Trouble Shipping Grain And Feed Via Rail Far From Over, Concerns Now Growing About Possible Worker Strike At Harvest

Rail retains a vital role in the transportation of goods across the U.S., but this year, the 140,000- miles worth of railroad tracks across the country haven’t been immune to the supply chain chaos plaguing U.S. transportation sectors.

Now, a potential stoppage on the nation's railways this fall is spurring concern, even after President Joe Biden signed an executive order Sunday to keep the nation's rail traffic on track. 

“What I’m hearing from our members is fewer equipment issues,” says Mike Seyfert, president and CEO of the National Feed and Grain Association (NFGA). “The equipment and engines don’t seem to be breaking down, but the amount of time it's taken to get the trains and the reliability of receiving them have.”

With more than 1,000 members today, NFGA represents everything from grain buyers and handlers to transportation companies who ship the grain.

“It seems to be most severe right now in the West, or for those who are trying to ship west on those lines that are going into the western part of the country,” says Seyfert. “Either for feed purposes, processing purposes, or export purposes to the western side.”


Read More: U.S. Rail Strike Averted For Now As Biden Steps In Before Sunday's Deadline


Just how bad is it? Seyfert says some feed users even report being just days away from running out of feed.

“At times in the past several months, we have heard from more than one member that has had severe difficulty getting feed, sometimes being within several hours of being short,” says Seyfert.

Foster Farms, the largest chicken producer in the western U.S., asked federal regulators to issue an emergency service order last month to direct Union Pacific to prioritize corn shipments that thousands of dairy cattle and millions of chickens and turkeys depend upon. Seyfert says the move is one example of how serious the transportation issues have become.

What's Driving the Issues Shipping Via Rail? 

Today’s rail issue centers around labor and the amount of time it’s taking to receive shipments via rail.

“The velocity to deliver trains is getting more and more difficult. You're having challenges with having enough locomotives in different locations,” says Ken Erikson, senior vice president at S&P Global Fuels, Chemicals and Resource Solutions Group. “You have challenges with crews who may have been hit by weather, who may be hit by diversions, some of the rail crews timeout or they don't have enough locomotive engineers in the right position.”

Eric Wilkey of Arizona Grain, Inc. is seeing the issue firsthand. Area farmers were in the middle of harvest, and Wilkey still hadn’t received the rail cars he needed.

“We've got a whole harvest that’s basically been received, and we haven't been able to ship anything,” Wilkey told U.S. Farm Report at the end of June.

Wilkey says rail cars that were supposed to arrive in early May started to finally trickle in during the first part of July, but that was two months behind schedule.

“We never stopped the farmers from harvesting, so we have created some really large inventories and that has significant cash-flow impacts on us,” adds Wilkey.


Read More: Livestock Producers Report Being Just Days Away From Running Out of Feed Due to Shipping Rail Issues


Erikson says the severe issues shipping grain and other products to the western U.S. started in March. However, the beginning of the labor issues can be sourced all the way back to 2019.

“The railroads had on a mandated requirement, instituted precision railroad systems for precision-scheduled railroads as part of the requirements to meet for the federal government,” he says. “And so they thought they didn't need as many crews if they could automate some things.”

That move came even before the COVID-19 pandemic hit, which exacerbated the shortage of labor.

“Railroads were down about 25%, overall, on their staffing, even heading into Covid,” says Seyfert. “But then also as part of those efforts, a lot of that equipment was mothballed or taken out of service. And getting some of that equipment brought back online and/or keeping engines up and running has seemed to be an issue, as well.”

Hearing Hints at Complexity of Issue 

In April, the Surface Transportation Board (STB) stepped in, holding a hearing to get to the root of the rail issues. The hearing was full of differing opinions and pointed questions.

Just prior to the hearing, Landus Coop, which represents 7,000 farmer-owners in Iowa, submitted testimony saying rail issues meant they were only able to load half the number of shipments necessary, and the backlog meant farmers trying to haul grain to the coop were being turned away. The letter stated: 

  • Landus is only able to load half the rate of shipments necessary today. With 450,000 bushels loaded in each train, this impact multiplies daily.

  • Farmers trying to haul grain to us today are getting turned away because we cannot make the inventory space for them. This is an important and optimal window of time when farmers must haul remaining old-crop inventory in preparation for harvest.

  • Disruption to inventory flow has led to increased handling costs and reduced customer service throughout Landus. We are experiencing lost business daily due to the disruption.

  • Grain bushels are getting “trapped” in pockets of surplus supply, while shipping destinations are experiencing a growing deficit in access to supply.

  • Our soy processing facility has experienced a 10% decrease in production over the past six months due to rail performance alone. This is in turn further impacting profitability and our ability to access markets where soybean meal is in highest demand.

  • Trucking is not a viable alternative transportation mode today due to labor shortages.

The letter went on to say "If this situation is not resolved quickly, we risk the potential for livestock producers in California and other states potentially running out of feed."

Concerns About Labor Issues Growing Worse at Harvest

Rail carriers and unions are in the middle of labor negotiations right now. The collective bargaining process made headlines last week, as Biden had until Sunday, July 17, to create a Presidential Emergency Board (PEB). The move was an essential step in keeping the collective bargaining process on track, as well as keeping the nation's railways operating.

“We are pleased that President Biden has taken an important step by creating a PEB to help all parties find a reasonable path forward,” says Association of American Railroads (AAR) president and CEO Ian Jefferies. “An agreement that allows both our hardworking employees and the industry to thrive into the future remains possible.”

AAR points out the Railway Labor Act governs collective bargaining for the rail industry, which aims to help parties reach an agreement without work stoppages or disruptions to U.S. freight rail movements.

While a crisis was averted with the president’s executive order, the collective bargaining process is far from over. Now, there are fresh concerns the ongoing labor dispute could come to a head just as harvest arrives in the Midwest this fall.

“Once we get into mid-September, there's also a risk of some labor issues, even labor stoppage on some of the rail lines,” says Seyfert. “And so getting these things addressed now, and all of us working together before we get particularly into that fall harvest timeframe is essential. We've really never been in a situation where a reliable and resilient rail service is more important than it is now.”

Tense Labor Negotiations? 

The April hearing in front of the STB gave a hint to just how tense those labor negotiations could continue to be. Rail carriers pointed out just how severely impacted they’ve been from what’s been dubbed the “Great Resignation,” and the issues getting labor back up to speed. Certain rail carriers also outlined the plans in place to get labor back to necessary levels to operate efficiently and smoothly.

However, rail workers place blame on the railroads, saying there’s more to the story. Mark Wallace, locomotive engineer, and vice president of Brotherhood Of Locomotive Engineers and Trainmen (BLET), which is North America’s oldest rail labor union, testified during the STB hearing in April.

“Since 1984, 40 railroads have been reduced to seven class one carriers, now largely controlled by speculators and hedge fund investors,” he stated. “This culture of profits over safety, customer service and the lives of railroad workers is now exposed as this industry is network fails on a daily basis.”

“Now, they signaled to us in meetings publicly and otherwise they are having some success in hiring again and getting crews successfully through training,” says Wilkey. “For the Midwest, there’s a little bit of time, but for us, there's no time. We're in harvest right now. And I don't have time to wait another three months for crews to be trained.”

It’s not just the hearing that hinted toward prolonged trouble with train transportation. Grain handlers like Wilkey says current rail bids point to problems persisting into fall.

“These car values would be somewhere north of $1,000 per car this fall,” says Wilkey. “And so that's the market sending signals that there's going to be tightness, there's going to be concerns.”

Typically, Wilkey says those bids would be around $100 per car.

Congress Urges STB to Take Action 

In late June, 51 members of the U.S. House of Representatives signed a letter and sent to the STB regarding issues with the rail system in the U.S.. The letter asked STB to continue to work through the current rail issues with all stakeholders in order to address short-term challenges and find a resolution. 

"On behalf of our constituents and farmers around the country, we write regarding poor rail service, which has limited fertilizer shipments, among other essential agricultural inputs and commodities, including grain and feed," the letter stated.

"At a time when global fertilizer supplies and global crop production are highly disrupted, imposing shipping curtailments on fertilizer inputs and grain, as recently proposed by Union Pacific, will cause major supply chain disruptions, hurt American farmers, and exacerbate the food crisis considerably. We must ensure critical commodities reach essential industries and workers, such as America’s farmers, who are essential to feeding our nation and the world. Food is a national security issue, and we must treat it as such," the 51 members wrote in the letter. 

The Senate sent a similar letter to the STB in May. 

Wait Times Cause Economic Pain 

As the labor battle plays out, the short-term issues are causing grain handlers economic pain.

“There have been significant economic impacts,” says Wikley. “I would estimate since the first of the year, today, there's been in the order of $100 million paid out by the industry to solve this logistics problem that's developed. And that's just outside of the bounds of normal.”

The battle over labor seems to have a long tail, as those in the grain industry try to work together to make sure this major shipping vein doesn’t buckle.

 

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