Rail corporations and labor unions have reached stalemate over paid sick go away, elevating the prospects of a employee strike in coming months. With harvest simply over midway full, the specter of a rail strike couldn’t come at a worse time.
Railroads transport 1.5 million carloads of grain every year in line with the Affiliation of American Railroads. These carloads account for 25% of all U.S. grain transport, and the rail share for grain export actions is nearer to 40%.
Different transport sources might decide up some slack, however with low water ranges on the Mississippi already considerably slowing barge motion, and each rail and truck transportation already at full capability, there’s little margin for error.
“If the rail strike turns into a actuality, there may be merely not sufficient capability within the system to choose up the slack,” says Daren Coppock, president and CEO of the Agricultural Retailers Affiliation.
What’s at stake
On Sept. 15, rail corporations and unions reached a tentative labor settlement deal – topic to ratification by union members – pushing off a strike shortly earlier than the cooling off interval for negotiations got here to a detailed.
On Wednesday, the Brotherhood of Railroad Signalmen grew to become the second union to vote down the proposed contract. The Brotherhood of Upkeep of Approach Division of the Worldwide Brotherhood of Teamsters introduced their vote to reject the settlement deal on Oct. 10.
Final week, negotiators for railroad corporations rejected BMWED’s demand to present employees seven paid sick days per 12 months. The events will probably proceed negotiating, however the rejection is a severe reason behind concern.
A strike might occur as quickly as Nov. 19 until all 12 rail unions approve contracts or Congress steps in. Six railroad unions have ratified the settlement, and 4 others are nonetheless pending ratification with choices anticipated by mid-November.
BMWED and the Brotherhood of Railroad Signalmen will now want to barter new offers with railroad corporations because the remaining unions vote on their proposed contracts.
If a settlement isn’t reached, the rail strike will take a direct hit on provide chain effectivity. In flip, it’s going to take a direct hit on the pocketbooks of farmers.
“If our rail infrastructure shuts down, provide can not join with demand and farmer profitability will endure,” says Mike Steenhoek, government director of the Soy Transportation Coalition. Shippers gained’t be capable to transfer grain they’ve readily available and costs supplied to farmers will dip within the type of a stronger damaging foundation.
Farm Futures market analyst Jacqueline Holland explains robust foundation choices are already spotty throughout the Japanese Corn Belt this fall, and a strike would solely make issues worse.
Nonetheless, ag representatives stay hopeful agreements can be reached so as to keep away from a strike.
“We actually need each railroads and rail unions to reach at an settlement that’s useful to either side, however what’s essential to agriculture and lots of different industries is to keep away from an precise – or perhaps a risk of – a railroad strike that may add additional hurt,” Steenhoek explains.
“I hope cooler heads prevail and that we’re in a position to salvage a deal that works for everyone,” Coppock says. “We’re asking the President to remain engaged within the state of affairs and provide you with a decision that works for all sides – as a result of a strike is an final result the business simply can’t stand.”
Mississippi River challenges
Mississippi River ranges proceed to fall to historic ranges, with extreme impacts to navigation not seen since 1988, in line with the American Business Barge Line.
“Barges are parked, ready for a flip to attempt to get via, not solely simply on the Mississippi River, however the rivers that feed into it, just like the Ohio River, the Illinois River,” Steenhoek says. Except river ranges drastically improve and barge site visitors can ramp up, there’s no means for barges to choose up slack within the case of a rail shutdown.
Drafts on the Decrease Mississippi had been diminished to 9 ft on Oct. 17, a 30% discount to barge capability versus regular situations. Native restrictions are additionally in place in some areas with draft restrictions as little as seven ft.
Associated: No reduction in sight for inland waterway ranges
The diminished drafts have main implications for grain motion. For each one foot of decreased water depth, 5,000 fewer bushels of soybeans are loaded into every barge. Subsequently, a three-foot discount in water depth would lead to 15,000 fewer bushels.
Shippers nonetheless pay the identical worth for a barge – whatever the load capability or how lengthy it takes to maneuver up or down the river. And in line with USDA’s Oct. 18 Grain Transportation Report, the fee to ship a barge of soybeans is already 130% greater than final 12 months’s worth.
Price-efficiency is a serious concern with mild loading barges. Proper now, it’s taking far more time and gasoline to maneuver the identical quantity of commodity to its remaining vacation spot. In the end, these prices can be handed alongside to the end-users.
As well as, the barge business continues to keep up a most of 25 barges linked collectively alongside the Decrease Mississippi River in comparison with 30- 40 barges underneath regular situations.
For every barge that may’t make it down the river, it takes 16 rail vehicles – or 70 vans – to maneuver that load. To place that in perspective, that’s 560 rail vehicles or 2,450 vans to exchange a typical 35-barge tow. These additional rail vehicles and vans don’t exist, and due to this fact can’t carry the load.
Driver shortages
In the meantime truck driver shortages stay at an all-time excessive, in line with the American Trucking Affiliation. “Based mostly on our estimates, the trucking business is brief roughly 78,000 drivers,” says Bob Costello, ATA chief economist. “That’s down barely from 2021’s file of greater than 81,000 – however nonetheless extraordinarily excessive traditionally.”
Driver shortages have led to a big improve in pay. Nonetheless, nearly 40% of truckload carriers report that will increase in pay final 12 months resulted in drivers selecting to drive much less, make the identical amount of cash and be house extra usually – in the end including to the scarcity.
For farmers and ag retailers who can get entry to the trucking companies they want, the prices – attributable to pay will increase and excessive gasoline costs – may be the limiting issue.
Takes steps to guard farm operations
If you’re farmer who depends on the river system to market your grain, suppose onerous and quick about options. One choice is to make use of on-farm storage and wait out the storm. Nonetheless, if that isn’t an choice, think about hauling grain to a facility with rail loadout capability – sooner fairly than later.
Whereas getting grain to its vacation spot is a serious concern throughout harvest, farmers also needs to have in mind how these transportation woes will affect fertilizer coming in.
In September, the business skilled main rail slowdowns – and even stoppages within the case of anhydrous ammonia – all simply from the specter of a strike, explains Coppock. “It’s onerous to foretell how lengthy the availability chain could possibly be affected if we do truly see a shutdown.”
Get fertilizer booked in the event that they haven’t completed so already – however don’t assume that ensures on-time supply.
Coppock additionally encourages farmers to maintain a detailed watch on fertilizer and gasoline costs in coming weeks.
“For industries like agriculture, the choices made right now are figuring out the place and the way soybeans and grain can be shipped subsequent month, two months from now,” Steenhoek says. “Having a predictable provide chain is important for agriculture to succeed, however this predictability is clearly unattainable through the center of harvest season.”
