By MIKE STEENHOEK
Soy Transportation Coalition
At this time of the year, I start to get questions regarding our transportation system’s ability to handle the impending harvest.
Below are some thoughts that may be of interest.
From having my ear to the ground and visiting with various grain handlers, I am pretty confident our nation’s railroads will be able to accommodate the upcoming harvest.
Over the past couple years, railroads have devoted significant resources to improving the condition of their networks.
Without question, there are additional locomotives, track, and personnel available today to meet the needs of rail customers compared to previous years.
Railroads should be commended for this level of investment.
While railroads have invested more in their networks, it is anticipated that volumes transported will be restrained due to farmers electing to store their grain and soybeans.
We witnessed this last year – particularly with corn.
The further retreat in prices will result in a growing number of farmers deciding to hold onto their harvest – hoping for a more opportune time to sell.
Of course, there is a limit to how long a farmer can store his or her grain and soybeans, but on farm storage will be increasingly utilized this year.
Compared to previous years, a projected anemic export program will result in less volume being absorbed by the railroads and further contribute to on farm storage.
As many are aware, the strengthening of the dollar, the further depreciation of the Chinese jung, the weakening of the Brazilian real compared to the dollar (29 percent thus far this year), and the overall concerns with the Chinese economy are producing significant headwinds for U.S. agricultural exports – especially soybeans.
The good news is that there will likely be sufficient transportation supply to accommodate demand.
The bad news is that the increasingly unfavorable economics facing the industry is a key contributing factor.
Of course, the main wildcard regarding rail service is weather.
Both volume of snow and severity of temperatures can significantly curtail railroad network performance.
This was vividly on display in early 2014 when railroads struggled to absorb the 2013 harvest, in part due to a historic winter in many areas of the country.
Given the challenges and concerns confronting the industry, increased focus should be on those opportunities to reduce the costs associated with our transportation system
As I like to suggest, the profitability of the American farmer is not just a function of increased supply and increased demand. It is also a function of increased connectivity between supply and demand.
Transportation is that connectivity.
Much of the work of the Soy Transportation Coalition, and other agricultural organizations, is to remove costs from the entire transaction so that the per bushel cost to our customers is less than before.
Mike Steenhoek, is executive director of the Soy Transportation Coalition. He can be contacted at (515) 727-0665.
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