- DTN Headline News
Dread Grows as Harvest Nears
Friday, July 25, 2014 11:45AM CDT


By Mary Kennedy
DTN Cash Grains Analyst

OMAHA (DTN) -- As harvest nears, elevator operators in the Northern Plains still waiting on railroad cars ordered months ago are experiencing feelings of dread, especially smaller operators or those handling specialty crops.

Reports are that larger-shuttle loaders and those handling mainstream grains are receiving cars before single-car loaders.

In its weekly update to the Surface Transportation Board on July 18, the Canadian Pacific railroad said they have a total of 23,761 open car order requests in North Dakota averaging 10.72 weeks late. The report from the prior week showed 24,280 open requests with an average of 10.14 weeks old.

The problem with the CP reporting system is it does not separate older orders from more recent orders, making it unclear how much, if any, progress is being made on the past due cars.

However, if you talk to most CP shippers in the U.S., especially those who don't load 100-car trains, they will quickly fill you in as to how late the railroad really is.

Jeff Kittell, manager of Souris River Cooperative of Lansford, N.D., an elevator serviced by CP, said he is "still waiting on a March 6 spring wheat unit train." He added, "Single cars ordered for February 3 are supposed come this week."

Keith Brandt, manager for Plains Grain & Agronomy in Enderlin, N.D., said, "We loaded a May 5 shuttle yesterday but have orders for smaller units dating back to April 8," said Keith Brandt, manager for Plains Grain & Agronomy in Enderlin, N.D. "Railroads are really favoring the large unit sizes. That makes it tough for specialty crops and there is not a big market for shuttles of spring wheat."

Robert Johnson, CP senior vice president of operations, told the STB, "We remain committed to working with our customers and the STB staff to move as much grain as possible and to find solutions to problems that may arise." Here is the link to the full July 18 report by the CP to the STB: http://goo.gl/…

But Kittell, like many other shippers, has little confidence in the CP's ability to catch up before harvest. He said his locations need at least three to four trains to clean out before harvest and that it was probably "not going to happen as winter wheat harvest is about three weeks away."

Brandt added, "We are plugged on wheat and wheat harvest is two weeks away. There is a lot of unpriced corn that wants to move before soybean harvest and that is going to muddle things up for soybean harvest."

BNSF MAKING PROGRESS

The BNSF railroad seems to be making progress, as cars owed and days late decreasing from last week. The BNSF also announced on July 22 that it "will offer more shuttles and COTs for this year's fall harvest than in 2013. Specifically, we will run at least as many COTs as we did in 2013 during the fall months."

In their July 15 weekly service update, BNSF said, "For the week ending July 15, overall on-time performance decreased a little over 8 percentage points compared to the prior week but is still 27 percentage points better than our baseline week in early February. System velocity, which is defined as miles per day (MPD), increased to 177 MPD for the week ending July 15 compared to 173.2 the prior week. For the week ending July 15, our trains holding average is down 9 percentage points when compared to the previous week and down more than 32% since the week ending Feb. 7. Fewer trains holding means more trains can begin their trips without delay due to congestion or a critical resource."

In his weekly podcast of July 18, John Miller, vice president of BNSF agriculture products said on average, 6,154 cars were owed vs. 6,720 the prior week and days late were at 23.7 vs. 27.1 the prior week. North Dakota is still owed the most cars with 3,831 cars owed vs. 4,243 the week prior and has been waiting 26.5 days vs. 29 days the prior week. Montana is owed 1,098 versus 1,212 cars the prior week, Minnesota is owed 425 cars vs. 613 cars the prior week and South Dakota's total rose to 489 cars owed vs. 229 cars the prior week. Here is the link to the BNSF July 18 service report: http://goo.gl/…

RAIL, BARGE FREIGH COSTS SOAR

Secondary freight costs continue to rise for U.S. BNSF shippers with the last trade reported at $3,500 per car and this is over and above the tariff rate paid to move the car. Cars in the primary railcar market (COT auction) have been trading at historic highs since late May for guaranteed railcar placement for grain shipments in August, September, and October.

"Bids for the week ending July 17 ranged between $2,700 and $3,200 per car for BNSF Railway's guaranteed grain car placement in September and between $2,800 and $3,000 per car for placement in October," according to USDA's weekly transportation update.

While most trading typically occurs in the secondary railcar market where shippers buy/sell cars originally bought in the weekly COT auctions, shippers are worried that cars will be hard to come by this harvest. This has sent many shippers vying for the weekly allocated cars sold by the BNSF in the primary freight market.

"Unlike premiums paid in the secondary railcar market, which are transferred between shippers and do not affect railroad profits," said the USDA, "premiums paid in the primary market accrue directly to the rail carrier."

Barge freight rates on the U.S. river system have also been moving higher since the rivers reopened after nearly three weeks of closure due to flooding which caused locks in the Upper Mississippi River and parts of the Illinois River to close, stopping barge movements. Now, as shippers try to catch up on shipments, empty barges are in high demand, sending freight costs substantially higher.

"As of July 22, barge rates for export grain from St. Louis and the Lower Illinois River were $15.76 and $25.38 per ton, respectively," USDA reported. "Since July 1, the St. Louis rates rose 52% and the Lower Illinois River rate increased 44%."

Barge operators are expecting demand to be higher than normal when the U.S. corn and soybean harvests start, which is sending October barge freight higher as well. "October rates for barge delivery to St. Louis and the Lower Illinois River are $25.86 and $34.66 per ton, respectively," USDA reported.

Higher freight costs both on land and in the river system will be and have been a big factor for U.S. corn, soybean and wheat basis levels this year. If end users are unable to procure grain when needed, they will absorb the freight costs for the most part. If grain is moving at a steady pace, it is likely that elevators and eventually farmers will have to absorb those higher costs.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(CZ/SK)


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