Market Matters Blog

Better Weather, Lower Grain and Oil Prices, More Power Help Railroads Improve Service

Mary Kennedy
By  Mary Kennedy , DTN Basis Analyst
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BNSF locomotives moving along the Northern Corridor. (DTN file photo by Mary Kennedy)

OMAHA (DTN) -- A combination of milder weather, lower prices for grain and oil and more locomotives has helped railroads improve placement of railcars this spring, according to the latest railroad company reports.

One year ago, BNSF owed South Dakota 671 cars, Minnesota 1,496, North Dakota 7,175 and Montana was owed 3,217 cars. System wide, 14,618 cars were owed, according to a BNSF report to the Surface Transportation Board. In their report to the STB on April 22, BNSF reported South Dakota was owed three cars, Minnesota eight, North Dakota 203 and Montana was owed 169. System-wide, the total amount of cars owed stood at 554, a stark contrast compared to one year ago. Part of the decrease in cars owed can be attributed to BNSF adding more locomotives into service.

According to the CP report to the STB on April 22, "Our outstanding grain car orders remain at zero this reporting week, as they have for the previous nine weeks. We spotted a total of 1,432 grain cars this week, which total includes single cars and cars in dedicated trains, and we received 293 new grain car orders. From a grain order perspective, we continue to be current in the United States. With respect to the Rapid City, Pierre & Eastern Railroad (RCP&E), RCP&E did not request any grain cars this week. On average, there was a plus-12 locomotive balance again this reporting week, meaning there were 12 more CP locomotives on RCP&E than RCP&E locomotives on CP."

Besides a milder winter overall compared to last winter and railroads adding more power, grain prices are lower than one year ago, which is causing farmers to sell less product. One year ago, cash corn was priced at $4.77, cash soybeans were $14.58, cash spring wheat was $7.08 and cash winter wheat was $7.38. In comparison, the cash price on Friday, April 24, was $3.47 for corn, $9.29 for soybeans, $5.29 for spring wheat and $4.66 for winter wheat.

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Another factor is the decrease in oil prices, which has slowed tank car movements that were clogging railways last year, leaving little room for grain cars. One year ago, June oil futures were trading at $100.84 per barrel and on April 24, June was trading at $57.15 per barrel. In the week ended April 24, Baker Hughes North American Rotary Rig Count reported that the number of rigs drilling for oil in the United States totaled 703, compared with 1,534 a year ago.

The USDA Grain Transportation update reported, "There is a continued shift in grain transportation away from rail towards other modes. Shorter-distance domestic movements to processing facilities within states are more likely to favor truck transportation, whereas long-distance exports movements tend to favor rail or barge. In addition, some traffic shifted to barge, which has 5% more grain traffic year to date, compared to the three-year average." For a more in depth comparison year over year, here is the link to the USDA GTR report on April 23: http://goo.gl/…

BNSF UPDATE ON CAPITAL MAINTENANCE

In January, BNSF announced major capital projects it plans to complete in 2015 to maintain and grow its rail network. The company said it will spend more than $100 million per state in nearly half its network to increase velocity, add capacity and improve their network. Here is the link to the full plan: http://goo.gl/…

On April 24, the BNSF reported, "Our capital maintenance activity is now in full production with work continuing on new double-track projects along our Southern Transcon route. The Panhandle subdivision, which runs from Amarillo, Texas, eastward through Oklahoma and into southern Kansas, will collectively receive approximately 18 miles of new double-track, nearly half of which is already in service. In addition, we will add approximately nine miles of new double-track along our Clovis subdivision in New Mexico, which is expected to finish in June and eliminate a significant bottleneck on the Southern Transcon. As this expansion work is being done, some trains may experience minor delays through the area."

Last November, the BNSF completed an additional eight miles of double-track on their Glasgow subdivision, which runs from Minot, North Dakota, to eastern Montana. Maintenance work in the Dilworth, Minnesota, area was nearly completed and work along the Minneapolis/St. Paul to Chicago main line was scheduled to finish in early December. All of these improvements made by the BNSF created more track space in key areas and allowed for a smoother flow of trains throughout their entire system.

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

Follow Mary Kennedy on Twitter @MaryCKenn

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