NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

August 13, 1998

The Market Advisor: Transportation Expected to Be a Concern

George Flaskerud, Extension Crops Economist
NDSU Extension Service

Transportation issues are affecting grain movement both for export and in the domestic market, according to David Miller, director of commodity services with the Iowa Farm Bureau Federation. Miller dealt with transportation issues in part of a feed grains and oilseed outlook paper he presented recently at an extension outlook symposium. The following excerpt on transportation was taken from the paper he presented.

Rail back-ups are occurring around the Houston and Los Angeles rail terminals. These back-ups are causing delays in grain shipments of up to 30 days and are slowing the movement of grain from country locations to terminals and beyond.

Significant amounts of grain may have to be piled up at harvest this year due to slow grain movement and tight storage conditions. It is currently estimated that up to 75 million bushels of corn and/or grain sorghum will need to be stored outside, on the ground, in Kansas this year.

The internal problems of the railroads are at the heart of the transportation problems affecting grain movement, especially those directly tied to the snafus arising from the Union Pacific-Southern Pacific merger and the Burlington Northern-Santa Fe (BNSF) merger. But by no means are they responsible for all of the problems.

Changes in uses and destination of grain, both at export and domestically, are contributing to the problems of moving grain efficiently and effectively. Grain movement through the Pacific Northwest (PNW) declined last year and is expected to remain soft during 1998 and 1999. At the same time, Mexico is emerging as a significant market. BNSF recently laid off nearly 10 percent of its workforce in the PNW while grain sits for weeks waiting to move through the Kansas-Texas corridor and into Mexico.

In addition, changes in domestic usage patterns are also taxing the transportation system. Exports of corn from the Corn Belt to destinations within the United States are increasing. North Carolina and the southeastern United States as a whole have emerged as significant markets for U.S. grain, but these markets are served primarily by one or two rail lines, with no barge access and little truck service due to excessive transit costs for truck shipment.

This year, demand in the 12 northeastern and southeastern states will require more than a billion bushels of corn from the Midwest. Eastern Corn Belt states and Illinois will be able to supply about 60 percent of that corn, but more than 450 million bushels will need to move from west of the Mississippi to these eastern areas. Since the vast majority of this corn must move by rail to these locations, this means that 22 percent more railcar capacity is needed for this route this year as compared to a year ago.

The U.S. grain transportation system does an excellent job of moving grain over short distances for local consumption, or over long distances to export locations (Gulf ports and the PNW). But high-volume, efficient movement of grain from the western Corn Belt to the southeastern United States is not what the system was designed for.

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Source: George Flaskerud (701) 231-7377

Editor: Dean Hulse (701) 231-6136