CHICAGO (Reuters) — Some U.S. railroads said they will start halting crop shipments today, one day ahead of a potential work stoppage. The move, confirmed by an agricultural association and sources at two grain cooperatives, will threaten exports and feed deliveries for livestock.
As farmers harvest crops that are shipped to meat and biofuels producers, the shipping disruptions could add to inflation. Farmers also plan to fertilizer fields after harvest and shipments of fertilizer are being delayed.
Max Fisher, chief economist at the National Grain and Feed Association, which represents most U.S. grain handlers, said rail customers reported at least one railway would stop taking grain shipments Sept. 15.
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Most major U.S. railways have already stopped accepting new shipments of ammonia fertilizer and other potentially hazardous materials, said Justin Louchheim, senior government affairs director at The Fertilizer Institute, an industry group.
Louchheim said fertilizer producers are evaluating their storage for ammonia that cannot move by rail and considering whether some can move by truck.
The potential rail shutdown looms just six weeks before most midwest farmers would begin applying fertilizer, said Josh Linville, fertilizer director at StoneX Group. About 40 percent of the U.S. fertilizer supply is on a rail car at some point before arriving on a farm, he said.
Railroads have until a minute after midnight on Sept. 16 to reach tentative deals with holdout unions who represent about 60,000 workers.
Worries about service interruptions boosted prices for corn-based ethanol at several hubs and kept sellers out of the market, said Josh Pedrick, a managing editor for S&P Global Commodity Insights.
The Association of American Railways (AAR), which represents railroad companies, did not immediately respond to request for comment on grain transportation.
The work stoppage would be keenly felt in North Dakota, South Dakota, Minnesota and Nebraska, from which grain is hauled via rail to ports in the Pacific Northwest for export, said Thomas Lahey, domestic freight manager at grain merchandiser Columbia Grain International.
Grain elevators in the upper midwest move soybeans mostly via BNSF Railway, Canadian Pacific Railway and Union Pacific, he said.
U.S. Class 1 railroads transported nearly 1.5 million carloads of grain in 2020, including 691,000 carloads of corn, 340,000 carloads of soybeans and 248,000 carloads of processed soybeans like soymeal and soy oil, AAR said.
U.S. chicken producers rely on about 27 million bushels of corn and 11 million bushels of soymeal every week to feed their birds, the National Chicken Council said. Much is moved by rail.
“Any disruption of service could negatively impact the welfare of the birds, and ultimately impact production at a time when Americans are already dealing with record food inflation,” said council spokesperson Tom Super.
In North Carolina, local grain growers do not produce enough corn to feed all the farm animals, said Bob Ford, executive director of the North Carolina Poultry Federation.
“We’d be in trouble if they went on strike for very long,” Ford said. “We’d run out of corn.”
Wayne-Sanderson Farms, a Georgia-based chicken company owned by Cargill Inc. and Continental Grain, is working with local corn producers to augment feed supplies if needed during rail disruptions, said spokesperson Frank Singleton.
The beginning of corn harvest in the southern United States, a main poultry region, “will relieve some of the pressure” on feed supplies, he added.
Some rail customers do not have enough soymeal for livestock, said Fisher, of the National Grain and Feed Association. In a worst-case scenario, that could force some producers to cull animals.
Railroads also ship hexane, a chemical solvent that crushers use to extract oil from soybeans, said Mike Steenhoek, executive director of Soy Transportation Coalition.
“Any slowdown or stoppage of rail service, especially on the eve of harvest, would significantly impact farmers’ ability to meet customer demand both domestically and internationally.”
