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STC: Improvements mean railroads ready for this harvest

 
By TIM ALEXANDER
Illinois Correspondent

ANKENY, Iowa — Owners of Class I freight rail lines don’t want to be accused of sitting idle on the tracks after weather and economic conditions all but put the brakes on Great Plains farmers’ harvest deliveries during the polar vortex winter of 2013-14.
Rather, railroads have made vast improvements to their delivery systems by investing billions of dollars in new locomotives, track and personnel over the past two years to ensure delivery delays of agricultural commodities would be minimized if similar conditions were to return.
This is according to Mike Steenhoek, executive director of the Soy Transportation Coalition (STC), which monitors freight rail deliveries of agricultural goods and issues occasional “report cards” on the performance of Class I railroads such as Union Pacific, BNSF and CSX Transportation.
“From having my ear to the ground and visiting with various grain handlers, I am pretty confident our nation’s railroads will be able to accommodate the upcoming harvest,” Steenhoek predicted in an email issued Sept. 4. “Over the past couple years, railroads have devoted significant resources to improving the condition of their networks. Without question, there are additional locomotives, track and personnel available today to meet the needs of rail customers compared to previous years. Railroads should be commended for this level of investment.”
In addition to the polar vortex, which included prolonged periods of below-average temperatures and moisture, a spike in crude oil activity in North Dakota was partly to blame for the shortage and backlog of railcars from the Dakotas down to Kansas and east into Illinois, Roger Johnson, president of the National Farmers Union, told the Associated Press last week. “It doesn’t take too much more on the tracks to really get things snarled up.”
But the shortage and backlog in 2013-14 is an experience in his company’s rear-view mirror, said John Miller, BNSF Railway Co. vice president of agricultural products. “Last October through December (2014) we actually moved record volumes of soybeans out of the northern states. I would suggest that our improvements began last harvest,” he said.
“What you are seeing this year is a continuation of resources coming to bear. We’re seeing continued track expansion and an expanded maintenance budget under our 2016 capital investment plan.”
Miller said farmers along the BNSF network can rest assured shuttle delivery velocities have improved over the past two years.
“With (increased) velocity, the system becomes much more predictable and efficient for the shipper, because the fluidity is there,” he said, adding BNSF should be able to maintain strong shipping velocity throughout the harvest season.
“We have plenty of cars and are offering more freight than the market currently needs. We’ve got cars to offer, and we’ve got over 700 locomotives parked right now.”
Problems with grain deliveries in 2013-14 attracted the scrutiny of the federal Surface Transportation Board and elected officials, including U.S. Rep. Kevin Cramer (R-N.D.), who pressed the board for solutions. “We put the pressure on the railroads and were willing to be a pain to them, but we are also willing to give them credit that they’ve owned up to this problem and appear to have fixed it,” Cramer told the AP.
Railroads’ recent investments in shoring up their delivery networks will likely not be tested by the expected near-record corn and soybean harvests this year, Steenhoek predicted, for a couple of reasons.
“It is anticipated that volumes transported will be restrained due to farmers electing to store their grain and soybeans,” he said. “The further retreat in prices will result in a growing number of farmers deciding to hold onto their harvest, hoping for a more opportune time to sell.”
In addition, a comparatively weak export program will result in less volume absorbed by railroads and further contribute to on-farm storage, Steenhoek continued. “As many are aware, the strengthening of the dollar, the further depreciation of the Chinese yuan, the weakening of the Brazilian real compared to the dollar and the overall concerns with the Chinese economy are producing significant headwinds for U.S. agricultural exports – especially soybeans.
“The good news is that there will likely be sufficient transportation supply to meet demand. The bad news is that the increasingly unfavorable economics facing the industry is a key contributing factor.”
Miller confirmed BNSF is anticipating an “overall soft” U.S. ag export market this year, particularly for corn and wheat. He added U.S. soybeans heading for China will help keep the soybean export market viable.
The wild card aspect of a successful harvest transport season remains the weather, Steenhoek and Miller agree. To that end, BNSF has invested in more switch heaters, snow removal equipment and other resources to help it combat another prolonged severe winter, such as the historic polar vortex.
But other factors beyond control, such as low commodity prices and a weak export market, are combining to shape the level of demand for harvest transportation this year. Unless something drastic changes with prices and international demand soon, it appears supply could outstrip demand for 2015-16 harvest movements by rail.
“If we see a surge or movement from the farm community over and above their current orders, we have more resources available at the ready,” said Miller.
9/16/2015