“The railroads don't want to have the cars and equipment out in areas of the country where they can't protect them very well,” says Max Fisher, NGFA chief economist. “So, they're taking steps to mitigate damages. For our members, they're looking at essentially not receiving their grain on time and not being able to then ship out the finished products such as ethanol, flour, things of that nature.”

 The rhetoric between unions and the railroads is also heating up ahead of Friday’s deadline. While the remaining unions say the negotiating process is still ongoing and they are committed to reaching a deal, rail companies say the some are creating false narratives about pay raises and paid time off. One group even accused the nation’s largest railroads of trying to further abuse shippers and gridlock the supply chain in order to extort a contract settlement from rail unions. 

“Our Unions remain at the bargaining table and have given the rail carriers a proposal that we would be willing to submit to our members for ratification, but it is the rail carriers that refuse to reach an acceptable agreement,” Jeremy Ferguson, president of SMART Transportation Division and Dennis Pierce, president of Brotherhood Locomotive Engineers and Trainmen said in joint statement. In fact, it was abundantly clear from our negotiations over the past few days that the railroads show no intentions of reaching an agreement with our Unions, but they cannot legally lock out our members until the end of the cooling-off period. Instead, they are locking out their customers beginning on Monday and further harming the supply chain in an effort to provoke congressional action.”

The Association of American Railroads (AAR) claims coverage of the strike in recent days has included false information, specifically that laborers get no sick days or paid time off. 

“Moreover, the matters at hand were dealt with summarily by the Biden administration’s hand-picked arbitrators through the ‘Presidential Emergency Board.’ A reminder that the White House has stood by those recommendations, which have served as the basis for nine tentative agreements with labor unions and endorsed by broad swaths of the U.S. economy. The majority of these industry groups have called on Congress to enact the framework by law should parties fail to reach agreements by midnight Thursday,” AAR said in a statement. 

What’s the likelihood a strike happens? There are a lot of moving parts, but Erikson says a last-minute deal is still possible. 

“I can see where you may get one, maybe two unions that can come together on terms and I think he could get to a point where you have a high percentage over 50%, maybe closer to 60%, if not more, where this is an opportunity to make it known just how important labor is to the railroads, how important labor is to the country, and that there are important things that the unions want to demonstrate that they have as having proper wages, proper respect and proper benefits,” says Erikson. “It's just maybe an attention getter to make a point.”

The Biden administration on Monday urged railroads and unions to reach a deal to avoid a shutdown of the rail system, saying it would pose "an unacceptable outcome" to the U.S. economy.

Tuesday’s release of inflation data showed core inflation was up not down and CPI did not go down as much as analysts predicted. Erikson points out even if a strike lasts one or two days, it will have a severe economic impact, but rising wages will also be passed on to those not at the negotiating table.   

“Today's inflation numbers are terrible,” says Erikson. “And this would be making the point that look, we got to preserve these wages somehow. And that could be backfire, because if you get higher wages, and someone's going to pay that freight, and that's the consumer for farmers, its basis, it's just weaken basis for the consumer and retail goods, it's higher prices somewhere along the line. And that may be the adverse effect to this is that Be careful what you read what you request, it may come back to hurt everybody and that's the risk that's being run here.”

Agricultural Impact of Railroad Strike

NGFA says some processors will be forced to temporarily shut down, no matter how long a rail strike lasts, and Erikson says it will be weeks to get the system back up and running, a system already facing severe backlogs. . 

Farm Journal Washington Correspondent Jim Wiesemeyer is also looking into the impact it could have on farmers. In his daily report, Wiesemeyer focused on the possible rail strike, breaking down the impact by commodity:

Cotton: “There is a lot of old crop that needs to ship via rail,” said Jordan Lea, senior trader at Deca Global LLC, a textile supplier and former president of the American Cotton Shippers Association. “The whole logistical system is still too fragile from backlogs and Covid. We do not need this hiccup right now.”

Livestock and poultry: “A shutdown would quickly cause additional problems and force producers to make difficult decisions regarding the viability of their animals,” said NGFA.

Biofuels: “Processing and biofuels plants may have to scale back production due to an inability to both move in commodities for processing and move out finished products for consumption,” the NGFA noted.

Food industry: “Failure to finalize an agreement before the Sept. 16 deadline will hurt U.S. consumers and imperil the availability, affordability and accessibility of everyday essential products,” the Consumer Brands Association, which represents manufacturers of food, beverage, household and personal care products, said in a letter (link) to President Biden last week.

Congress Can Step In

While Congress can intervene, NGFA says that is a last resort, as that could become complicated. Yet, NGFA was on Capitol Hill this week talking to legislators about the importance of stepping in if a strike does take place.  

“This is a political football, you know, and I'm sure that Congress really doesn't want to be in the middle of this, no doubt, they want the two parties to come to an agreement,” says Fisher. “we're trying to convince the rail carriers and the rail labor for the last two unions to come to an agreement, we don't want to have to depend on Congress to solve this. That's kind of our, our last, last line of defense, so to speak.”

 

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