Insights - Winter Update 2014 - 3

train bids/offers for November were $3,100 per car above tariff,
up $1,550 from last year and also at their peak. But nature
provided some relief. Weather delays early in the corn and
soybean harvest season reduced railcar (and barge) demand
to ship those crops, allowing freight prices to decline,
some significantly. By late October, November non-shuttle
secondary railcar bids/offers per car were $800 above tariff,
down $1,350 from a week earlier but still $384 above a year
ago, the U.S.D.A. said. Average shuttle bids/offers were $1,892
per car above tariff, down $282 from the prior week and down
$1,208 from the peak but still $792 above a year earlier.
When the hard red winter wheat basis in Kansas City dropped
as much as 20c bu on Nov. 4, grain traders attributed the declines
to improved rail loadings and a climate of moderating freight
costs in the past few weeks. A key development was a weaker
cash basis - by as much as 50c a bu at the Texas Gulf and about
30c in the country - over the past month, a trader said.
"There have actually been pretty decent loadings," said a grain
industry executive, commenting on current rail service, adding
that prices of single rail cars offered by the BNSF Railway had fallen
from about $3,000 a car to about $1,500 a car in recent weeks.
The rapid changes in backlogs and prices indicate how
precarious the overall rail service situation is, especially during
the peak demand period of the fall harvest. And farmers, shippers
and mills often have a sense of powerlessness when dealing with
rail and freight issues in general.
Higher rail freight costs have been a key factor in boosting
the cash wheat basis at delivery locations, with the basis on the
benchmark 14% protein hard red spring wheat in Minneapolis
briefly soaring above $6 a bu in September and doubling the
price of wheat. The higher basis and freight costs may have added
nearly $2 a cwt to the price of some grades of flour, according to
a source at a major baking company. Grain mills are affected by
higher costs to get grain to their facilities and to ship out bulk
milled products and byproducts.
Rail freight delays and higher rates have added as much as $2.50

a bu to the cost of grain, with some of the highest costs noted
in North Dakota, grain industry sources said. At the same time,
higher freight costs have pushed prices paid to farmers lower.
Jim Peterson, North Dakota Wheat Commission marketing
director, said earlier in the fall that wheat prices in the country
were about 50c a bu below the Minneapolis December futures
price and farmers were being paid as much as $1.50 a bu less for
their wheat than they otherwise would be paid because of high
freight rates. At the same time, elevators were seeing $2 to $2.50
a bu added to costs because of rail freight issues, he said.
Record high freight costs aside, there is just as great a
concern about availability and performance of rail freight
transportation for the agricultural sector.
The Surface Transportation Board, which oversees the
deregulated railroad industry, held hearings and meetings in

U.S. RAIL TRAFFIC - 2014

Total carloads

12,830,740

% increase from 2013

0.3%

7.8%

3%

1.3%

15%

3.6%

1.5% 13.4% 2.8% 6.2%

Cumulative Jan. 1 - Nov. 1
Coal
4,913,839

Nonmetallic
minerals
1,587,320

Chemicals
1,327,703

Ores & metals
1,125,759

Grain
878,825

Motor vehicles
742,560

Other farm
products
729,941

Petroleum
& products
672,118

Forest products
496,880

Other
355,795

% of total carloads
38
12
10
9
7
Source: Associaton of American Railroads

Ores & Metals

6
6
5
4

Grain
Grain

3

Coal
Nonmetallic Minerals
Chemicals

Motor Vehicles
Other Farm Products
Petroleum & Products
Forest Products
Other

3
Insights - Winter Update 2014

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