Erik Burgess, Published May 02 2014
ND farmers suffer nearly $67 million in lost revenue from clogged rail lines
The study, released Friday, shows that spring wheat, corn and soybean farmers lost out on about $66.6 million over the past four months because of railway delays due to increased oil traffic, cold weather and a large grain crop harvest last fall.
This is money that local farmers could have made but didn’t because of congested rails, said Frayne Olson, the NDSU assistant professor and crops economist and marketing specialist who did the study.
“Because there were delays and we saw lower prices than we normally see this time of year, farmers lost out,” Olson said. “This is an ‘opportunity cost.’ That’s what we’d call it in economics. They lost the opportunity to have that income.”
The study shows a potential for another $95.4 million in lost revenue from 2013 crops if the status quo continues.
“We still have grain that’s on the farm that still has to be delivered, that still has to be moved through, and if things don’t improve, these losses can build very, very quickly and can continue,” Olson said.
Delane Thom, regional manager for CHS-Southwest Grain in Taylor, said the loss numbers don’t surprise him.
The weather has warmed and the delays have improved in the past few weeks, he said, but he still has cars that are 60 days behind schedule.
“What they just need to do is focus on getting the problems fixed, I think,” Thom said, referring to the railway industry.
Many factors have caused the losse, and it’s difficult to point the finger solely at increased oil traffic, Olson said.
“That is one of the factors. I’m not disputing that in any way, shape or form, but I can’t go as far to say that this is all because of oil,” he said. “I think that’s an overstatement.”
The nation had a record corn crop in 2013, and high yields of soybean and wheat, which means more grain product than ever before has been trying to get on the rails, Olson said.
A very cold winter also meant train engines couldn’t pull as many cars and that they also pulled them at a slower speed, Olson said. That’s something BNSF Railway officials have also pointed to as reason for the delays, but Thom isn’t totally buying it.
“I’ve lived in the Dakotas all my life, and it seems like every year about October, November, we have a winter,” Thom said. “And this is the first time it’s become a real big issue.”
The losses reported in the study are conservative estimates because it only included spring wheat, corn and soybeans, which account for an estimated 75 percent of cropland acreage in North Dakota, Olson said.
Data for other crops such as barley, sunflower, canola, lentils and flax was not readily available for the analysis, the study states.
To calculate the losses, Olson analyzed the difference in national price versus local price for those three crops.
North Dakota prices are typically lower than national prices, with the difference usually greatest around harvest time, Olson said. That’s supply and demand – elevators overflowing with harvested grain drop prices to signal to farmers that they are full.
But in the first four months of this year, the difference between local and national prices on those three crops was unusually large, brought on by congested rails and elevators, Olson said.
“That’s when the delays got bad enough that it really started showing up in local farm level prices,” he said.
Olson said the study was meant to be a quick snapshot and that his department at NDSU wants to do a more in-depth analysis.
“Our challenge right now is to find the resources to be able to do that,” he said. “To do a full analysis, to be able to really try and answer directly the questions you’re asking, is going to take a lot more work.”
Readers can reach Forum reporter Erik Burgess at (701) 241-5518