A Possible Rail Strike is Quickly Approaching Unless Congress Steps In
U.S. Farm Report 11/12/22 - Farm Journal Report
Harvest in Iowa is nearing the finish line. As the monster corn crop continues to pile up in the eastern part of the state, there are renewed concerns about what a possible rail strike could mean for the grain industry and fertilizer needs this fall.
“By and large, we're on the short rows, so to speak, of harvest here. There are a few areas still wrapping up,” says Matt Carstens, president and CEO of Landus Cooperative, a farmer-owned co-op with a large footprint in Iowa.
As harvest wraps up and the focus shifts to fall fertilizer, Carsten says the low Mississippi River is placing more pressure on rail this fall.
“The weakness of that system is so fragile. One person not showing up has a ripple effect for what could be days on a unit train coming to see us or leaving our facilities,” Carstens says.
Grain handlers and input suppliers across the country are concerned about what the potential crisis on the nation’s railways could mean for business and for farmers.
“If you're not getting movement on the river system, or those freights get high enough, which they are, you see a switch to rail, which puts more pressure on the rail infrastructure,” he adds.
The proof is showing up in freight costs. As demand has surged for rail cars, the National Grain and Feed Association (NGFA) says the cost of rail freight has skyrocketed.
“We're hearing secondary rail freight rates on a railcar are running around $1,500 to $2,000 a car right now. I think that number was around $150 a car at this time last year,” says Mike Seyfert, president and CEO of NGFA.
The cost to ship via rail has jumped 13 times from where it was last year, and the reliability of that vital shipping vein continues to be in limbo due to a looming strike.
“There was an agreement that was reached and announced back in September. With the Biden administration, we're working with the railroads and the unions to get that deal, but all 12 unions have to ratify,” Seyfert explains.
Just this week, a third union voted to not ratify the deal, putting the future of a final rail agreement at stake and increasing the chances of a rail strike.
The original date the rail workers could strike was Nov. 19, but just last week, a group representing major railroads, as well as one union that already voted to reject the new contract, agreed to push that potential strike date back to Dec. 4.
While this gives the groups more time to reach a new agreement, it also places more pressure on Congress to step in and prevent the nation’s railways from a stoppage, but some fear it’s just kicking the can down the road as concerns over transportation heat up.
“You add that threat with low river levels, and, no pun intended, it could be a perfect storm if things don't go the right way quickly. With the freeze coming in, a bunch of rain really isn't going to help us at this point get those river levels up,” Carstens says.
Strike or no strike, rail issues have created waves all year. However, the situation maybe wasn't quite as bad as expected this fall.
“A number of our members have told us they had expected it to be a little more difficult here in the fall and during harvest than it was. The fact they're not saying that it was worse, that's a good thing,” Seyfert says.
Data from Nov. 3 in regard to the latest unfilled grain car orders of 11 days or more shows:
- 4,657 in early November
- Compared to 9,492 cars in April
- Compared to 430 cars a year ago
Seyfert says the data shows just how strained the nation’s rail system has become.
“We're making progress. We have been going in the right direction, even though we do still have some challenges,” Seyfert adds.
Leaders in the grain-handling industry say shutting down rail for even a few days would provide shocks to the system, and there are questions regarding just how long it will take for that system to recover.
“I fear with the freeze coming on the river systems, still seeing low levels and more pressure on rail and the rail strike looming over our heads still, there's a lot that creates some angst if you're in the agribusiness world or a farmer, in particular,” Carstens says. “There's a lot of pressure on this that has to get resolved.”
