RECORD CROP CAUSES GRAIN CAR SHORTAGE
RECORD GRAIN CROP CAUSES RAILCAR SHORTAGE: Grain suppliers like Cargill Inc. and railroads like Union Pacific Corporation face rising costs and shipment delays because of a railcar shortage caused by a record corn harvest and rising demand in Europe and Asia for wheat and soybeans. The monthly lease rate for a 120-ton grain hopper railcar, capable of carrying 5,150 cubic feet of grain, is about $270 to $325, up from $200 a year ago, according to leasing companies like CIT Group and RailSolutions Inc., a railroad consulting company. Some shippers have had to wait almost three weeks for cars. "We've leased up everything we could lease," the Union Pacific's chief executive, Richard Davidson, said in an interview with Bloomberg News. Some farmers and exporters have had to stockpile crops to await railcars as demand for wheat, soybeans and corn has surged because drought reduced supplies from Europe and Australia. "This happens every harvest, but it feels a bit more severe this year," said Frank Sims, a vice president at Cargill, the world's biggest agricultural company. [Brotherhood of Locomotive Engineers, 11-18-03, from report by Bloomberg News]
RAILROAD LOGJAMS THREATEN BOOM IN THE FARM BELT: In a harbinger of potential snags across the U.S. economy, a sudden boom in the farm sector has combined with shortages of railcars and crews to delay freight trains and lead to higher delivery costs for farmers across the country, Monday's Wall Street Journal reported. The demand for grain-hauling equipment is hot because the Farm Belt is humming after five years of recession. Grain prices are profitable for farmers in large part because corn and wheat exports have soared 24 percent since September 1, a reflection of poor harvests this year in Europe and elsewhere. But there is a catch: Failure to deliver their goods is cutting into the potential profits. That is because years of cost-cutting on both personnel and equipment have left railroads short-handed, forcing them to scramble to deal with the unexpected surge in both the agriculture sector and the economy in general. Indeed, railroad delivery times for everything from lumber to containers of consumer products have started to climb. And that could eventually lead to higher prices for items ranging from breakfast cereal to cars. The Farm Belt is feeling the effects of the train shortage most significantly because it is so heavily dependent on the railroads. About 40 percent of the nation's grain is transported by railroad, with most of the remainder being carried by trucks and barges. Also, the sudden surge of business caused by the autumn harvest across the Plains and Midwest tests the rail system as no other industry does. The delays are sparking fears that bottlenecks might also arise in other sectors of the U.S. economy as they also get busier. But it is the Farm Belt that is feeling the pinch right now. Farmers in Reynolds, N.D., for instance, are still waiting for a train that was scheduled to arrive November 1. As a result, the economy of the tiny farm town is slowing. Reynolds United grain elevator, owned by 300 farmers, has stopped buying wheat from growers because it can't move the 270,000 bushels it already has bought. The cooperative is dependent on Burlington Northern Santa Fe Corp., the second-biggest railroad, to haul its wheat to market. [Brotherhood of Locomotive Engineers, 12-1-03, from article posted on Wall Street Journal website]
RAILROADS ADD CREWS, CARS TO BATTLE GRAIN DELAYS: Railroad executives said on December 8 that railroads are accelerating efforts to add new equipment and employees in the face of transportation delays plaguing the nation's grain markets, but the problems are not expected to abate any time soon, according to this Reuters report. "January and February are typically high demand we think we're going to be right up against it from a grain standpoint," said William Eilbracht, general director of logistics for Union Pacific Corp, which operates the largest U.S. railroad and runs more than 23,000 grain hoppers throughout the country. "We're continuing to add more crews and locomotives to our base, which will help," he said. Bumper U.S. wheat and corn crops this year and strong export demand for U.S. grain has met with a shortage of grain hopper cars and crews, leading to shipment delays of a month or more in many parts of the country. The delays have led to price increases for rail cars and caused a spike in the premiums paid for wheat, corn and soybean deliveries. State and federal officials have said problems are creating economic hardships for the nation's grain elevators and farmers. In an effort to explain their strategies for overcoming the delays, rail representatives spoke Monday [December 8] in Kansas City at the National Grain and Feed Association's country elevator council. Union Pacific has recently added 1,000 employees and plans to bring on another 2,200 next year. It also has brought on 46 new locomotives recently that were not scheduled to be added to the fleet until 2004, Eilbracht said. The additions, coupled with an expected seasonal slow-down in nonagricultural shipments at the first of the year, should help get things back on track by the end of the first quarter, he said. Burlington Northern Santa Fe Corp. , another major U.S. carrier, has added more than 2,200 hopper cars to its grain fleet and 232 locomotives since August. Kansas City Southern Railway, which operates about 3,500 hoppers, is also running behind, about 10 days, said market manager Betsy Graverson. And Canadian National Railway, which has about 3,400 cars running grain in the U.S., is currently about 1,800 cars behind schedule after seeing demand soar more than four times last year's volume, said Stephen Gehrt, the railroad's director of U.S. grain and fertilizer. The company is bringing an additional 1,100 cars on line in 2004 and is also adding crews. But he said, the railroad will continue to struggle to meet commitments likely through March. "It's going to be a continuing struggle," said Gehrt. [United Transportation Union, 12-8-03, from Reuters report]
GRAIN RATES TO INCREASE - BNSF TO CHARGE $100 MORE PER CAR: Burlington Northern Santa Fe Railway, the Montana's primary rail shipper, has announced plans to raise grain shipping rates, a decision Montana agriculture officials say will hurt farmers and the economy. Agriculture Director Ralph Peck said Monday [Dec.15] the move would raise shipping costs an average of 6 cents a bushel in the state. "Any way you look at it, it's not good for Montana," he said. "I believe BN saw another way to improve their bottom line at the expense of Montanans." Gus Melonas, a BNSF spokesman, disagreed, saying the railroad considers itself a partner with the industry. "Grain traffic demand has increased dramatically this year, and current rates do not reflect current market conditions," he said. He said rates also are going up in North Dakota. Melonas said BNSF has made a series of temporary rate reductions on wheat moving from Montana to the Pacific Northwest and California in recent years, with the reductions resulting in savings of up to $300 a car. The current reduction will expire Dec. 31, he said. "BNSF has chosen to modify its base rates to limit any effective increase to a maximum of $100 per car," he said. Since August, he said, the railroad has added locomotives to the grain service and added to its grain car fleet. This year, BNSF has hired personnel, he said, and made improvements along the grain market corridor, with a goal of improving customer service. Rates with 110-car shuttle elevators are negotiated, state agriculture officials said, and the existing rates will be in place until the contracts are up. Jim Christianson, executive vice president of the Montana Wheat & Barley Committee, said BNSF's planned increase underscores the need for rail competition in the state. "That's the number one problem in Montana ever since God made dirt," he said. Gov. Judy Martz said she planned to follow up on the rate decision with BNSF officials. "Agriculture is Montana's number one industry and the ability to ship agriculture products to markets at competitive prices is critical," she said. "And, very simply, this is a fairness issue." [Brotherhood of Locomotive Engineers, 12-16-03, from report by Associated Press]
NORTH DAKOTA GRAIN DEALERS HEAD TO WASHINGTON: North Dakota Governor John Hoeven and Public Service Commissioner Tony Clark are bringing North Dakota grain elevator operators to Washington to push for reform of railroad service for North Dakota. The Hoeven delegation will meet today with Chairman Roger Nober of the Surface Transportation Board and Bill Hawks, undersecretary for marketing and regulatory programs for the U.S. Department of Agriculture. "We're in Washington this week to drive home the fact to policy-makers and regulators that railroad rates and shipping practices are just unacceptable," Hoeven said. "A lack of competition has enabled the railroads to take unfair advantage of the industry." Hoeven said Burlington Northern Santa Fe plans to increase shipping rates in North Dakota for sunflowers, canola, beans, barley and wheat - in a year when tons of those same commodities are being stored on the ground in part because of a lack of rail cars to ship them to market. Clark said this year's problems are worse than usual. "Record amounts of grain are piled at elevators across the state and the transportation crisis in the farm belt is threatening to reverberate throughout the economy," Clark said. Scott Ostlie, manager of the Northwood (N.D.) Equity Elevator, is accompanying Hoeven and Clark. So is Steve Strege, executive vice president of the North Dakota Grain Dealers Association. Senator Byron Dorgan, D.-N.D., sent a letter Tuesday to the Surface Transportation Board calling for immediate action to address the "growing crisis" that a lack of railroad transportation cars is having on the North Dakota wheat industry. "This is causing serious financial hardships for farmers and elevator operators unable to move their crops in a timely fashion," Dorgan wrote to Nober. "The impact is enormous." Dorgan said he also sent a letter to Burlington Northern Santa Fe, saying it "has a responsibility to meet its commitments and to treat all of [its] customers fairly." According to the North Dakota Public Service Commission, Burlington Northern Santa Fe has reduced the number of grain cars by 23 percent since 1997. There currently are 18 million bushels of grain piled on the ground across the state, breaking the previous 1994 record of 12.9 million bushels. [Brotherhood of Locomotive Engineers, 12-17-03, from report on Grand Forks Herald website]
BNSF TO INCREASE SHIPPING RATES: The Burlington Northern and Santa Fe Railway will raise its grain shipping rates early next year due to the harvest, a spokesman told the Associated Press. "This is market-driven. Current conditions and near-record harvests have put pressure on the entire grain transportation network," said Gus Melonas, director of public affairs for the railroad, a subsidiary of Fort Worth, Texas-based Burlington Northern Santa Fe Corp. Existing rates don't reflect current marketing conditions, Melonas told the Daily Republic of Mitchell, S.D. Domestic rates for wheat and corn will increase $100 per train car and soybeans will increase between $200 and $260 per car next month, he said. Corn will rise by another $100 per car in February, according to Melonas. Bob Way, a Mitchell grain merchant, said he hasn't seen a shipping increase that big in a long time. "We see it fluctuate up and down a little bit, but this is a big one." The increases come as livestock and grain farmers finally can make some money, Sen. Tim Johnson, D-S.D., told The Associated Press on Saturday. "This is just enormously frustrating," Johnson said. "I'm going to be talking to the Surface Transportation Board about this." Johnson said he doesn't know the legal options yet but that the federal Surface Transportation Board has some regulatory oversight, "and we need to do whatever we can do try to at least moderate, if not eliminate, these price increases." According to Way, the increases mean freight costs will rise about 8 percent for corn and 7 percent for soybeans. For farmers, the increases will mean about a nickel a bushel less on corn and soybeans, he said. "Through February, we will see an increase in freight of 5 cents a bushel on corn and 6 cents a bushel on soybeans," he said. The railroad blames part of the increase on investments in new cars and locomotives to haul the bumper crops. "We have made significant investments to best serve the ag market," Melonas said. "That also includes new rails and ties across (the Midwest)." It's bad enough that there's a rail car shortage, Johnson said. "To add on top of that higher rates seems to me to be just unfair." He said he will talk to the president of the Burlington Northern Santa Fe as well. Oversight is needed, Johnson said, because South Dakotans are captive shippers. "This may be supply and demand, but where you've got a monopoly or near-monopoly situation, where no one else can haul the grain, then you've got the potential for some gouging to go on." Still, it's too early to label the increases as price-gouging, he said. The BNSF badly needs equipment upgrades, Way said. "The service was really poor and the quality of cars that we're getting is bad," he said. "I know that they're short of equipment. I don't know if the harvest has anything to do with it." The increases already have been added to December grain prices at the Mitchell grain elevator because that grain won't be shipped until next month, Way said. [United Transportation Union, 12-22-03, from Associated Press report]
BNSF TO ADD GRAIN CARS TO FLEET: North Dakota Governor John Hoeven said on Friday (Jan. 9) that the Burlington Northern Santa Fe Railway (BNSF) will add 6,000 grain cars to its fleet and establish an ombudsman to address service problems in the northern U.S. Plains, according to this Reuters report. The moves are intended to help address a rail car shortage that has caused widespread grain shipping delays in the nation's breadbasket. Rail car placements in North Dakota were running about 30 days behind, Hoeven said. "They indicated they will buy 6,000 rail cars over the next four years to help with the car shortage," Hoeven said. The railroad agreed to the steps at a Fargo, North Dakota, meeting Friday between Hoeven, BNSF officials and grain shippers. Hoeven said the ombudsman's role would be to link grain elevators with railroad officials to address rate and service issues. Hoeven said Burlington Northern , the second-largest U.S. railroad and main carrier in North Dakota, was providing adequate service to grain elevators big enough to load its 110-car "shuttle" trains. But delays have hurt smaller shippers in the state who rely on 54- and 26-car trains. "We need good service for non-shuttle loaders, as well as shuttle loaders. That's where we're behind on cars. We pressed that point very hard," Hoeven said. BNSF spokesman Dick Russack said the railroad was not ignoring small shippers. "The bulk of our capacity is available for those people," Russack said. The shuttle trains, he said, can move more material quickly with less equipment. Bumper U.S. corn and wheat crops this year and a booming export market prompted a surge in demand for grain freight this fall. As a result, Burlington Northern, Union Pacific and other railroads scrambled to beef up previously down-sized grain fleets and hire more crews. Still, grain delays have persisted into the new year and railroad officials expect them to continue until spring. "We expect to be pretty close to caught up by the end of March," Burlington Northern's Russack said. He confirmed that the railroad plans to add 6,000 covered hopper cars to its fleet. The cars, each with a capacity of 286,000 pounds, would replace smaller grain cars but raise the railroad's overall grain capacity. Earlier last week, Burlington Northern also agreed to roll back a controversial $100-per-car rate hike on grain cars ordered before Dec. 16 that have not been delivered. The rate increase had been scheduled to go into effect on Jan. 1. [United Transportation Union, 1-9-04, from report by Reuters]
BNSF WILL EXEMPT GRAIN RATE INCREASE FOR SOME: Burlington Northern Santa Fe Railway will exempt certain contracts from the shipping rate increases it announced recently, the railroad's president said. In a letter Thursday [January 8] to Montana Governor Judy Martz, BNSF's Matthew K. Rose said "covered hopper" shipments ordered with a want date before Dec. 16 but that still have not been handled by the railroad are exempt from the increase as long as shipments occur this year. Gus Melonas, a spokesman for BNSF, said Friday that he did not know how many shipments would be affected. Martz said the move would help those elevator operators who have had to wait for cars because of an extended backlog. BNSF has had shipment delays because of the huge 2003 grain harvest, said Rose, who is also chairman and chief executive officer. He said officials believe that they "will essentially be caught up" by the end of March. Last month [December], the state's primary rail shipper announced a rate reduction that it had in place would expire December 31, in part because of increased grain traffic demand. Melonas said at the time that the rates did not reflect market conditions. State agriculture officials have said the move would raise shipping costs an average 6 cents a bushel in Montana. Martz said officials are continuing to ask the railroad to reconsider the increase. Ralph Peck, director of the state Department of Agriculture, on Friday [January 9] also said producers continue to pay a 2.5 percent fuel surcharge for grain shipments. "The change BNSF announced this week will help those elevator operators who quoted prices based on expected shipping costs," he said. "All of these added costs eventually filter down and are paid by producers, however." [Brotherhood of Locomotive Engineers & Trainmen, 1-12-04, from Associated Press report]
BNSF PRESIDENT SAYS RAILROAD WILL IMPROVE GRAIN SERVICE: The president of the Burlington Northern and Santa Fe railroad says the late delivery of railroad cars to North Dakota is not a crisis but says the company will make changes to improve service. The railroad plans to add 6,000 grain cars over the next four years and will add an ombudsman in North Dakota to handle complaints from shippers, BNSF president Matt Rose said Friday in Fargo. "I see our rail system running very well," Rose told a group of grain shippers and state officials Friday [January 9]. "People ask me if I understand the lateness, and the answer is yes. But this state, quite frankly, is just about reflective of the overall network." Rose told the group that he feels like he's "constantly being demonized in this state" despite making "humongous investments" in improvements specifically for North Dakota. "The complaints we get out of the state are at a much higher level than what we hear out of other states," Rose said after the meeting. "We feel like we're a very important partner of our customers and producers, and sometimes that doesn't always come through." Grain shippers are upset by late railroad car deliveries, forcing elevator managers to pile crops on the ground and preventing millions of dollars worth of grain from moving to market. Pete Peterson, who manages elevators in Petersburg and Dahlen, said some of his BNSF shipments are up to two months late, as opposed to a two-week backlog with his Canadian Pacific deliveries. "This didn't make me very optimistic," Peterson said after the meeting. "I appreciate the gentlemen coming out here to meet with us ... but the railroad is going to determine who lives and who dies by their type of system that they want to put in place." Rose said the situation has improved since late November, when demand hit its peak. In the last week of December, the railroad hauled 40 percent more cars out of North Dakota than it did a year ago, he said. Service is up 11 percent from last year over the past four months, Rose said. This also is an unusual shipping year because of a banner harvest, Rose said. "It is the proverbial saying, we don't want to build a church for Easter Sunday," he said. Rose said the additional cars will increase capacity, but said they will not solve the problem of a large harvest. He said the state of Washington has its own railcars to handle large apple crops, and the Canadian government owns about 80 percent of the grain cars in that country. The ombudsman will help coordinate deliveries, Rose said. That representative should improve service, Peterson said. The railroad also has agreed to roll back a $100-per-car rate increase on cars that were supposed to be delivered by Dec. 16, but were not. "We're trying to put an olive branch out there," said Rose, who told the group he would not discuss shipping rates. [Brotherhood of Locomotive Engineers & Trainmen, 1-12-04, from Associated Press story by Dave Kolpack]
BNSF RAISES FREIGHT RATES FOR WHEAT: The Burlington Northern Santa Fe Railway Co. will raise its rates to ship wheat from the northern U.S. Plains by $100 per car starting June 1, the carrier said in a statement on Friday [April 2]. The higher rates will affect wheat shipped from North Dakota, Minnesota, Montana and South Dakota to domestic destinations and export markets in St. Louis, the U.S. Gulf and the Duluth-Superior port on the Great Lakes, the statement said. The railroad, a unit of Burlington Northern Santa Fe Corp., said on Thursday [April 1] that it also plans to raise rates by $100 per car for wheat shipped out of the southwestern United States. "We base our pricing, as we always do, on market conditions," BNSF spokesman Pat Hiatte said. BNSF is the largest U.S. grain hauler. Along with other carriers including the Canadian Pacific Railway and Union Pacific, BNSF has struggled with a backlog in grain shipments stemming from large North American corn and wheat harvests last fall and a booming grain export market. Grain dealers have said that rail car placements at grain elevators in North Dakota, for example, were running up to 50 days behind at times this past winter. Hiatte said BNSF was making progress with car placements. "We are proceeding down that path. We are getting caught up," he said. [Brotherhood of Locomotive Engineers & Trainmen, 4-2-04, from Reuters report by Julie Ingwersen]
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