Market Matters Blog
Mary Kennedy DTN Basis Analyst

Monday 08/18/14

Rail Backlogs Continue

OMAHA (DTN) -- As winter wheat harvest winds down (95% as of Aug. 10 according to USDA's latest Crop Progress report) and spring wheat harvest gears up (6% complete), grain transport problems that have existed for months are still with us. That frustrates elevator operators wanting to free up space for not only wheat but corn and beans in the fall.

An oil train in northern Minnesota with one buffer car at the end. (DTN photo by Mary Kennedy)

Tim Luken, manager of Oahe Grain on the RCP&E shortline in Onida, S.D., has had many sleepless nights over the CP railroad not performing, as he still waits for at least 170 past-due cars in the midst of new-crop harvest.

On Aug. 13, Luken said to DTN in an email, "I have still not sold any grain due to the fact [of] not knowing when we may get cars. I am hoping I can get my old contracts due to [the] grain buyer by the end of September. This will catch me up. We are cash only on all wheat. We took in 185,000 bushels yesterday and only have room for 70,000 today. Will have to wait for trains next week again."

The problem is exacerbated by what Luken said looks to be a big spring winter wheat harvest. "This is just the tip of the iceberg. Hearing of a lot of farmers trying to put up more bins," said Luken. "Think about this: We get through both small grain and row crops, but there is no way the farmer and elevators could ever get cleaned out before next harvest the way the CP is getting cars to us. This is very devastating."

In a letter to the Surface Transportation Board (STB) on Aug. 11, USDA Undersecretary of Marketing and Regulatory Programs Edward Avalos said, "With remaining grain in storage due to the backlog, grain elevators in some locations, such as South Dakota and Minnesota, could run out of storage capacity during the upcoming harvest, requiring grain to be stored on the ground and running the risk of spoiling. The projected size of the upcoming harvest creates a high potential for loss in the affected States."

USDA is concerned the pace of CP's weekly progress on reducing the backlog of late grain cars is insufficient to meet its obligation of fulfilling the 29,650 open requests for service before October. "We estimate CP would need to move about 4,725 cars per week to clear the grain backlog by Oct. 3," Avalos pointed out. "This includes about 3,300 past-due cars and about 1,425 new requests per week, the weekly average of new requests in July. However, CP's weekly reports to the board show it has only been moving an average of 1,969 cars per week in July, which would leave a significant amount of the grain backlog remaining in October." The entire letter to the STB can be seen here: http://goo.gl/…

The CEO of the Canadian Pacific Railroad does not think his railroad is that far behind, according to Agweek. Hunter Harrison told North Dakota leaders at a roundtable meeting on Aug. 11 in Minot, N.D., that his railroad might be "effectively caught up, in its ag orders, despite reports to the contrary." Harrison also said his firm only handles 20% to 25% of North Dakota's grain in a normal year, so the problem lies more with the Burlington Northern Santa Fe railroad.

Here is the link to the CP service update to the STB on Aug. 15: http://goo.gl/…

Another CP shipper, Jeff Kittell, manager of Souris River Cooperative in Lansford, would likely not agree with Harrison that the CP is "effectively caught up." Kittell told DTN in an email that, "Past-due cars for Souris River are still as late as March 17 on singles and March 24th on a unit train." He indicated some shippers feel CP will get to a point where they roll out the new car order system and then just wipe old orders off the books. If that were to actually happen, some elevators waiting on CP cars will effectively get further behind, as they sit full with old-crop grain and new-crop grain begins to beat down their doors.

BNSF Closer to Filling Past Due Orders

"The BNSF is getting very close to moving all old-crop related cars", said John Miller, vice president of BNSF agriculture products in his weekly podcast of Aug. 15. "With this kind of progress, we are confident we will be down to 2,000 past dues by mid-September, if not sooner."

According to the website service update on Aug. 15, the BNSF "... has made good progress on decreasing the number of past due car orders for agriculture customers with U.S. past dues down 21% compared to the prior week and now stand at 2,671 past due orders. For coal customers, our average daily coal deliveries increased to 734,600 tons, which is up from 716,600 tons delivered the prior week, or 2.5% better."

Montana's past-due car orders were at 618 cars vs. 729 the prior week, Minnesota is owed 221 cars vs. 331 cars the prior week and South Dakota is owed 132 cars vs. 103 cars the prior week. North Dakota is owed 1,325 cars vs. 1,774 cars the week prior and has been waiting 18.2 days vs. 19.8 days the prior week. Here is the link to the BNSF service update to the STB on Aug. 15: http://goo.gl/…

Paul Lautenschlager, manager of Beach Coop Grain, Beach, N.D., is staring at an elevator full of old crop as the new-crop wheat harvest waits for space and he waits for past-due railcars to empty the bins out. He told DTN he is hoping to get a train he ordered for June 10 very soon. He is frustrated and said if the car situation doesn't get any better, he is "looking for a disaster at harvest. Wish me luck!"

The BNSF website stated, "While there will continue to be some week-to-week fluctuations in the performance of our operation due to normal, periodic weather events and planned maintenance and expansion work, we remain focused on executing our plan to increase capacity and strengthen BNSF's service performance."

OIL TRAINS CROWDING TRACKS

In an email to DTN, Bob Zelenka, executive director of the Minnesota Grain and Feed Association, said the rail backup is causing financial problems for grain elevators and logistical troubles for grain handlers and traders. "We still have grain elevators that are several weeks behind on receiving their rail cars, while at the same time, every day, an oil train goes by the elevator, which seems to add insult to injury," he said. "The extra oil shipments have aggravated congestion in St. Paul and Chicago rail yards, further delaying whatever grain trains are available to serve farmers.

Repair work may further delay trains in those areas. In his August 15 podcast, Miller said tie and replacement gangs will be working in the Minneapolis to Chicago corridor, but "engineering and transportation teams will co-ordinate efforts to keep traffic moving through fall." This work is expected to continue until November.

"The way things stand right now, it's going to be nip and tuck as to whether railroads will be able to move last year's crop prior to new crops coming out of the field," Zelenka said.

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

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/CZ)

Posted at 2:29PM CDT 08/18/14 by Mary Kennedy
Comments (3)
The problem is Political. In Minnesota we have Sen. Franken and Sen. Klobuchar. In D.C., we have Pres. Obama and the elected powers of a handful of States. Pipeline and mining is at a standstill. The wealthy Enviro's have this group wrapped around their fingers for election cash. (many out of staters) After years of Amy, six years of the Joker and six years of a President, construction is still at a standstill. They then stand in front of a camera and tell us there trying to solve the problem. The base of the problem ( in Mn.) is who the 7 county metro has put in office, not the R.R.s. One can have all the meetings you want and the problem will not go away until many of the do-nothing elected are removed at the ballot box.
Posted by Bonnie Dukowitz at 5:37AM CDT 08/21/14
the whole infastructure in the upper midwest needs work when we have big crops............ i have had one of my elevators go a long time with out cars during winter wheat harvest
Posted by JeremeyFrost at 11:18AM CDT 08/21/14
The arab and daddy warbucks of BNSF RR are making megabucks off of the RR and Pipeline situation that exists on Great Plains of the USA & Canada. What, 2 more years of this "DO NOTHING" governance ?
Posted by james kuntz at 9:20AM CDT 08/26/14
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