DES MOINES, Iowa – This harvest season a bumper crop of corn and soybeans will strain the capacity of U-S railroads, but some commodity groups like the American Soybean Association are asking authorities like the Surface Transportation Board to take another look at logistics to see if crude oil shipments are being treated equitably.
The Soy Transportation Coalition is also skeptical of rail capacity; Executive Director Mike Steenhoek says there’s just not enough track to handle increasing crude oil and grain and oilseed production.
“That’s what’s really causing this supply-demand imbalance,” explains Steenhoek. “You’ve had this dramatic, exponential increase in crude oil production in place like North Dakota at the same time that we’re witnessing a large expansion of corn and soybean acres in those areas. So you have this increased demand chasing after this scarce rail supply.”
Steenhoek says in 2009, US railroads transported 11,000 carloads of crude oil. In 2013, that figure had increased to 400,000 carloads. Railroads are still playing catch-up, according to Steenhoek, and upgrading the rail infrastructure is a lengthy, expensive undertaking. That means improvements won’t be online for the 2014 harvest, and that’s at the expense of producers and their monster crop.
“We like to describe it as trying to attach a garden hose to a fire hydrant,” he says. “You’ve got this significant volume of production trying to fit into a very limited rail supply, and so what’s going to happen is farmers are going to be effected negatively with the price that they’re offered at their point of delivery. So there’s going to be a lot of farmers who are going to lose $20,000, $50,000, $100,000 this year alone; not because they didn’t produce a crop, not because there isn’t demand for that crop, but simply because there’s not adequate transportation for that crop.”
To hear more about the logistics of this year’s massive corn and soybean crop as it relates to rail capacity, click on the audio player above.
