Agriculture stakeholders knew rail congestion would continue to be an issue, especially during harvest, but the delayed harvest has exacerbated the problem. Rail congestion was one of several factors that caused a roller coaster ride in the grain markets this week when a tight soymeal supply got even tighter.
Old crop soybean supply was already tight, but the delayed harvest and rail issues has made it difficult for crush facilities to get deliveries, causing soymeal futures to spike.
Jim McKinstray, vice president of central merchandising and transportation for The Andersons Inc., recently reported that the rail industry has suffered significant declines in service levels the past 12 to 18 months, and its degradation has been felt in virtually all business groups dependent on rail service and across all Class 1 carriers. In some cases, he said it is even worse along short-line systems.
“The service degradation primarily takes the form of unpredictable and untimely transit of cars from origins to destinations,” McKinstray said. “Secondary to this, freight rates are increasing, car supply is decreasing, and car lease/ purchasing values are increasing; all to the detriment of grain producers, shippers and receivers.”
Suderman said he thinks rail is going to be a problem for quite some time. Additionally, he said there has been some improvement in Canada where the government was going start removing the required weekly reporting. The U.S. issues, however, remain. “We haven’t solved the problems; we’re trying to learn how to manage it.”
The robust soybean demand has also changed the scenario for barge activity. Typically, corn shipments are greater than soybean shipments during first, second, and third quarters, but the U.S. Department of Agriculture recently reported that soybean harvest was providing much of the cargo for downbound barges on the Mississippi, Ohio, and Arkansas Rivers. Data provided by the U.S. Army Corps of Engineers show that for the week ending October 25, soybeans represented about 73% of downbound grain tonnages, while corn was 26% of the grain tonnages. Based on the 5-year average, soybeans are 50% and corn is 47% of the total downbound tonnages during the fourth quarter. Barge operators have indicated that corn shipments are expected to pick up in late December and early next year.