The worst rail delays in more than a decade are impeding crop shipments in the Midwest, causing grain-storage facilities to fill up and sending prices for corn, soybean, and soybean meal up sharply, according to The Wall Street Journal.
Congestion on railroad networks, now threatening to extend into a second year in the U.S. Farm Belt, is forcing some buyers to purchase additional soybean meal, used mainly in animal feed, to ensure a steady supply, analysts said. That helped push futures prices up 11 percent in the past week. And, soybeans and corn both jumped by around 7 percent as livestock and poultry operations in the eastern United States rushed to avoid feed shortages and speculators bid up the price of the commodities related to soy meal, analysts said.
Analysts worry that unless railroad congestion abates, soybean-meal futures prices could march higher in the weeks ahead, potentially lifting some consumer prices for meat and other animal products.
For farmers who are able to ship their crops, last week’s commodity-price run-up offered a chance to sell at higher prices after an extended period of decline. Abundant summer rain this year nurtured what is projected to be the biggest U.S. corn and soybean crops in history, which has hammered prices. Even after last week’s surge, corn futures are down 11 percent since the start of the year at the Chicago Board of Trade. Soybean futures are down 20 percent.
The rail snarls will cut grain-trading volumes to 8 million to 10 million bushels at Oahe this year, from 12 million to 15 million in a typical year, Mr. Luken said.
The transport problems are caused by several factors: Rail companies are experiencing an overall rise in demand to move goods, including consumer goods, crude oil from the shale fields of the upper Midwest, as well as increased grain from two years of bumper crops. Last year, an unusually harsh winter compounded problems by forcing shippers to run shorter, slower trains.
That overflowing demand has lifted profits for railroad companies such as BNSF Railway, owned by Warren Buffett ’s Berkshire Hathaway, Inc., and Canadian Pacific Railway Ltd., the two primary railroads serving the upper Midwest. Canadian Pacific shares have soared 37 percent this year, while rival railroads CSX Corp. and Norfolk Southern Corp. have climbed 24 percent and 19 percent, respectively. Rail companies have claimed progress in easing bottlenecks. BNSF earmarked $1 billion for expanded capacity along its northern U.S. tracks this year. “We’re delivering consistently better performance than we did last year,” said John Miller, BNSF’s vice president of agricultural products, who said the biggest factor influencing grain shipment speeds this fall is the scale of the crop to be moved, rather than rail congestion.
