Farmers and grain shippers are increasingly worried about where they’ll put millions of bushels of Minnesota-grown corn and soybeans because the rail system is far behind.
With the harvest just ahead, farmers and grain shippers are increasingly worried about where they’ll put millions of bushels of Minnesota-grown corn and soybeans because the rail system is far behind in moving last year’s crop.
A boom in oil shipments out of North Dakota has led to delays and skyrocketing freight costs that are ratcheting up tensions between rail firms and many of their customers: coal companies, utilities, ethanol plants and passenger rail.
But prompt rail service is of particular importance to the Upper Midwest’s immense agricultural sector. Bob Zelenka, executive director of the Minnesota Grain and Feed Association, said the railroads are not adjusting quickly enough to the unprecedented oil traffic.
“It just added substantial congestion to whole BNSF and [Canadian Pacific] network,” Zelenka said, “and neither was well prepared with the infrastructure to handle that increase in volume.”
Gov. Mark Dayton sent a letter last week to the Surface Transportation Board, which regulates railroads, complaining of “dire circumstances” that Minnesota farmers face because of delayed grain shipments, and asking for increased accountability from the railroads.
The board will hold a previously scheduled field hearing Thursday in Fargo to learn more about the problems and to hear from railroad executives, top elected officials, and leaders from corn and soybean associations, farmers unions, power companies and coal shippers.
In calling for the hearing, the board said it remains “very concerned” about grain shipments, especially with above-average and potentially record corn and soybean harvests expected in a few weeks.
“As the new harvest ramps up, storage space at many [grain] elevators reportedly is already unavailable or very limited” because much of the 2013 corn and soybeans have not been shipped yet, the board noted. “As a result, some farmers are being forced to store grain on-site in bins, bags, or on the ground, or to truck grain to distant elevators.”
The railroads have pledged to catch up on delayed shipments, and BNSF Railway Co. has added locomotives, crews and new track in strategic areas.
John Miller, BNSF group vice president of agricultural products, said in an interview Wednesday that the latest shipping numbers show dramatic progress since April, May and June, when the company had a huge backlog.
“I know the market feels like we’re not caught up,” Miller said. “But the reality is we are caught up in Minnesota.”
BNSF and Canadian Pacific Railway are the main companies serving the northern tier corridor, which sends corn, soybeans and wheat from Minnesota, North Dakota and Montana to the Pacific Northwest, much of it for export to Asia.
A University of Minnesota Center for Farm Financial Management study estimated in July that transportation problems between March and May cost Minnesota corn growers $72 million, soybean farmers nearly $19 million and wheat growers $8.5 million. A similar study by North Dakota State University estimated $66 million in higher costs for that state’s farmers for sales between January and mid-April.
The extra costs come from higher freight rates, and higher storage rates from grain elevators. The rates reflect the increased risks of spoilage, lost sales and penalties for products not delivered on time if farmers and shippers cannot move their grain to market.
Zelenka said those most affected in Minnesota are growers in northern and western counties that are dependent on rail, since those in southern and central areas near rivers may have the option to ship by barges.
Lance Peterson, who grows corn and soybeans on about 2,000 acres near Underwood just east of Fergus Falls, said farmers are tired of rhetoric from the rail companies. “They said a lot of problems last year were due to the coldest winter in 30 years, but we’re well beyond that now and that story should be closed out,” he said. “So now it’s time to provide adequate service and get this year’s crop moved.”
Peterson, who is on the board of the Minnesota Soybean Growers Association, said a secondary market has developed for freight, where some elevators or shippers who contracted for trains months ago are selling those contracts at 500 percent markups to growers and other shippers desperate to move crops.
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