Rail Delays Hitting Home for Ethanol, Grain Shippers

Surface Transportation Board will hold hearing on rail issue this week

Published on: Apr 8, 2014

A long-brewing rail car shortage centered on the Dakotas is beginning to lead to trickle-down issues in grain shipping and ethanol industries, South Dakota Gov. Dennis Daugaard said last week, suggesting the railway industry work to find solutions for overflowing grain and ethanol facilities.

In an editorial Friday, Daugaard explained that the shortage is likely caused by several factors, including the extremely cold and long winter, expansion of the Bakken oil field, bigger grain harvests and rail construction in other states.

"I am very concerned about this problem because our agriculture economy is highly dependent on the state's commodities getting to the market," he wrote. "Much of what has caused the shortage is out of our control. Still, we must do everything possible to find solutions. Our agricultural producers and shippers need resolution of this situation."

Surface Transportation Board will hold hearing on rail issue this week
Surface Transportation Board will hold hearing on rail issue this week

Related: BNSF Grain Trains Are 23 Days Behind Schedule

In response to the issues, the Surface Transportation Board is planning an April 10 hearing to report on recent railroad service questions, review solutions to the issues and discuss additional options to improve service.

Questions on the delays have been shouldered by the two key rail companies shipping out of the area – BNSF and Canadian Pacific. Both BNSF and CP representatives are scheduled to appear at the hearing.

Ethanol impact
Ethanol producers are increasingly concerned with the state of the rail industry. Renewable Fuels Association President Bob Dineen last week in a letter to Ed Hamberger, Association of American Railroads CEO, said the growing disarray in the rail industry within the first quarter of 2014 has caused ethanol producers to scale back production.

On-site storage at producers' locations is a limiting factor, Dineen explained. As rail cars are unable to pick up shipments, ethanol stocks in key regions have been depleted, and prices have increased.