Record crops in Dakotas and Minnesota pile up as trains carry crude oil, not agricultural products

As farmers prepare for expected record crops of wheat and soybeans, they fear that the backlog of railroad delays will only get worse and could lead to millions of dollars in losses and slower production for cereal giants like General Mills, Ron Nixon reports for The New York Times. (NYT photo by Dan Koeck: Rail cars being loaded with corn near Hillsboro, N.D.)

Rail delays—blamed on a bad winter, a bumper grain crop, increased competition from oil and coal shipments, and an improved economy that is jacking up the amount of consumer goods—have led many grain farmers to store crops, or risk selling them at lower costs.

Railroads say they aren't favoring oil over crops, but as millions of barrels of oil are being transported from North Dakota by rail, farmers continue to wait for their product to be moved, Nixon writes. Bill Hejl, who grows soybeans, wheat and sugar beets near Casselton, N.D., told Nixon, “If we can’t get this stuff out soon, a lot of it is simply going to go on the ground and rot."   

Delays have been especially harsh in North Dakota, where energy has replaced agriculture as the state's top industry, Nixon writes. "Railroads have long been the backbone of North Dakota’s transportation system and the most dependable way for farmers to move crops — to ports in Portland, Ore., Seattle and Vancouver, from which the bulk of the grain is shipped across the Pacific to Asia; and to East Coast ports like Albany, [N.Y.,] from which it is shipped to Europe."

"But reports the railroads filed with the federal government show that for the week that ended Aug. 22, the Burlington Northern Santa Fe Railway — North Dakota’s largest railroad, mainly owned by billionaire Warren E. Buffett — had a backlog of 1,336 rail cars waiting to ship grain and other products. Another railroad, Canadian Pacific, had a backlog of nearly 1,000 cars," Nixon writes.

Delays mean canceled orders from food giants, who are unable to wait for shipments that are slow coming, Nixon writes. A North Dakota State University study "found that rail congestion could cost farmers in the state more than $160 million because a local oversupply of grain has lowered prices. The study also found that farmers would lose $67 million in revenue from wheat, corn and soybeans from January to mid-April. Around $95 million more in losses are expected if farmers are unable to move their remaining inventory of crops."

And that study was done "before the current harvest, which is forecast at a record 273 million bushels of wheat, up from 235 million bushels in 2013," Nixon writes. "This year’s soybean harvest is also expected to be a record, and corn will be a near-record." And those delays have cost General Mills, the Minnesota-based maker of Cheerios, 62 days of production — as much as 4 percent of its output. "Cargill, another Minnesota-based food giant, reported a drop in net earnings that it attributed in part to 'higher costs related to rail-car shortages.'" (Read more)