2018 Ag Transportation Summit: Discussion and Takeaways

This article has been reprinted from the Aug. 9 USDA Grain Transportation Report.

On July 25 and 26, over 200 stakeholders, including producers, commodity groups, and transportation providers, along with representatives from federal agencies and state governments, attended the 2018 Ag Transportation Summit, in Arlington, VA.

This year’s theme–Connecting Growing Supply with Growing Demand–was reflected in the remarks of speakers from government and industry.

An overarching takeaway from the sessions was the need to address critical funding projects now, in order to make the connection between a growing supply and demand and to avoid missed opportunities.

Many speakers mentioned that competition in the global market for agricultural products is becoming increasingly stronger, and the U.S.’s competitive advantage in transportation allows many American producers to compete against lower cost producers abroad.

By not investing in transportation now, American producers face an increased likelihood of missing competitive opportunities in the future.

Remarks by the Secretary of Agriculture

This year’s keynote address was provided by Secretary of Agriculture, Sonny Perdue, who stressed the importance of trade to American agriculture and how an efficient transportation network is vital to the success of selling agricultural products, both abroad and in the United States.

Secretary Perdue highlighted several points affecting the competitiveness of U.S. agriculture, regarding the transportation network.

These included the importance of finding practical regulatory solutions for the agriculture trucking industry; having the railroad industry focus on its agriculture customers; improving the inland waterway infrastructure; and investing in port and “inland port” infrastructure.

Challenges for Motor Carriers and Roadways

Jon Samson, American Trucking Associations (ATA), put the impacts of the looming truck driver shortage into perspective.

Of the 3.5 million truck drivers classified by the Department of Labor, ATA estimates that 500,000 are over-the-road for-hire truckload drivers, which is the segment of drivers affected by the shortage.

ATA estimates the driver shortage of 51,000 in 2017 could grow to 180,000 by 2026.

This would impact the majority of businesses using truck services because 75 percent of the truck industry is non-competitive with rail or other modes.

As a result, only 25 percent of customers will have the ability to switch to alternative transportation modes if the driver shortage persists.

Kirk Steudle, Michigan Department of Transportation, and Tom Sorel, North Dakota Department of Transportation, spoke about the lack of, and need for, dedicated and sustainable highway funding.

They mentioned the I-35W bridge collapse in Minnesota as an example of the need to be proactive with infrastructure maintenance and repair projects.

They suggested increasing states’ gas tax, registration fees, or the number of toll roads, as possible ways to generate funding.

Rail Service and Regulatory Issues

Representatives from five Class I Railroads talked about recent service issues, and priorities moving forward to address those issues.

Sam Sexhus, BNSF Railway, remarked that overall rail traffic has been growing due to the economy and that traffic in 2018 has almost reached the record level achieved in 2006.

In order to keep up with expected growth, BNSF has taken 1,150 locomotives out of storage; is doing major track expansion work on two of its major routes–the Northern and Southern Transcons; and is hiring 4,500 new crew members.

Brad Thrasher, Union Pacific Railway, highlighted the increase in terminal capacity planned for the Brazos Yard in Texas.

It is the largest capital investment in a single facility in the company’s history, and should increase network efficiency and capacity.

Jarad Farmer, Canadian Pacific Railway (CP), echoed the increase in rail traffic, with growth across all commodities.

He mentioned CP’s focus on growth and providing service, characterized by its recent purchase of locomotives, hiring of 700 new employees, and investment in new grain hopper cars.

The new cars are higher capacity and shorter than existing cars, allowing a 134 car train to have 20 percent more grain capacity while remaining at 8,500 feet in length.

Pat Simonic, Norfolk Southern Railway (NS), acknowledged the railroad’s recent service issues and attributed these mainly to a lack of crews.

He said the track and equipment capacity is in place, but NS needs to hire more crew to utilize it.

However, he noted the strong economy was making the recruitment process especially difficult.

Tim McNulty, CSX Railway, noted the service issues faced by CSX during its transition under the implementation of Precision Scheduled Railroad (PSR) have improved.

Under PSR, CSX has reduced its flat yards from 8 to 5 and reduced crew and equipment. McNulty also noted train velocity and dwell times had both

improved, and that CSX would continue to grow its intermodal business with no impact to other commodities, such as agriculture.

In addition, Ann Begeman, Chairman of the Surface Transportation Board, noted that the work of the Board would remain focused on the internal Rate Reform Task Force while awaiting confirmation of a full complement of five commissioners.

She established the Task Force, after becoming Chairman, to develop recommendations for reforming and streamlining the rate review process.

Until confirmation of the remaining three Board Members, Begeman noted there would not be any major decisions on pending regulatory matters.

Waterways and Ports

Sean Duffy, Big River Coalition, expressed the need for a deep draft of 50 feet on the Lower Mississippi River.

This will allow states connected to the Mississippi River inland water system to maintain their export competitiveness, with other coastal ports, in attracting the larger post-Panamax vessels.

Daniel LeGrande, Virginia International Terminals, spoke of the Port of Virginia’s vision to become the primary East Coast gateway for agricultural exports, which already represent over half of its containerized exports.

In addition, LeGrande discussed the need to address logistical challenges surrounding increasingly larger vessels that make fewer ports of call.

Mark Wilson, Port of Kalama, spoke about Kalama’s strategic importance as a major exporter for bulk products, such as soybeans and grains, and the uncertainty surrounding changes in trade patterns on grain exports.

R.D. James, U.S. Army Corps of Engineers, and Mike Toohey, Waterways Council Inc., spoke on funding challenges, such as inadequate funding and debates over usage fees for commercial users of the inland waterways and the need for maintaining this resource for its strategic importance to the United States.

Ken Eriksen, Informa Economics, noted that despite the challenges facing the movement of U.S. grain and other products, the United States still has to move its products in order to satisfy the growing global demand.

According to Eriksen, high canal fees for the relatively smaller grain vessels and recent lower bunker fuel prices have encouraged fully loaded grain vessels to go around the Cape of Good Hope, instead of through the recently expanded Panama Canal, on their way to Asian markets.

Innovation in Agricultural Transportation

Sal Litrico, American Patriot Holdings, shared details on a new container vessel design under development.

It will have a cargo capacity between 1,824 and 2,960 twenty-foot equivalent units (TEUs) and operate between new intermodal container ports located at Plaquemines Port, Memphis, and St. Louis.

The new vessel design will offer a new low-cost container shipping option from the interior of the U.S. for many products, including agricultural and refrigerated products, with direct connection to larger export container ships.

Annette Mueller, MAERSK, Aaron Lieber, IBM, and Julie Detlefsen, Cargill Inc., spoke on bringing digitization to paperwork in the barge industry, via blockchain technology, as a way to cut costs, speed the transfer of documents, and improve accuracy.

Currently, documents such as a transfer of ownership are overnighted by mail, along the chain of custody, with certain companies receiving ownership multiple times in the process; and final ownership settled after the barge has already reached its destination.

However, with new technology, barge ownership and other documents could be maintained electronically, securely, and without delays.

Prioritizing Transportation Infrastructure Investments for Ag Export Supply Chains

Through a collaboration with USDA Agricultural Marketing Service, researchers from Washington State University (WSU) and Texas A&M University presented the results of a series of workshops held across the country in order to develop a tool to help agricultural stakeholders and local policy makers prioritize investments in transportation, which would enhance the competitiveness of agricultural export supply chains.

Eric Jessup, WSU, conducted research for the wheat and soybean supply chains, and David Ellis and Luis Ribera, Texas A&M, conducted research on infrastructure investments along the U.S./Mexico border.

Both prioritization tools are cost/benefit analyses for examining proposed transportation infrastructure projects.

However, they are tailored for specific areas and commodities across the country and assign a ranking based on the expected net benefits.

The ranking is useful in evaluating the priority of implementing one project over another.

Ultimately, agricultural stakeholders and policy makers can use these tools to set regional priorities; mobilize additional resources from across jurisdictional boundaries; improve synergies across local agencies; and create more efficient infrastructure investments. Results of the study and the prioritization tools will be made available to the public online at a later date.