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Crop shipments still stranded in North Dakota as oil-by-rail dominates

North Dakota’s economy has traditionally been dominated by agriculture, but rail traffic has been crowded since oil from the Bakken shale has pushed the state’s rails to the limit. Ron Nixon from the New York Times writes:

…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, owned by the 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.

For farmers, the delays often mean canceled orders from food giants that cannot wait weeks or months for the grain they need to make cereal, bread and an array of other products. “They need to get this problem fixed,” Mr. Hejl said. “I’m losing money, and my customers are turning to other sources as a result. I don’t know how much longer we can survive like this.”

Railroad companies contend that they are not giving oil tankers preferential treatment, but elevator operators are still fighting to get last year’s harvest shipped before the new harvest comes in.

The competition for shipping by rail in North Dakota has lead to increased freight costs for farmers, which cuts in to their profit margin. The lack of trains available for crop shipments means that the crops must be stored for a longer period of time. This excess supply leads to a decreased demand for crops from grain elevators, which depresses prices. If the crops are left too long, they will be wasted due to rot.

A recent North Dakota State University study found that farmers stand to lose more than $160 million in lost revenue due to oil traffic.

The Agriculture Department has expressed concern that rail companies would be unable to handle the approximate 30,000 requests for rail shipments before October.

BNSF has been the most active in trying to relieve the problem, working towards adding railways and hiring more workers. However, it is unclear if additional rail capacity will be available this year. The huge backlog of shipments combined with what is expected to be a plentiful harvest in North Dakota makes another winter with strained rails seem likely.

The failure to transport crops may only seem like it affects farmers, but the consequences of letting crops go to waste has global effects. The lack of supply causes a spike in prices which in turn causes food price inflation to rise. Companies like Kelloggs and General Mills are forced pass the costs on to the consumer. In recent years, companies have been masking the cost by keeping the same package size while reducing the contents.

See Shale Plays Media’s own report: Balancing oil and agriculture

Read the full Times article here: Grain Piles Up, Waiting for a Ride, as Trains Move North Dakota Oil


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