With the start of the spring-wheat harvest in Arnegard, North Dakota, a week away, the bins on Bob Wisness’s 11,000-acre farm are half full with last year’s crops that have been stranded by a train traffic jam.
“With the railroad situation the way it is, it almost looks hopeless as far as catching up” for storage capacity normally at least 90% empty at this time, said Wisness, the president of the North Dakota Grain Growers Association.
BNSF Railway, owned by Warren Buffett’s Berkshire Hathaway Inc., and Canadian Pacific Railway Ltd. struggled with “greater-than-normal” demand from shippers of coal, oil (NYMEX:CLQ14) and Midwest crops, the U.S. Department of Agriculture said last week in a report. Record-high grain and soybean harvests anticipated this year may exacerbate the squeeze in silo space.
Railroads in 2013 transported 75% of the wheat crop and more than half of the corn (CBOT:ZCU14) and soybeans (CBOT:ZSQ14) from elevators in the Dakotas, Minnesota and Nebraska, according to a report by the Upper Great Plains Transportation Institute. This year has been an “exceptional” one for shipping hurdles, said Kurt Lensing, an assistant vice president and industry specialist at AgStar Financial Services in Waite Park, Minnesota.
As of yesterday, about 2,700 railcar orders were running an average of less than 17 days late in the U.S. compared with a peak in early April of about 16,500, John Miller, the group vice president for agricultural products at Fort Worth, Texas-based BNSF, said in a telephone interview.
“We’ll be down to less than 2,000 past due by the middle of September,” he said. “We’ll have covered virtually all of the old crop over the next several weeks and then the work flow becomes simply new cars. We think that’s a tremendous improvement.”
At Berkshire’s annual shareholder meeting in May, Buffett acknowledged the jams on BNSF’s network triggered by a boom in shipments and harsh winter weather. The railroad has been working on improving service to meet demand, Matt Rose, BNSF’s executive chairman, said at the gathering.
As of July 31, Canadian Pacific, based in Calgary, reported 22,457 requests for grain cars in North Dakota that average 11.7 weeks late and 7,193 orders at 12.4 weeks behind in Minnesota, the USDA said in an Aug. 7 report.
The company said yesterday in an e-mail that it “is focused on ongoing improvement in the velocity of our trains and effective utilization of our railcar fleet in order to deliver more cars each week.”
“BNSF has made steady improvements in service and is expected to work through its grain-car backlog by October,” the USDA said. “CP, however, continues to experience problems and may not be ready for the upcoming harvest”
The U.S. spring-wheat crop (CBOT:ZWU14) will rise to 572.4 million bushels this year, a four-year high, the government said on in an Aug. 12 report. The majority of the grain is grown in the Dakotas, Minnesota and Montana.
“You’ve got to be in a position where you can let customers know that you’re going to be a reliable, timely source of wheat, and that’s our concern going forward,” said Jim Peterson, marketing director of the North Dakota Wheat Commission, a promotion and research group. In the state, 10 to 15% of last year’s crop remains stored on farms, he said.
Oahe Grain Corp. is waiting for more than 400 rail cars to ship 1.4 million bushels of grain from its Onida, South Dakota, grain elevator, Tim Luken, the general manager, said on Aug. 5. The unprecedented delays left contracts for delivery from as far back as March unfulfilled, he said.
The elevator uses rails controlled by Darien, Connecticut-based Genesee & Wyoming Inc. The lines were previously owned by Canadian Pacific. The backlog probably won’t clear until late November, the USDA said.
“I can load 110 cars a week, easily,” said Luken, who’s worked in the industry for 35 years. “I’m only getting sometimes 25 cars a week, sometimes 50 cars a week, sometimes zero cars a week. We’ve only got from Sept. 1 to Oct. 1 to try to get cleaned out for the row crops. With the rail being so slow and the situation we’re in, it’s not going to happen.”
Even after adding grain bins in the past few years, including six more this season, Wisness of Arnegard said about half of his crop will be stored on the ground, the most ever. Elevators probably will only be able to accept 10% of his supplies immediately after the harvest, he said.
“The combines are going to go,” Wisness, 60, said on Aug. 11. “The grain, if we can get it to the elevator, we’ll get as much as we can in there. If not, it’ll go in the bin or get on the ground. I think most farmers are in a similar position.”