Dmitriev Mikhail | BIGSTOCK

Jan 16, 2023

Grain deliveries resume at Foster Farms

After STB orders Union Pacific to step up shipments, the railroad has completed at least six grain deliveries.

Foster Farms said last week that its grain inventories have been restored after the federal government ordered Union Pacific Railroad to step up its shipments.

Foster Farms filed a petition for emergency service before the U.S. Surface Transportation Board (STB) on December 29, noting continued service deterioration.

On January 3, STB issued an emergency order to force UP to haul corn and grain to California to prevent millions of chickens and cattle belonging to Foster Farms from starving.

UP is delivering grain; bird health no longer at risk

According to reports, on January 13, Foster Farms said six Union Pacific trains had completed deliveries and additional trains are scheduled. Bird health is no longer at risk, the company said in a statement.

"We have a long working relationship with Union Pacific, and it is our hope that more reliable service standards can be maintained and further disruptions minimized," Foster Farms said in the statement.

As required by STB, Union Pacific said it has provided the board and Foster Farms with service updates since January 3.

Rail service problems began in October

According to the Foster Farms' December 29 petition, the company said an emergency service order is necessary because of the “substantial, measurable deterioration of rail service” by UP to Foster Farms’ Traver, Turlock, and Delhi facilities beginning October 2022.

Foster Farms said corn delivered by UP is used exclusively to feed hundreds of thousands of cattle and millions of chickens, which are raised for the purpose of providing food supplies.

According to Foster Farms, “the lack of sufficient deliveries of unit trains in October and November resulted in feed stocks dwindling to critically low levels." Inventory levels have continued to dwindle in December.

Foster Farms said it has supplemented UP deliveries with corn shipped on BNSF Railway Company (BNSF), which was then transloaded onto trucks at locations within driving distance to Foster Farms’ facilities, and purchased extra unit trains on the secondary market.

Foster Farms also said it has cut off feed to the dairy cattle to preserve corn for feeding the chickens, which are more susceptible to starvation.

UP received previous orders to deliver feed to Foster Farms

This is the second time in the past year -- because of similar service issues with Foster Farms -- that STB has issued an emergency service order. On June 17, 2022, STB directed UP to adhere to specific service commitments and report regularly to the board during this period.

On July 1, 2022, the board extended the emergency service oversight period through July 17, 2022, and on July 20, 2022, the board determined that the docket would be left open through January 20, 2023, in the event that further action is necessary.

Railways suffering from labor shortages

Rail companies have struggled with labor shortages over the past year, exacerbating service issues.

Railroads are still recovering from labor issues stemming from having to furlough workers in 2020 during the COVID-19 pandemic. It may take years to recruit, hire and train enough labor to match the pre-COVID workforce, said Rick Paterson, managing director of Loop Capital Markets, during the recent National Grain and Feed Association's (NGFA) Country Elevator Conference.

Poor performance can be traced back to the second and third quarters of 2020, when the railroads were caught off-guard by strong shipping demand after they'd already laid off much of their workforce.

The pandemic's great resignation then thwarted the restoration of crew capacities by accelerating attrition and compressing the furlough recall rate -- the percentage of furloughs that come back to the railroad when called to work again.

Lisa Cleaver

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Marketwatch: Jan, 26

US Corn Price Idx: ZCPAUS.CM

open: 6.8094
high: 6.8144
low: 6.7594
close: 6.7718

US Soybean Price Idx: ZSPAUS.CM

open: 14.4452
high: 14.6802
low: 14.4151
close: 14.657

US Hard Red Winter Wheat Price Idx: KEPAUS.CM

open: 8.0809
high: 8.1609
low: 8.0365
close: 8.0686

US Soft Red Winter Wheat Price Idx: ZWPAUS.CM

open: 6.8629
high: 6.9087
low: 6.8275
close: 6.8713