Rail carriers are anticipating a strong demand for grain shipments this fall as China buys more corn and soybeans, but harvest pace is also surpassing five-year averages, increasing the concern for potential bottlenecks.
Producers are smashing records harvesting corn and soybeans this year. As of Monday, USDA figures showed 72% of the nation’s corn crop was harvested, well ahead of the five-year average of 56%. Soybean harvest is also ahead of schedule; producers have harvested 83% of that crop, which surpasses the five-year average of 73%.
According to weekly data from the American Association of Railroads, grain carloads for the week ending Oct. 17 increased 4,920 carloads to a total of 25,547 carloads compared to the same time a year ago. That is a 23% increase from 2019.
National Grain and Feed Association President Randy Gordon told Agri-Pulse he is starting to see slowdowns in railcar service in certain areas.
Randy Gordon, NGFA
“Generally, overall, the service is still acceptable in most regions, but we’re starting to see slippage in parts of the Southeast with one of the class one railroads,” Gordon said. He also noted there is at least one class one railroad — the classification given to the seven largest carriers in the country —indicating a “bit of a lag” in the west as well.
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Increased ag purchases from China will also put pressure on the rail service, Rep. Dusty Johnson, R-S.D., said, and railroads need to make sure they are meeting demand from shippers the best they can.
"The purchases from China are robust, and that is going to mean that a lot of South Dakota product wants to move to the (Pacific Northwest) and rail plays a critical role in that," Johnson told Agri-Pulse. He said there is a lot of grain in storage in South Dakota, and there aren't a lot of other places for it to go if the rail can't carry it. According to USDA as of Monday, corn harvest in the state is at 79%, well above the 5-year average of 37%.
Gordon notes the slippage in service is due to railroads furloughing workers due to the coronavirus, but he said service issues vary by railroad company.
In testimony last week before the Senate Commerce Committee, he relayed an email from a flour miller “indicating that one railroad is about three to four weeks behind on just getting empty cars positioned to load to their mill.”
However, he said so far that situation is an outlier. Mike Steenhoek, executive director of the Soy Transportation Coalition, agrees with Gordon that service has been mostly acceptable.
Steenhoek told Agri-Pulse "service levels overall have been good" but he continues to hear from a number of exporters and grain handlers about high rail rates and service performance by rail companies not always being reliable.
“Overall, we're seeing really good volumes being moved but you do hear some of these grain handlers and exports that plan to have a service on a particular day and all of a sudden that service doesn’t occur,” Steenhoek said.
Scott Strickland, general manager of Consolidated Grain and Barge Co. in Hennepin, Ill., tells Agri-Pulse it seems like the rail pace is being maintained as he ships grain across the southern U.S.
“We continue to see demand in the Southeast and demand in the Southwest, but due to opportunities that are available ... we continue to see rail capacity keep pace with that activity,” Strickland said.
At least where he is located, he said finding railcars to ship grain has not been an inhibitor so far this harvest season.
Strickland said last year, harvest was a lot slower because of wet conditions. But this year, the warmer hot and dry weather has supported harvest pace.
“I’ve seen a very dry, very fast harvest up until really last week when moisture started to come in,” he said.
Speaking at the Commerce Committee hearing last week, American Association of Railroads President and CEO Ian Jefferies said ag shipments continue to be one of the bright spots in American rail traffic.
“It’s been fairly strong all year but certainly as we’re getting into a peak type season, we anticipate continually increasing volumes,” he said. When it comes to rail service being on time, he said constant communication with customers is key.
“Customers and carriers need to be in constant communication to be able to effectively forecast to the best of their ability when these shipments need to go, and I think we’re seeing that,” Jefferies said. He noted as “hiccups pop up,” communications allow those to be addressed quickly.
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