Grain Exports Delayed

Trains Magazine General Discussion
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US grain exports snagged by infrastructure delaysSunday, August 24, 2008 3:11 PM EDT

The Associated Press
By CHRISTOPHER LEONARD and CATHERINE TSAI AP Business Writers

Across the country, from grain elevator to grain elevator, golden wheat and corn are piled in towering mounds, waiting for a rail car to haul them to market.

Some grain can sit for a month or more on the ground, exposed to wind, rain and rats.

It’s the dark side of the booming global demand for U.S. corn, wheat and soybeans. The surge in exports is revealing inefficiencies in the country’s railways, highways and rivers that carry the grain that helps feed the world. And those bottlenecks are costing farmers, shippers and ultimately consumers millions of dollars a year.

Mark Hodges, the executive director of the Oklahoma Wheat Commission, has seen it firsthand. Earlier this summer, when consumers around the world hungered more than ever for American wheat and corn, he hopped into his pickup truck and toured local grain elevators.

Piles of grain sat like giant anthills, waiting to be shipped. Frantic managers couldn’t find enough rail cars to haul it.

“When you’re putting wheat on the ground, there’s going to be a loss,” Hodges said. “They don’t ever like to put it on the ground, but when wheat is $7, $8 or $10 a bushel, they sure don’t like to put it on the ground.”

A surprisingly large harvest this fall is expected to test the system even further. The U.S. Department of Agriculture predicts farmers will produce the second largest corn crop and fourth largest soybean crop in history.

Some agribusiness groups worry the bottlenecks could hurt the United States’ stan

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The problem is obviously the supply of grain-capable covered hoppers. But new ones (in the range of 5100-5300 cubic feet capacity) just aren’t being built.

BNSF, which is, I believe, the largest in terms of grain carloads, has bought a lot of new covered hoppers over the past few years. UP, Number Two in grain, has not kept up with BNSF, but has gotten a few. KCS has a fleet of cars in its new paint scheme that I’m looking forward to seeing. Don’t know about CSX and NS, but they aren’t big players in this business, anyway. CN and CP haven’t done much in the way of new cars, but CP (including Soo) has been leasing a lot of older cars–whether this is for grain isn’t certain.

BUT…

Throughout the 1970s and into the early 1980s, a lot more grain cars were being produced. The Canadian Government provided large fleets of cylindrical cars to both CN and CP (Saskatchewan and Alberta chipped in as well). In the U.S.A., the major leasing companies (and there were more of them than there are now) had large fleets of new grain cars, ranging in size from 4600 to 4780 cubic feet (smaller than today’s cars because of the difference between a 263K and 286K gross rail load). In about eight years, the North American Car Corporation amassed over 10,000 of these cars. Pullman Leasing got slightly under 10,000; Evans a couple of thousand, and Union Tank Car over a thousand. Trinity Industries, the new kid on the block, added several thousand cars to the fleet. Admoittedly, not all of these cars were for grain service–they were the right size for soda ash, fertilizer, and other things, too. But we’re talking a solid 30,000 cars built by the carbuilders for leasing companies. Many of these cars carried classy paint schemes of the operators (or cooperatives) of grain elevators that filled them. Demand for cars like this caused cars to be imported from Canada, new leasing companies to enter the busin

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Every year this article or a similar one gets trotted out like clockwork. But then I’ve only been watching these type of articles for the last 25 years or so.

Reality is that the railroads are hauling more grain trains than ever before.

Dave H.

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If this article had a point or a thesis it eluded me.

RWM

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I’m not sure, but I think the point was that there is too much grain out there than can be shipped. [;)]

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Well, three points came across to me. 1) If the farmers/agri-businesses want more ships, they can charter more ships. 2) If the farmers/agri-businesses want more covered hoppers, they can buy more covered hoppers. 3) If the farmers/agri-businesses want more covered storage, they can fund and build more covered storage.

A fourth point would be that they’d rather whine about things to a reporter than actually do something that would cost them money.

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OK. I posted the article now I’m going to open a can of worms. Since we produce so much corn, etc. that we cannot ship it because we don;t have the hoppers how come a box of cereal cost over $4.00? Why don’t we keep the grain at home and only sell the excess? Damm Capalists!!!

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I believe the point is, the same for a lot of other things, which is the lack of infrastructure to handle the demand.

inch

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First off, a farmer’s and elevators operate on small profit margin and neither they nor the elevators, set the commodity market prices. That’s done at the CBT, NYSE and on the world markets. So there is very little interest in putting money into something that’s only in high demand 3 or 4 months a year.

Some larger processors and co-ops do own or have investments in lease cars. Some exporters also, have investment in barge companies.

As far as more storage, farmers and elevators investing have been doing that for years. The government has even provided funds for grain storage buildings and bins.

And on your fourth point, as far as them whining comment, maybe you need to start keeping track of your complaining on the prices of gas, groceries, and all those other things you pay for. Then put yourself in the farmer’s shoes awhile for complaining about the things they have no control over either. They have gambled a lot of money on Mother Nature and the markets with no guaranties of stating in business or paying next year grocery bill.

inch

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The same reasons as to why you pay more for everything else. Increased transportation, production cost and worldwide demand.

inch

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Maybe there are enough grain hoppers, they just have to be cycled faster. Why build more rail cars if they are just gonna sit in line ?

Load them faster, unload them faster and run them faster.

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…I certainly don’t have the answers to the above questions, but I sure am seeing increasing haulage of grain, covered hoppers thru here now {as it happens each year}, by NS. Loaded, headed east or south.

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Farmers are griping again. Can Hallowen be far away?

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You think the US is selling so much of its production that we have to buy back enough to eat? I suppose with the subsidies that other governments give their farmers, it might be a way to turn a buck.

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Every year, the grain harvest is going to be too much, or too little to meet current demand. What are you going to do? If you expect railroads to have more cars available in the bumper crop years, who will pay for their use in the lean years?

The article mentions what a shame it is to put store crops on the ground when the price is currently so high. Guess what? Bumper crop=more supply, less demand. That will cause the price to come down.

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There’s not that much corn in a box of Corn Flakes. I just recently read an article on food prices in the Des Moines Register. Corn prices are down, but the “experts” don’t think food prices will drop that much, if at all, because the amount of corn in a single item isn’t as much as most think and all the other costs involved in producing and transporting food are still higher than “normal.”

Jeff

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Reading between the lines, this is another case of one sector of the economy (agriculture) expecting another sector (transportation) to subsidize it. The farmers and their cooperatives want the railroads to have a large pool of freight cars waiting and ready for whatever size crop comes about from one year to the next. Of course, this has to come at the expense of the railroads, not the farmers. If the harvest is poor and the cars sit around unused, that’s just tough. On the other hand, if there aren’t enough cars available, the railroads will again be the bad guys.

It is not a lot different from the utilities who want the railroads to be severely penalized in the form of re-regulation because they (the railroads) have finally been able to charge enough for hauling coal to actually make a profit that attracts investment and recovers some of the cost of upgrading their infrastructure.

Ditto for the chemical companies and their recent lawsuit. They produce a dangerous product that requires special handling, the railroads charge accordingly and now it’s called “unfair.”

John Timm

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Farm a farmer’s point of view, I don’t expect the railroads to do anything other than meet demand. I don’t believe there is a shortage of cars. Cycle times has more to do with a backlog of grain than anything. How many times do I see trains just sitting in the middle of no where. I realize they cannot run continuously, but this is one area the railroads could work on and it wouldn’t cost them new cars, and would even add to their bottom line. If there was a need for more cars, you can bet most railroads would make the investment to increase carloads and profits. That said, this “too much grain issue” does not land squarely at the railroad’s feet. Perhaps the largest contributer to the backlog is the antiquated lock and dam system. For years the battle has raged to try to appropriate funds to modernize this system. And before someone asks why don’t farmers do that themselves, keep in mind that it is not only grain that travels the river. Other than toll roads, no one builds their own highways to get to where they need to go either. Living out in the country, I don’t hear much whining from other farmers. Most of the noise is coming from the large grain companies.

I would like to see a system invented where coal trains could be loaded with grain bound for the west coast after dumping the coal at the power plants. So far, no one has found a safe and contamination free way of doing that.

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$4.00 for your cereal? A couple of years ago, corn was selling for under $4/bushel - It is now in the $7-8/bushel range! The demand for corn has been driven up by corn ethonal production. I live in southern Minnesota and the past two years have seen massive amounts corn planting due to the high demand, and they are buidling new ethonal plants all along I-90 to the west of me(Rochester, MN). A 120 million gallons/year ethonal plant needs a lot of corn to keep it in production.

As far as shipping corn out of the area, most of it is trucked(50 plus miles) to Winona, MN and then loaded on barges for movement to export elevators on the Gulf. The high cost of trucking it 50 miles is offset by the better price the farmer gets at the elevator that load the barges. At this point, there are no elevators that are big enough to do ‘shuttle elevator’ type operations and load out complete trains in the area.

Rail car shortages have been around forever, and no one wants to spend $70,000/covered hopper if it is not going to be used all year. One of the problems is the the time lost when that loaded car is sitting, waiting to be unloaded. I noted that someone mentioned ‘dual service’ hoppers for coal/grain. I remember in the late 70’s, there was an operation that was making fiberglass ‘toppers’ for ICG coal hoppers. As mentioned, there was ‘clean out’ time, sealling the coal gates with ‘poly’ and adding the ‘toppers’. The other issues was that the capacity of a 100 ton coal car was less ‘cubes’ that a 100 ton grain car. The result is you ‘cube out’ before you get 100 tons of grain product in the car. If you are paying for a 25 or 50 car ‘shuttle’ - you are going to have grain left at the elevator and be upset. Elevator operators get upset when they get older 4750 cubic ft cars rather than the newer 5000+ cubic ft cars(100 tons vs 1

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The railroads are STORING grain cars because the demand for grain trains is down. Grain trains are turning faster than ever. With other business segments down there are more than enough engines to pull the grain trains.

Dave H.