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Published August 25, 2014, 09:23 AM

With poor rail flow, SD farmers and elevators pile, bag grain

Scott Dowling is one of many farmers piling wheat on the ground and stuffing it into bags.

By: Mikkel Pates, Agweek

DRAPER, S.D. — Scott Dowling is one of many farmers piling wheat on the ground and stuffing it into bags.

There is no room for the crop in the bin, and elevators aren’t able to move it to market. Dowling and his wife, Janet, farm in Jones, Stanley and Haaken counties in South Dakota. The farm has grown to 50,000 acres, with a staff of one full-time and nine seasonal employees. About 28,000 acres were planted to winter wheat this year and 12,000 acres to spring wheat. He has 25 combines operating at once.

Dowling’s farms have 3 million bushels of bin capacity — all full.In addition, he’s piled a whopping 415,000 bushels of winter wheat on the ground near Draper, S.D., a town of about 70 people and the farm headquarters. With the elevators not taking grain, it was just coming too fast to do anything else with it, he says.

At 58, Dowling has been farming full-time for nearly 40 years. In May 2014, Dowling was one of several farmers in National Geographic’s “Faces of Farming,” which featured farmers worldwide, describing the people who feed a world of 9 billion people. (The magazine noted that one “monster American farm” like this would equal 8,000 farms in Ethiopa.)

Since 2009, Dowling has leased a large farm north of Midland, S.D., accounting for about three-fifths of what he farms. The farm includes an old elevator in the town of Midland on the Rapid City, Pierre & Eastern Railroad line, formerly Canadian Pacific and before that the Dakota Minnesota and Eastern short-line.

“I’ve been there since 2009, loading rail,” Dowling says.

Historic rail problems

The 2014 crop will go down in history for its acute rail logistical problems.

Milt Handcock, general manager of Midwest Cooperatives, based in Pierre, S.D., doesn’t want to overstate things, so he says he’s “concerned.”

But it’s a big concern because the Pierre headquarters has been full and not accepting grain a majority of the time since winter wheat harvest started around July 18.

The Pierre site can handle up to 75 cars at a time. It is served by theRCP&E Railroad, which is fed by CP Railway from an interchange 250 miles to the east in Tracy, Minn. The co-op gets long, 110-car shuttle trains from the Burlington Northern Santa Fe Railway, but only at its Onida, S.D., terminal.

Midwest Cooperatives, associated with CHS Inc., has seven grain elevator locations including rail terminals in Onida (110 cars), Pierre (75 cars), Philip (35 cars) and Blunt, S.D., (25 cars). It handles an even volume split among winter wheat, spring wheat, corn or milo, and sunflowers or soybeans.

Midwest Cooperatives orders cars weekly from the RCP&E on a tariff system — a standard rate based on location. It’s possible to double-order cars, but there is no advantage to it, Handcock says.

“They’re only going to deliver what they’re able to get delivered. So if you know they’re going to only have 500 cars a week there’s no sense in ordering 600 a week,” he says. “The car ordering system isn’t the issue. It’s the lack of crews and power to the cars.”

The RCP&E recently has offered suggestions to its customers for using its car ordering system more efficiently. In the old CP system, some elevators double-ordered cars, on the theory that whoever had ordered more cars might receive the most cars — proportionally.

“The RCP&E says to us, if you’re honest and realistic about how many cars you need, we will do what we can to get that number of cars to you,” Handcock says. “Don’t just throw out a bunch of car orders because that creates a mistrust. They can’t tell if it’s real or a fictitious number.”

The Surface Transportation Board in June ordered CP and BNSF to report their overall status in late cars to the agricultural industry. Even though CP had just sold RCP&E, the company agreed to report their status with RCP&E, and were required to deliver 500 grain cars a week to the new shortline.

In recent weeks, CP has also started reporting how many locomotives it has brought in, and how many locomotives are delivered, compared with the agreed-upon numbers of engines and cars. Handcock says the RCP&E is moving in equipment from other lines across the country, including Kansas and elsewhere.

RCP&E and CP have promised three extra cars per week to South Dakota.

“The RCP&E has their own engines and cars and are slowly bringing their own cars in, but we knew there would be a transition time when their cars are spread across the U.S., because they had other commitments prior to the sale,” Handcock says. “Those cars are slowly moving onto this line through time. And eventually they’ll have 2,000 to 3,000 of their own cars, and their own engines, and they won’t be as reliant on the CP.”

He says, “As time goes on, I think the RCP&E issues are going to lessen, but they’re still going to be reliant on the CP, the BN and the UP into the future. If the situation doesn’t get any better for those three Class One railroads, RCP&E will still be at the mercy of those class ones.”

Pierre has been consistently short on cars because of simple math. The elevator has a 75-car capacity, but recently has been getting fewer than 50 cars at a time — about 170,000 bushels. Midwest can unload its customers at 25,000 bushels an hour, so it takes about eight hours to fill the elevator.

“If we get served once a week, we’re open for eight hours,” Handcock says. “If we get served twice a week, we’re open for 16 hours. I would predict that’s the way it’s going to be all the way through corn harvest and into the winter months and all the way to next harvest. That’s the way it’s going to move.”

Full at harvest

The winter didn’t allow producers and elevators to empty their storage before winter wheat harvest. That followed a fairly good crop in 2013.

“A lot of on-farm storage was full, going into the winter,” Handcock says.

Farmers in the region went into harvest about 60 percent full on storage, according to government estimates in July.

“Midwest Co-op normally goes into harvest close to empty at all of our locations, and this year we were at least half full,” Handcock says. “So then wehave a 60- to 80-bushel-per-acre winter wheat crop when we’re used to a 40- to a 60-bushel crop, and things get worse. The winter wheat wasn’t early, but it got ripe at a rapid pace. With fewer cars, three days into harvest we were piling on the ground.”

Midwest has made three piles totaling about 300,000 bushels in Pierre, and about 100,000 more at a location in Draper S.D.

The winter wheat averaged about 55 to 60 bushels per acre on S.J. Dowling Farms — about 25 percent better than average.

On Aug. 13, Dowling’s two custom harvesters wound up winter wheat harvest. They were down to 4,000 acres of spring wheat on Aug. 19.

“I can’t sell my grain and get my money,” Dowling says. “I need to sell it, so I can pay my combiner and pay my fuel bills and equipment, parts, repairs and make payments. You’ve got to extend (credit) to get it paid, wait more time, pay more interest. My bankers are supporters — behind me 100 percent. They know it just takes time to work through it.”

Dowling on Aug. 16 also started filling 10-by-300-foot bags. He figures he’ll have 20 of them, at 13,000 bushels each.

Bagging it up

Besides piling on the ground, Midwest Cooperatives also has been putting some of its spring wheat in bags. Instead of the long tubes most farmers use, the company is using vertical cone-shaped bags, filled with augers, near Draper and other locations. Those each hold 56,000 bushels.

“It’s just a little better than piling it on the ground,” Handcock says. “Really, the only thing you’re doing is keeping it from the elements — rain. That’s it. You can’t circulate air through it. Your bag has to be destroyed when you empty grain out of it. It’s a one-time use.”

Bags cost about 10 cents a bushel. It takes time to put the grain in the bag, and pick it up. The bigger the bag, the less cost per bushel.

“We figure an open pile of wheat on the ground has only a six-week shelf life — you’ve got to start picking it up,” Handcock says. “I’m hoping to get two or three months in a bag before we have to pick them up.”

With open piles, there is the risk of heating and spoilage. Piled grain can pick up moisture and sprout. Luckily, insects aren’t much of a problem in open piles.

Grain going into the piles has been dry — 10 to 11 percent moisture.

‘Keep moving grain’

Farmers aren’t set up with large storage systems or bunkers, so they will market their grain, despite price dips.

“Producers in our area market grain 12 months out of the year,” Handcock says. “They move grain. The prices are a factor, but there’s also next year. You can’t just keep grain over and over because they don’t have enough on-farm storage levels to keep two years worth of crop.

“They say in the U.S. there’s enough on-farm storage to hold a 14-billion-bushel corn crop,” Handcock says. “But that doesn’t account for beans, wheat, sunflowers, milo, oats, barley — everything else that’s grown. On-farm storage has increased around here, but no one has enough to hold their whole crop.”

The only way the situation is going to get better is for “the whole rail industry to get better,” Handcock says.

And he has a message for the railroads: “I guarantee you that if we get cars, grain is going to move. The basis level and the low futures price are not going to keep grain from moving. The grain is on the ground. There is a fall harvest coming, and by July 1 (2015), we’re back with another harvest. You’ve got to keep moving grain.”