Market Matters Blog
Mary Kennedy DTN Basis Analyst

Friday 04/18/14

Railroad Delays Interrupt Field Work

OMAHA (DTN) -- Farmers are getting frustrated. Not only are they unable to empty their grain bins due to delayed railcar placements, but they are also concerned that rail delays will limit their ability to get fertilizer for spring field work.

Pictured is the first barge on Lake Pepin of the 2014 UMR shipping season. (Photo by Captain Larry Nielson, Lake City, Minn.)

"The rail problem is having a huge effect on us," said Dave Kjelstrup, who farms in the Underwood, N.D., area. "Urea cost is high because of transportation; in fact, some suppliers are telling their pre-paid customers they can't deliver the fertilizer. Thankfully, we have ours in bins on the farm."

Moving grain is still a problem, according to Kjelstrup. "The elevators are full and with no trains they can't get the farm grain in, and the bins in the country are full. Not serious now, but four months from now it will be. I personally can't move my sunflowers because Cargill can't move the oil and they are full waiting for rail cars."

Help may be on the way. On Tuesday, April 15, the Surface Transportation Board announced it will direct the Canadian Pacific Railway Company and BNSF Railway Company to present their plans to ensure delivery of fertilizer shipments for spring planting by Friday, April 18. The STB has also requested both railroads provide weekly status reports beginning one week later regarding the delivery of fertilizer on their respective railways.

The BNSF was one step ahead of the STB request, and on Monday, April 14, provided this plan on their website: "As we enter the next few weeks of peak demand for fertilizer, we understand the shortness of the season and the necessity of timely delivery in order to safeguard that producers can get this year's crops planted with the proper plant nutrients. BNSF is undertaking several specific actions to expedite fertilizer delivery to ensure our customers have the fertilizer where and when they need it." See the full announcement here: http://bit.ly/…

While elevators and farmers are hopeful the railroads get the fertilizer moved, it's a "catch 22" situation as the delay in grain car placement continues to keep elevators at a standstill.

Paul Lautenschlager, manager at Beach Co-op Grain in Beach, N.D., said his elevator is currently seven weeks behind in receiving cars, which prohibits him from accepting anything other than pre-contracted grain.

According to the last podcast update by the BNSF on April 11, ag rail car placements in North Dakota are still behind by over 7,000 cars and actually got worse from one week ago. The total of cars owed in the U.S. was barely improved from the prior week at 15,099 versus 15,127 one week ago. Days late increased again with the entire U.S. average at 26.7 days late versus 25.7 one week ago. North Dakota is behind 7,216 cars and later than last week at 26.1; Montana improved slightly at 3,300 cars behind but also later than last week at 31.6; Minnesota is behind from one week ago with 1,313 cars but days late improved to 23.5 and South Dakota is slightly better with 1,020 cars behind but got further behind at 28.7 days late. The entire April 11 podcast can be heard here: http://bit.ly/…

In his written testimony to the STB April 10 hearing, Robert Zelenka, executive director of the Minnesota Grain & Feed Association, gave an example of how rail delays affected one unnamed grain elevator on the Canadian Pacific railway. "This elevator ordered its rail cars two months early, but the cars ended up 12 days late," he said. "This cost the elevator nearly a quarter-million dollars in late charges on a 100-car corn train. In contrast, the CP has no penalty for late car placements. One of our biggest concerns looking forward is the likelihood of going into this fall's harvest with elevators close to full of grain and no freight to ship it." He said in a separate interview that, "This is as bad as I have seen it in my 33 years in this job, and there are several elevators that stand to lose a lot of money as a result of the poor service be provided to grain shippers."

CANADIAN FARMERS HAVING TROUBLE MAKING ENDS MEET

Cash flow issues are mounting across the Canadian Prairies. "Lack of cash flow due to poor grain movement is impacting producers' ability to cover last year's debt, while making it difficult to meet this season's input needs," said DTN Canadian Grains Analyst Cliff Jamieson. A piece by the Globe and Mail suggests the demand for last season's federal cash advance program, which loans $400,000 with the first $100,000 interest-free, saw a 50% increase in demand, while next year's program has also already generated interest in the past two weeks.

Meanwhile, debate surrounding Bill C-30, the Fair Rail for Grain Farmers Act, has been delayed until after the holiday weekend.

"While railways may be hitting the government-set target of 500,000 metric tons or approximately 5,500 cars for each of the two railroads, some farm groups continue to suggest it's not enough and that further changes in the legislation are needed to not only clear the current backlog of cars but the meet the needs of the future," Jamieson added. "The Western Canadian Wheat Growers Association would like to see a higher weekly target set for grain shipping, stating that the current weekly movement will continue to leave in excess of a 20-million-metric-ton carryout on farm by the end of the crop year and will lead to depressed prices for some time to come. As well, the Keystone Agricultural Producers passed a motion calling for increased running rights, which would force both railways to open their track to competing railroads as a means of increasing competition."

SMOOTH SAILING FOR BARGES ON LAKE PEPIN

On Monday, April 14, the USACE St. Paul, Minn., District said, "Our ice measurement team went out to Lake Pepin today to survey the current conditions only to discover that there wasn't anything to measure!" Then on Wednesday, April 14, the Angela K moved through Lake Pepin, pushing 12 barges and officially opened the 2014 Upper Mississippi River shipping season. Elevator operators on that portion of the river anxiously awaited the barges that would allow them to load grain bound for the Gulf, making space for farmers who have been waiting longer than usual to haul in grain they sold for opening.

DULUTH GRAIN SHIPPING SEASON STILL ON ICE

With open water along the North Shore of Lake Superior, the first upbound convoy of lakers arrived in port on April 14.

According to Adele Yorde, public relations manager at Duluth Seaway Port Authority, the first full convoy of downbound lakers was loaded and lining up to leave for the Soo Locks midday on April 15. "The convoy will be headed by the heavy icebreaker Mackinaw as they still expect to run into solid ice fields as they head south below Isle Royale toward Whitefish Bay," Yorde said.

According to the Daily Great Lakes and Seaway Shipping News, "It has been almost a month since the Soo Locks opened for business, but traffic is still moving at a historically slow pace. There are currently more than 40 ships waiting to get through the locks, and at this point the flow of traffic is at Mother Nature's mercy. Ships are lined up throughout the St. Marys River system, waiting for their turn to go west across Lake Superior."

Jim Peach, Soo Locks assistant area engineer, told the Seaway Shipping News, "This is one for the record books as far as anybody's living memory; as for anybody on our staff this is the first time we've experienced this much delay." Next week's ship schedule still does not show any salties scheduled, which keeps grain from leaving the port later than normal. Updates on the convoys can be found here: http://www.boatnerd.com

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter at @MaryCKenn

(AG/CZ)

Posted at 12:53PM CDT 04/18/14 by Mary Kennedy
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