Rail freight costs Ships are waiting to be loaded as a big demand for rail cars and congested traffic tests system
CHICAGO, Ill. (Reuters) — Transporting the largest U.S. corn crop on record is driving up costs for rail cars, barges and trucks.
After three years of crop shortfalls that left grain supply pipelines all but empty by late summer, the U.S. grain handling system is now tasked with quickly absorbing a huge corn crop, which is projected at a record 13.8 billion bushels.
Approximately half of the crop has already been harvested.
“You have a record North American grain mass, and you went from zero to 100 miles an hour in two weeks,” said Charlie Sernatinger, an analyst with ED&F Man Capital in Chicago.
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With the bulk of the estimated 3.15 billion bu. soybean harvest complete, farmers are now turning their attention to the much larger corn crop, and yields are surprisingly big.
“People were projecting a sizable corn harvest, but yield results coming in from the field are better than expected. That’s going to tax the system even more,” said Mike Steenhoek, executive director of the Soy Transportation Coalition.
Costs for rail freight already surged in October, partly because of strong export demand for U.S. soybeans and hard red winter wheat. Also, grain traders say freight trains have been running slowly, especially in the western United States.
“Normally they get 2.5 or 2.8 turns a month, sometimes three,” said a grain trader, referring to the number of trips rail cars were making each month.
“They’re getting maybe 1.6 or 1.8 right now.”
Service on the BNSF Railway, a major hauler of grain from the Midwest to Pacific Northwest export terminals, has slowed after recent infrastructure upgrade projects fell behind because of adverse weather, he said.
BNSF said it was working with its customers to “address the challenging service issues the grain supply chain is experiencing during this record compressed harvest season.”
Industry sources said a growing number of ships were waiting for rail-delivered grain to load at Pacific Northwest export terminals.
“There are lots of vessels waiting in the Pacific Northwest that are waiting to be loaded, and railroads are having trouble keeping up,” said Steenhoek.
Rail cars are commonly traded in a secondary market by brokers who trade space on 100-car shuttle trains, expecting the trains to make a certain number of trips. When the trains run more slowly, these brokers are forced to pay for more freight to cover their commitments.
“They have to go back and buy them from the market, and they buy them from the same guys who have the same problem that they’ve got. So the market goes up exponentially,” said Joe Christopher, a grain merchandiser with Crossroads Commodities in Sidney, Nebraska.
Christopher said freight on BNSF traded as high as $2,400 a car in October, although nearby bids have since fallen to $1,300. The same freight for December is trading near $600, another grain trader said.
