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WHAT A DIFFERENCE A YEAR MAKES

A year ago the marketplace was defined by high product demand, corresponding price volatility, spiraling fuel costs, and high rail and ocean-going freight rates. Fast forward to today and the only item which remains from that list is the high rail freight rates.

“If you were to ask someone a year ago to predict today’s grain prices, I doubt many people would have landed on the prices seen currently,” notes Jay O’Neil, senior agricultural economist, International Grains Program, Kansas State University. “The high demand and price volatility seen were considered to be part of the ‘new operating environment’ in agriculture, and many projected this environment would remain for awhile. However, few could have predicted that within six months a dire global economy would arrive and bring with it a new operating environment.”

O’Neil says the combination of tight money supplies, a grain glut, reductions in animal units and a corresponding drop in feed requirements have conspired to weaken demand for U.S. products. Nevertheless, he also wants to remind people that if there’s one lesson to be learned, it’s that everything you know as real today can most certainly change tomorrow.

“It’s this volatility that makes having an infrastructure capable of reacting to the needs of a changing marketplace, critical to our agriculture,” he says. “While the stimulus package can offer some immediate benefits to improving roadway infrastructure, its lack of attention for improvements on the Mississippi and Illinois river waterways represents a major lost opportunity for meaningful infrastructure improvement.”

Don’t look for major improvements in rail infrastructure either. The majority of the $8 billion appropriated for rail improvements are earmarked for passenger rail service, so the five Class I railroads that move most of the agricultural products will be responsible for funding major infrastructure improvements to rail corridors — which means, of course, customers will bankroll the lion’s share of the bill via rates and surcharges.

Kendell Keith, president, NGFA shares O’Neil’s chagrin over the omission of waterway projects in the stimulus package but vows to keep this issue and others in the forefront of their legislative mission.

“While the lock and dam provisions may have missed out because they weren’t ‘shovel ready’ in the eyes of the Corps of Engineers, we intend to work more closely with industry leaders like the grain grower associations, to help move the needle on these critical projects,” says Keith. “You must also remember that this administration is very new and still needs to fill some key positions. Many earmarks have not been articulated in the Recovery Act package and other legislation. As a result, action and dollars may take a while to trickle down to ground level.”