This article has been reprinted from the Aug. 29 USDA Grain Transportation Report.
Railroads are a critical mode of transportation for grain shippers, and timely rail transportation is especially important at harvest. Due to limited grain storage, much of the corn and soybean harvests must enter the transportation system immediately.
Congestion and delays on the rail system can lead to excessive stocks on and off farm and, in extreme cases, can also result in product loss.
With an eye toward the upcoming corn and soybean harvests, this article looks at various rail performance indicators for grain from the Surface Transportation Board’s (STB) Rail Service Issues Reports.
The article concludes with a look at state-level production projections compared to historical state-level rail car loadings to provide a sense of how spatial patterns in transportation demand might look in 2019, compared to recent years.
All Grain Rail Performance Data Now on USDA’s Platform
STB’s Rail Service Data includes 11 separate data items that railroads report each week, such as train speeds, dwell times, grain loadings, order fulfillment, and carloadings.
This data is extremely useful to the grain community, and our new Open Data Platform now includes the full set of STB’s service metrics, making more grain transportation data usable, shareable, discoverable, and accessible (see the August 1, 2019 Grain Transportation Report for more information on this platform). All of the datasets can be accessed through the Data Catalog.
This article showcases trends in several of these datasets.
Rail Demand for Grain Transportation
Figures 1 and 2 provide seasonal comparisons of recent grain carloadings and grain rail car auction market bids.
These data provide insight into current grain transportation demand and supply.
For instance, the figures highlight the impact of the flooding and weather issues earlier in the year. Grain carloads fell month-to-month through March, when the Midwest flooding was severe (Figure 1).
At the same time, shipper bids for timely, guaranteed service rose significantly from January to February, stayed high through March, and declined as railroads recovered and railcar supply increased and became more predictable (Figure 2).
In August of this year, weekly rail carloads were 9 percent below August 2018, but 9 percent above 2017.
At the same time, average grain railcar secondary auction market bids were $298 below August of last year and $480 lower than the prior three-year August average. Figure 1 suggests current grain transportation demand is not unusually high or low.
The auction market data in Figure 2 indicates that shippers are not currently willing to pay for more timely, guaranteed rail service.
The bids in Figure 2 are averaged over the month they were made and include delivery of railcars that month and in future months.
While average August bids for delivery in September (-$144) and October ($0) are slightly higher than for August (-$176), they are still at or below zero dollars.
This suggests that shippers believe they will have adequate rail service to meet demand over the next couple of months.
This could be the result of expectations of strong rail performance and railcar supply or expectations of relatively low rail demand, as the next two sections will address.
Rail Supply of Grain Transportation
Train speeds are a key measure of rail capacity.
Figures 3 and 4 show grain train speeds and grain origin dwell times.
Average grain train speeds in August were 6 percent above last year and 1 percent above the prior three-year average (Figure 3).
Similarly, average origin dwell times in August were 39 percent below the prior 3- year average (Figure 4).
These numbers suggest that the rail system is prepared to handle additional freight brought on by the corn and soybean harvests.
In addition to the more traditional performance metrics, the STB collects and publishes other data on rail movements of grain.
This includes grain cars that have not moved in over 48 hours, grain unit trains holding, grain car order fulfillment metrics for manifest service, and grain cars loaded and billed at the state level, among other datasets.
The first three are plotted over time in Figures 5, 6, and 7.
Overall, these charts tell a similar story, matching the train speeds and origin dwell time data, but each provides a slightly different perspective on the service picture.
Each of the charts shows significant spikes in service issues in February and March of this year.
Compared to January, average weekly grain cars not moved in March were up 99 percent, average daily trains holding were up 98 percent, and unfilled grain car orders were up 293 percent.
More recently, the August average for each of those metrics was down from August 2018—38 percent for cars not moved and 30 percent for trains held short.
However, while unfilled orders for grain cars using manifest service have declined significantly from March, they are still up 90 percent from August of 2018 (Figure 7).
In general, the STB metrics suggest rail service has recovered from winter weather issues and improved year over year.
However, the unfilled orders metric does not fit this story.
There were weather and service issues throughout 2018, yet unfilled orders were significantly worse in 2019 than in prior years.
Moreover, shippers have recently reported cuts in their service to the STB that would not necessarily show up in these metrics, such as reduced number of days per week that rail service is offered.
While the majority of these metrics show positive signs for the upcoming harvest, the unfilled orders metric and shipper reports to STB are concerning.
Outlook
The new marketing year (MY) for corn and soybeans begins on September 1.
To offer a glimpse into what changes may occur, this final section examines rail activity for grain and expected changes in production compared to past years by state.
To that end, Figure 8 shows the concentration and pattern of railcars loaded and billed in the months of October, November, and December.
Figure 9 shows the increase or decrease in expected production of corn and soybeans in MY2019/20 compared to the prior 3-year average.
As the left map shows, much of the rail freight for grain in October, November, and December originates in the central Plains and western Corn Belt, namely North Dakota, Nebraska, Minnesota, Kansas, Illinois, and South Dakota.
Across the U.S., demand for railcars for grain freight may slacken somewhat in MY2019/20, due to a reduction in grain supplies.
According to the latest (August) World Agricultural Supply and Demand Estimates report, USDA projects corn and soybean supplies (including beginning stocks, new production, and imports) will be down 2 percent in MY2019/20, compared to last year.
Inventories of corn and soybeans are projected up by 852 million bushels (33 percent), but production is projected down by 1,383 million bushels (7 percent).
State production data suggest that the demand for railcars will be more nuanced. If USDA’s projections are realized, six states would see a drop in their corn and soybean production of at least 150 million bushels (mbu) compared to the 3-year average.
As the map in the right pane shows, most of the reduction would be concentrated in Illinois (-441 mbu), Minnesota (-256 mbu), South Dakota (-246 mbu), and Ohio (-220 mbu).
On the other hand, Kansas and Nebraska, for instance, could see an increase in grain rail shipments in MY2019/20, supported by projected increases of 128 mbu and 34 mbu more than the prior 3-year average, respectively.