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Published August 07, 2014, 05:34 PM

ND ag industry expresses worries to BNSF chairman

North Dakota farmers and agricultural processors vented their concerns about grain shipments to the head of Burlington Northern Santa Fe Railway on Thursday in Fargo, N.D.

By: Mikkel Pates, Agweek

FARGO, N.D. — North Dakota farmers and agricultural processors vented their concerns about grain shipments to the head of Burlington Northern Santa Fe Railway on Thursday in Fargo, N.D.

BNSF executive chairman Matt Rose again reported the big capital increases the company is planning to invest in the region, but some shippers — especially specialty crop producers and processors who don’t ship in 110-car shuttle trains — said they’re still seeing serious and expensive inconsistencies in their service.

Rose said all rail units in 2013 grew more than 800,000 units and BNSF accounted for more than half of that. The railroad has handled 200,000 units per week four times in the quarter. Domestic intermodal (container shipments of goods that can be off-loaded onto trucks) is the biggest segment of the market. Both petroleum and agriculture growth have been huge.

“Over the past five and half years, our business in and out of your state has grown by 144 percent,” Rose said. “North Dakota has accounted for 24 percent of all of the volume growth on BNSF.”

The railroad operates in 28 states. He repeated earlier reports of expansion of people, and plans to build more double-track, especially to western destinations. The railroad has already sold more freight and expects to operate better during this year’s harvest than it did during last year’s, officials said.

Better than ‘13

Rose said the railroad has 1,600 past-due cars in North Dakota, but expects to be at fewer than 1,000 within weeks, and says all of them will be whittled down if the harvest is delayed.

“We will declare victory and say our ‘past-dues are behind us,’ unless the harvest comes in sooner rather than later,” Rose said.

Rose said the company is working to move some train traffic around Chicago, which he said is a quagmire that handles 40 percent of the train traffic in the U.S.

“We have to come up with ways to avoid it completely,” he said.

Sen. John Hoeven, R-N.D., who invited Rose, said BNSF is adding cars and locomotives and that’s good. “But we need more track,” Hoeven said. “And we need more double-track, because we know we’re going to move more oil. We need more capacity to avoid this problem in the future.”

David Berg, president and CEO of American Crystal Sugar Co., based in Moorhead, Minn., with two of its five factories in North Dakota, said his three major multinational food companies have waited for trains for five days to 21 days in the past 90 days.

“If they had someplace else to go they’d do it,” he said, and acknowledged the only plus is that they are having the same problems with other ingredients.

“This is at least a temporary transfer of wealth from agricultural producers.”

Berg said he is worried about the long-term.

“If you’re not viable any longer, you have a reduction in acreage, in volume, and that hits you (railroad) guys, as well. I run a company that’s been moderately successful over time, and I feel like a victim. It’s not where we want to be.”

Dry bean woes

Pat King, of P.W. Montgomery LLC in Fargo, N.D., said his dry bean company deals in a perishable product for which there is no futures market hedging. He said his industry has built up relationships with branded beans in Mexican markets that could be seriously damaged by delays. Customers who would buy from his company must simply go elsewhere.

King said it does no good for cars to be shipped to his facilities if they are parked somewhere in transit and federal phytosanitary permits run out, preventing the exports and requiring the cars to be returned to the origin. King said it would be better to receive two out of five cars in a week rather than none at all, followed by 15 cars the next week.

“If a person purchases a block of black beans today and it takes 60 days longer to get a rail car, and it’s pulled from our facility and parked in Bisbee, N.D., for another three or four weeks, it’s possible that that customer is going to be way upside down in the market,” King said. “Consequently, they’re not buying. As our bank lines are maxed out with owned inventory we can’t ship, we can no longer buy product from farmers, which means they can’t go to town and buy things. It’s a trickle down.”

John Berthhold, vice president of Walhalla Bean in Grand Forks, N.D., noted that 40 percent of the dry edible beans grown in America are grown within 150 miles of Fargo.

15 percent to ship

Dan Wogsland, executive director of the North Dakota Grain Growers Association, representing wheat and barley growers, said farmers are becoming concerned because 15 percent of last year’s crop is still in the bin and the new crop is coming on. He said high basis indicates “some people are betting against you.” The basis is the difference between local grain prices and central markets.

Wogsland said an unusually large small grain crop is expected in the region, but the problem in shipping it might be eased a bit by the late harvest. Rose said one of the problems in predicting needs is whether farmers will sell with current low market prices.

“If farmers don’t sell it, we’ll go to zero” late cars, he said.

Kevin Skunes, of Arthur, N.D., a member of the board of the National Corn Growers Association, said the situation for farmers will be “ugly” for a while, with basis running 80 cents to $1.10 per bushel at elevators.

Chad Weckerly, a board member of the North Dakota Farm Bureau, from Hurdsfield, N.D., said farmers are concerned about what’s moving out, but are also concerned about the inputs coming in.

“We’re paying the freight going both directions,” he said.

PSC involvement

Julie Fedorchak, a North Dakota Public Service commissioner, said she was assigned the rail portfolio by the PSC last week. She said the PSC technically doesn’t regulate railroads, but must operate as an advocate for shippers and farmers who depend on them. The PSC this week wrote a letter to the U.S. Surface Transportation Board, which does regulate railroads, expressing concern about the “entirely inadequate” response to farmer needs.

Fedorchak said a PSC survey in mid-July indicated more than 90 percent of Canadian Pacific customers and 50 percent of BNSF customers were waiting for more than 60 percent of their cars. Rose acknowledged that the high basis levels indicate there is little confidence that the railroad will perform.

Hoeven noted that Canadian Pacific Railway chief executive Hunter Harrison will be in Minot, N.D., on Aug. 8 for a similar meeting with producer groups.

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