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Perfect Harvest, Perfect Logjam

January 12, 2011
By: Guest Editor, Top Producer
Soy Transportation Tour
Better loading technology is one way railroads have tried to improve shipping efficiency. Rail shipping problems caused storage issues this past harvest.   
 
 

Despite ideal harvest conditions and high-quality grain this past fall, rail shipping problems created overloading and more on-the-ground storage, says Roger Fray, executive vice president of grain for West Central Cooperative in Ralston, Iowa.

“It’s not cool when it’s $5 corn,” Fray says. West Central, with 25 locations, stored more than 16 million bushels on the ground in 2010, or 23% to 28% of its total capacity.

Fray says the biggest problem was balancing shipper demands and railroad policies, which he says can be unfair at times.

“We had seven to nine days of rail delays and added 400,000 bu. to our ground piles,” he says. “It increases our financial exposure and challenges our standards to maintain quality. In short, it puts
us at larger risk.”

Fray was able to voice his concerns directly to Daniel Elliott, Surface Transportation Board (STB) chairman, who visited the Midwest recently for a firsthand look at grain movement. Elliott says he believes it is important to look at on-the-ground facilities, and his primary goal was to strike a balance between railroads and shippers.

“We’re a complaint-driven agency,” Elliott says. “We want to move away from expensive and lengthy litigation and invent avenues to get both sides talking.”

Elliott’s agency handled 1,450 cases in 2009. Communication between parties is a better way to resolve complaints, he adds.

Farmers Depend on Rail. In its annual report released in November 2010, the Soy Transportation Coalition (STC) found that 24% of soybeans, 43% of soybean meal, 67% of soybean oil and 99% of biodiesel produced in the U.S. are transported by rail. The report also stated that 41% of soybeans moved by rail (9.8 million tons) and 60% of biodiesel are transported at potentially excessive rates.

If rail transportation becomes too costly, farmer profitability and agricultural exports will be diminished, says Dean Campbell, chairman of STC. Transportation costs can be passed back to farmers by increasing the basis spread.

With the economy down, capacity was less an issue than a couple of years ago, says Delbert Christensen, who farms near Audubon, Iowa. He sees rail shipping coming under more pressure in the future. Christensen just returned from a grower trip to China and notes that Asian export markets are being accessed by rail shipments from the Midwest to the West Coast.

“As we open new export markets, capacity becomes a very difficult issue to solve,” Christensen says.

“The question is not whether we can achieve an abundant harvest. It is whether our transportation system can absorb it,” says Mike Steenhoek, STC executive director.

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FEATURED IN: Top Producer - January 2011

 
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