Elevators: prices slow train demand

FARGO, N.D. -- Grain elevators in the region are complaining less about railroads falling behind on freight delivery schedules, in part because farmers aren't anxious to sell grain at recent lower prices.

FARGO, N.D. -- Grain elevators in the region are complaining less about railroads falling behind on freight delivery schedules, in part because farmers aren't anxious to sell grain at recent lower prices.

Travis Traut, manager of Country Grain Cooperative Inc., Eldridge, N.D., on the BNSF line, says his elevator is full and he has 1 million bushels of soybeans in piles at two locations. That's normal for this time of year.

"We're probably three to five days behind our (train) delivery dates," Traut says. He says the level of freight has been adequate to meet the demand for grain at current prices. "If corn would have been at $6 a bushel, it would have been a problem."

A weekly report by Class I railroads to the federal Surface Transportation Board on Nov. 15 indicates BNSF had 3,005 cars late an average of 14.6 days in its single-car shipping category. That was an improvement of about 12 percent from the previous week.

The Canadian Pacific Railway on Nov. 20 reported to the STB that its system-wide congestion had improved and predicted car cycle times to destinations would begin to improve in the next several weeks. CP reported 3,283 cars outstanding an average of 18.7 days behind schedule. Of those, 2,684 cars were in North Dakota, which is behind-schedule an average of 20.5 days. Some elevator operators have been saying the company's new dedicated shuttle-style program isn't operating as quickly and efficiently as envisioned.


Brad Haugeberg, general manager for CHS-SunPrairie Grain in Minot, N.D., says his locations are on both CP and BNSF. He says CP shuttle service was OK through harvest, but single-car shippers for crops such as flax and barley are not seeing adequate cars. He says he's hopeful CP will shift more resources to U.S. customers, especially as the Canadian government recently lifted mandates and penalties for failing to ship minimum amounts of grain.

Snow impact

BNSF reported on Nov. 13 that a Nov. 10 snow storm led to "early winter action levels" for service in Montana, South Dakota, North Dakota and Minnesota.

John Miller, BNSF vice president of the agricultural group, reports normal movements at most locations, but the weather had "created some challenges with our manifest train size, as well as crew van restrictions due to snow and road conditions." Miller says the weather slowed tie replacement work underway in the northern part of the BNSF region.

"The pipeline to the Pacific Northwest export facilities is down approximately 10 percent," he says. "Our focus continues to be on improving the velocity of the ag network and reducing the transit time to all of the major corridors."

BNSF's turns per month measure for shuttle trains increased 10 percent from the previous week and speed improved 3 percent.

Miller notes October saw a record ag volume moving to the Pacific Northwest. BNSF set year-to-date records for volume for a combined region including North Dakota, South Dakota, Minnesota and Montana.

BNSF reported 2.2 shuttle turns per month to the PNW, which Miller acknowledged is not yet at the goal of a 2.5 turns.


Effect on basis

Transportation is one of the key components of basis, the difference between local elevator prices and major markets.

At Country Grain in Eldridge on Nov. 20, the basis was 75 cents less than December futures for corn, 95 cents below January futures for soybeans and 30 cents below December futures for wheat. Eldridge cash prices were $3 per bushel for corn, $9.26 per bushel for soybeans and $5.60 per bushel for wheat.

Traut says one new local factor this year is the rise of the Dakota Spirit AgEnergy ethanol plant in Spiritwood, N.D., which is making contracts and taking delivery of corn in Wimbledon, N.D., and expects to be operating in May. The ethanol option offers more of a local market for corn that doesn't have to be shipped by rail.

Dakota Spirit AgEnergy is working at a basis of 65 cents below futures for June delivery, while Traut's elevator is about 75 cents below. In some cases, Country Grain arranges a contract with the ethanol plant but the farmer would earn the extra 10- to 15-cent basis by delivering the grain directly to the ethanol plant.

Mikkel Pates is an agricultural journalist, creating print, online and television stories for Agweek magazine and Agweek TV.
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