Record Crop Could Mean Train Troubles This Fall

06:14AM Aug 01, 2013
train tracks elevator
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Rail companies got a late start on routine maintenance this year, which could create a back-up of trains and long lines at grain elevators.

Elevator managers in the Upper Midwest may have a difficult time this fall finding enough trains to ship the nation’s corn, soybeans and wheat to ports. That’s because a number of rail companies got a late start on routine maintenance on some of their main tracks. The maintenance could create a back-up of trains, and long lines at grain elevators. And talks of a bin buster crop in 2013 could make the situation even worse.

"Some rails have their maintenance system going through harvest," says John Grassley, director of Retail Services for CHS. "So, we could see some disruptions and some challenges this fall."

The late spring pushed everything back, including maintenance projects on U.S. railways. This could mean big hurdles for farmers, specifically in the upper Midwest, trying to get their crop harvested and sold.

"If an elevator is full, a farmer won't be able to deliver, and for us, every time you can't make a trade, we don't like to be able to do that. We like to be able to meet the farmers' needs," Grassley says.

Grassley says these maintenance projects are needed each year. This year, however, the timing could be bad.

"Long term, this will be good for us and it will be a benefit to the ag industry," he says. "Short-term, we're going to feel some pain this fall."

Even with possible hiccups this fall, the fact is today, U.S. railways are hauling less agricultural goods than before.

"We used to haul about 50 percent of our demand by rail, for both domestic and export market positions at our ports," says Randy Gordon, President of National grain and Feed Association. "It's down to about 28 or 26 percent right now.

He says that’s largely been replaced by trucks, but with increased efficiency in rail, it could regain some of that share in the future.

"As you get the bigger trains now with UniTrain shipments of 110 cars and up, it's a very efficient way to move vast quantities of agricultural commodities to both domestic and export market positions," says Gordon.

Ag shipments are now competing with the boom of crude oil on rail. For many ag companies who rely on trains, there’s uncertainty it can keep with agriculture’s need for speed.

"If the economy recovers, if coal recovers, there's all this capacity and all this need for rail, will the railroads be able to provide enough capacity to meet all the demand?" says Grassley. "Specifically with us, it's agricultural needs."