Insights - Winter Update 2014 - 4

April and later in the summer. The S.T.B. in the spring ordered
the BNSF Railway, the largest U.S. railroad and grain mover,
and the Canadian Pacific Railway to report fertilizer shipments
to facilitate spring planting, and subsequently required both
to report certain grain shipping metrics weekly. Some in the
industry, as well as elected officials from the most-affected
states in the Upper Midwest, have sought greater government

Industry revenue and average revenue
per mile are increasing nicely as capacity
remains constrained," Mr. Costello said. "However,
the industry is having a difficult time adding trucks
due to the driver shortage.''
involvement and transparency by railroads. So far the U.S.
government has limited its involvement, unlike the Canadian
government, which earlier in 2014 imposed hefty fines on two
major railroads in Canada if grain shipments fell short of specific
volumes. Canada's actions actually exacerbated problems in the
United States as the railroads there focused on east-west grain
movement at the sake of southern movement to the United
States, according to trade sources. The impact appeared to most
affect milling oats, of which U.S. mills depend in large part on
Canadian supply.
Railroads on Oct. 22 submitted their first weekly public
reports in response to the S.T.B. order for improving
transparency, accountability and service. On Oct. 23 the
Fertilizer Institute requested by letter that fertilizer be added
to the list of items included in the weekly reports, likely
seeking to avoid a repeat of the spring delays during the other
key fertilizer shipment period in the fall.
It should be noted that BNSF is the only railroad that has
voluntarily provided public updates on performance weekly via


podcast prior to the S.T.B. order, unlike other railroads that have
been berated for their lack of transparency.
There have at times been contradictory statements concerning
expected railroad performance. The U.S.D.A. in its Grain
Transportation Report said the BNSF told the S.T.B. in its fall
service letter that customers could expect improvements in
service going forward and that it planned to run a record number
of shuttles to accommodate this year's harvest. The Canadian
Pacific in its fall service letter said it was current with customer
demand and would have older grain car orders cleared by Oct. 1,
with the possible exception of North Dakota grain orders.
At the same time, the U.S.D.A. said:
"Railroads have indicated the network is unlikely to recover
until 2015 or 2016. Some shippers expect service problems to
worsen as soon as the railroads are hit with the demands from
this year's harvest. BNSF and CP's latest weekly status updates to
the S.T.B. show the rail backlog has not gone away and has even
started increasing again for BNSF."
The U.S.D.A. in its Oct. 16 Grain Transportation Report said:
"As the backlog of grain cars on BNSF Railway continues to
increase for the fourth consecutive week, average bids in the
secondary railcar market for BNSF service have climbed back to
the record level set in mid-March near the height of BNSF's grain
car backlog. Past due grain cars on BNSF are now at 5,695 cars,
up from 1,898 cars four weeks ago. This week's average secondary
railcar market shuttle bid for BNSF service reached the previous
record high of $5,875 above tariff. However, cycle times on grain
shuttles moving to the Pacific Northwest improved to 2.7 shuttle
trips per month, the fastest cycle time in three weeks, but down
from the 2.9 shuttle trips per month reached the week of Sept. 6."
A key, if not the key, problem for railroads is the
"Chicago gateway," the most important rail hub in North
America through which about 25% of the nation's freight
must traverse. Six major freight railroads plus Amtrak and
Chicago's commuter line use the gateway and depend on each
other's infrastructure (railroads own their own tracks, unlike
government owned highways). It was the major bottleneck in
rail movement during the winter of 2013-14.
"We're one weather event away from disaster," a grain industry


Insights - Winter Update 2014

Table of Contents for the Digital Edition of Insights - Winter Update 2014

Insights - Winter Update 2014 - 1
Insights - Winter Update 2014 - 2
Insights - Winter Update 2014 - 3
Insights - Winter Update 2014 - 4
Insights - Winter Update 2014 - 5
Insights - Winter Update 2014 - 6