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Grain Harvest Could See Impact from Rail Service Issues

Railroads blame labor shortage as primary cause of ongoing disruptions

PEXELS.com
PEXELS.com

Throughout 2022, agricultural shippers have dealt with significantly deteriorated rail service.

To better understand the persistent service issues, the Surface Transportation Board (STB) held a two-day hearing in April, with testimony from agricultural groups, including the National Grain and Feed Association (NGFA) describing costly ongoing problems.

To begin to correct these issues, STB required the railroads to submit detailed service recovery plans (SRP) and start submitting new weekly service metrics in May.

STB expected the SRPs to detail the specific actions that each carrier planned to take to improve service and the specific metrics by which it would evaluate its progress.

Railroads submit ‘inadequate’ SRPs

STB required the Class I railroads to submit revised SRPs on June 23, because the original submissions “were perfunctory and lacked the level of detail that was mandated by the board’s order.”

USDA’s latest Grain Transportation Report looks at the railroads’ revised SRPs and some of STB’s existing service data.

The latest report also examined a newly collected metric to assess the current state of rail operations and the progress toward recovery.

Service metrics remain poor but show some improvement

STB has collected service metrics data from the Class I railroads for several years. One of those performance metrics — the number of unfilled orders for empty grain cars in manifest service — highlights the extent of service problems for grain.

According to the USDA, unfilled grain car orders in 2022 have well exceeded their levels of prior years.

Starting in April, the weekly number of unfilled orders hit record levels.

Until late June, the number continued to climb, repeatedly setting new records. After peaking for the week ending June 22, however, the number of unfilled orders improved in the next week, dropping by 3,500 cars, or 22%.

Premium grain car service

Bids for premium grain car service in the secondary auction markets provide another metric showing the service issues shippers face.

Shippers can obtain cars from the railroads either on a first-come, first-served basis or by bidding for cars in the auction markets.

Especially when rail service is poor, shippers turn to the auction markets to secure more certain car service.

Near-month bids for grain car service have been high for most of this year. In recent weeks, however, those bids have fallen somewhat, possibly reflecting improved service.

New weekly service metric requirements

Along with requesting SRPs, STB also required the railroads to begin submitting new weekly service metrics.

Among these are dwell times at additional terminal locations, weekly recrew rates, some first-mile/last-mile metrics, and a trip-plan compliance (TPC) metric.

The TPC metric measures the weekly share of unit trains or cars that were placed within 24 hours of the original arrival estimate given by the railroad.

The railroads also provided historical TPC data and projected TPC levels six months out, which is especially useful to gauge railroad recovery progress.

For all railroads, TPC has trended down since the start of the pandemic.

TPC dropped significantly toward the end of last year, especially for BNSF Railway (BNSF) and Norfolk Southern Railway.

This year, BNSF is the only railroad to have somewhat improved its TPC.

Both BNSF and Union Pacific Railroad must make considerable headway to meet their projected December service levels.

According to CSX Transportation’s projections, by December, the company’s service will be at or above 90% where it currently stands.

The projection suggests the company does not expect service to worsen through the rest of the year, but prospects for improvements remain unclear.

Service improvements reflect seasonal declines in demand

The modest progress shown by grain service metrics reflects some improvements specific to particular railroads and others specific to particular regions.

The service improvements also reflect seasonal declines in demand for rail service from grain shippers.

BNSF accounted for most of the recent drop in unfilled orders, which accords with the progress seen in BNSF’s TPC.

In its SRP, BNSF described varying service recovery across its network: some improvement has occurred along its Northern Corridor (spanning the Upper Midwest to the Pacific Northwest), but poor performance lingers on its Southern Transcon route (spanning from Chicago to California).

Unfilled grain car orders in North Dakota have indeed fallen more than BNSF’s system total, suggesting some progress in the state. Still, the latest North Dakota numbers remain elevated compared to prior years.

Labor shortage continues disruptions

All the railroads named a labor shortage as the primary cause of the ongoing disruptions.

All the SRPs described a hiring plan, but worker attrition and long training times for new hires will likely prolong the service issues.

In their SRPs, multiple railroads described vacation buy-back plans to incentivize their employees to work through peak vacation time in the summer but cautioned the week of July 4 would likely result in service delays.

Upcoming grain harvest could pose a problem for railroads

Looking beyond the near term, the increased demand from the grain harvest could pose a problem for railroads.

Grain shippers’ typically low demand for rail service in summer may be a factor behind the decline in unfilled orders and auction market bids. Despite declining recent near-month auction market bids, bids for service in October have stayed high amid the expected high demand of harvest.

Well above recent years, bids made in June 2022 for October service were on par with those made in the same period during the service crisis in 2014.

Although the service metrics reflect some recent improvements, recent bids suggest shippers are still concerned about the railroads’ ability to handle the upcoming harvest.

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