Continued issues shipping feed and other products via rail are growing more severe. Feed users already report being just days away from running out of feed, and as labor negotiations continue between the railroads and unions, laborers have already voted to go on strike Monday, unless President Joe Biden intervenes.
As first reported last month, rail bottlenecks in the U.S. are not improving for those in need of grain in the West. Feed users in California and the Southwest are having issues sourcing grain, with some reporting they are paying $3 over the CBOT price to secure grain by truck. Not only are feed users on the brink of running out of grain, but there are also concerns the rail issues could grow worse during harvest this fall.
The National Grain and Feed Association (NGFA) says its members have been seeing issues since late winter and early spring, which then caused the Surface Transportation Board (STB) to hold a hearing in August. While the industry thought the issues would improve by summer, labor issues are not getting better.
“What I'm hearing from our members is there are fewer equipment issues and that the equipment and engines seem to not be breaking down, but the train times - the amount of time it's taking to get the trains and the reliability of receiving them - are still quite a problem in quite a few areas of the country,” says Mike Seyfert, president and CEO of NGFA.
Looming Rail Strike
The labor negotiations, which cover 115,000 workers according to Reuters, had been in what they called a 30-day cooling off period. The White House has until Sunday, July 17, to step in and appoint a Presidential Emergency Board (PEB).
Sources in the grain industry say if President Biden doesn’t appoint the PEB, then railroad labor is authorized to strike. The decision to go on strike is already in motion, as rail labor already voted to strike on Monday in the event Biden does not appoint a PEB, Reuters reports.
A White House official is quoted as saying the administration “is going through the standard process that has been used in the past when considering a PEB.”
The move to appoint a PEB is not unprecedented. President Barack Obama appointed a PEB in 2011 to help prevent a rail labor strike.
If the president does appoint a PEB before the Sunday deadline, the board has 30 days to make settlement recommendations, and strikes are prohibited during that time and for 30 days following the release of the report. If rail carriers or rail labor reject the PEB recommendations, Congress can intervene.
The Issue In Storing And Transporting Grain
Eric Wilkey, president of Arizona Grain Co., saw the issues starting firsthand this spring. Rail cars that were scheduled to arrive in May, as area wheat harvest was gearing up, didn’t actually start arriving until early July. As a result, wheat supplies piled up at their facilities.
“Now, they’ve [railroads] signaled to us in meetings publicly and otherwise, that they are having some success in hiring again and getting crews successfully through training,” he says. “For us, there's no time as we're in harvest right now. And I don't have time to wait another three months for crews to be trained.”
Just prior to the STB hearing in April, Landus Coop, representing 7,000 farmer owners in Iowa, submitted written testimony saying rail issues meant they were only able to load half the rate of shipments necessary, and the backlog meant farmers trying to haul grain to the coop were being turned away.
“If this slow down continues at this rate we risk not having space for the 2022 harvest for our 7,000 farmer members by an estimated total bushels of 15,750,000! The market impact of the additional cost of other freight shortages and an inverse grain market add considerable risk and uncertainty in our business. This comes at a time when we are also experiencing the strain of trucking shortages. The impact of these delays is compounding and causing increasing concern the closer we get to harvest season,” the letter stated.
Landus also said if the situation is not resolved quickly, the industry risks:
- The potential for livestock producers in California and other states potentially running out of feed.
- Ethanol plants and soybean crush facilities potentially not having the ability to ship product.
- Farmers unable to deliver old crop grain to elevators or ethanol plants, which will place enormous pressure on harvest success this fall, further disrupting the food and fuel supply chains in the months ahead.
- U.S. grain exporters will be not be positioned favorably to compete in global marketplace.
Foster Farms, the largest chicken producer in the western U.S., asked federal regulators to issue an emergency service order last week that would direct Union Pacific to prioritize corn shipments that thousands of dairy cattle and millions of chickens and turkeys depend upon.
??”The point has been reached when millions of chickens will be killed and other livestock will suffer because of UP’s service failures,” Foster Farms wrote in its request to the Surface Transportation Board in June.