The rail-car snarl of last winter may have cost corn, wheat and soybean growers in the upper Midwest $570 million, or 3 percent of their cash receipts for the crops, says a USDA report. To calculate the figure, department economists looked at the impact of higher shipping costs and lower local grain prices in Montana, Minnesota, North Dakota and South Dakota, where shipping delays were the worst due to a harsh winter, a large volume of grain awaiting transport and competition for rail service by the oil-shale industry.
The USDA says its $570 million figure is a rough estimate. “Knowing what the actual impacts were for these producers is difficult to determine,” the report said. “It is unclear whether or not producers would have chosen to market their crop at these depressed prices, could have sold under a forward contract, could have stored the crop for sale at a later date or even sold to shipper using a different mode of transport.” The report says shipping delays reduced corn prices by an average 17 cents a bushel, wheat by 18 cents and soybeans by 11 cents from Jan. 1-Nov. 30, 2014.
Railcar prices were at normal rates for the 2014 harvest, said the USDA. The tie-ups in the upper Midwest did not impede U.S. exports — shipments of grains and oilseeds during 2014 were above the three-year average.
“Nevertheless, rail service in the United States is currently operating near full capacity as the United States recovers from the recession and production of ethanol and unconventional oil and gas are near record highs. Because railroads are operating near full capacity, transportation disruptions (e.g. adverse weather conditions or an unexpected sudden surge in demand) are likely to cause performance problems for rail transport,” concluded the report, requested by Sens. Amy Klobuchar of Minnesota and John Thune of South Dakota.