Underwood, Minn., farmer and American Soybean Association (ASA) Director Lance Peterson joined other concerned growers Thursday, Sept. 4, in Fargo, N.D., at a public hearing before the Surface Transportation Board (STB) to testify on rail service issues and the negative impacts on soybean growers. As the backlog of rail cars in the upper Midwest continues, many elevators are still full of 2013-crop grain ahead of a looming 2014 harvest. This backlog negatively affects basis levels and cash bids, and could create a grain storage crisis as a new crop harvest begins.
Peterson represented ASA and the Minnesota Soybean Growers Association at the hearing, and re-emphasized points he made at a previous STB hearing in the spring.
“The message that I delivered was that inadequate rail service through delays and increased freight costs is not just a business challenge, but creates massive losses, which are passed directly on to the agricultural producer — the farmer.”
“I stated that my lost income would likely exceed $100,000 as one producer,” Peterson said. “I also stated that with thousands of producers across the upper Midwest losses could be in the hundreds of millions of dollars. Unfortunately these tremendous losses have now been confirmed. A recently released report from the University of Minnesota shows lost Minnesota farm income of $100 million from March to May of 2014.”
Peterson said the rail industry discussions in the spring centered on slow shipments due to the coldest winter in 30 years and assured correction before the 2014 harvest. But now, half way through the wheat harvest there’s still an abundance of last year’s crops that have not been moved, grain bin companies are so busy they can’t take any more business and farmers are in a difficult position of adding storage to avoid piling grain on the ground during this year’s harvest.
“The rail problems of the last year have grain shippers trying to figure out how to navigate through this year. In many cases shippers have spent millions of dollars in premiums on initial rail car auctions to access rail cars for the coming year,” Peterson said during his testimony. “Based on expected car movement, this amounts to an approximate $700/car premium just to access the cars. If grain movement is not adequate, shippers will be forced to look to the secondary market to acquire additional cars. The asking price for October/November shipments is currently more than $4,000/car. It is imperative that rail movement is adequate and timely.”
Peterson also said knowing the movement, velocity and turn-around time of the grain cars is helpful, but not enough. He requested fuller reporting of rail service, asking the STB to require railroads to submit metrics showing past dues, average days late, turnaround times, etc. for agricultural customers vs. crude oil customers and other customers.
“This information would help to give a clear picture of railroad service issues,” he said. “Based on the size and scope of the rail shipment problems being faced in the upper Midwest this is not too much to ask. Farmers are suffering losses of hundreds of millions of dollars through increased basis levels, lower cash market prices, and storage losses because of the current rail situation in the upper Midwest. Requiring full disclosure of rail movements will give rail shippers, policy makers, and the STB itself a much clearer view of the situation as we work with the railroads on solutions.”
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