Earlier today (September 7), the Surface Transportation Board (STB) issued a notice of proposed rulemaking (NPRM) on reciprocal switching as a remedy for inadequate rail service (pdf). Under reciprocal switching, an originating carrier transports a shipper’s traffic to an interchange point, where it switches the rail cars over to a competing carrier. The competing carrier pays the originating rail carrier a switching fee for moving the cars from the shipper’s facility to the interchange point (Grain Transportation Report, January 6, 2022).
The proposed rule would provide a streamlined path for STB to prescribe a reciprocal switching remedy. The streamlined process would apply whenever service to a terminal-area shipper failed to meet any of three performance standards, based on measures of (1) service reliability, (2) total transit time, and (3) local service performance. If finalized, these proposed service metrics will be standardized across all Class I railroads and available to shippers on request.
Initial comments on the NPRM are due by October 23, 2023, and reply comments are due by November 21, 2023. STB has been considering reciprocal switching reforms since at least 2010. However, based on the service issues in recent years, STB Chairman Oberman said, “Stakeholders can expect prompt action on this proposal.”
FMC told the Journal of Commerce that the list supports the Commission’s ongoing efforts to strengthen the oversight of regulated entities through “informed compliance.” FMC’s efforts are aimed at eliminating unfair or unjustly discriminatory practices used by carriers against shippers.
ILWU Ratifies New Coastwide Contract
On August 31, the International Longshore and Warehouse Union (ILWU) announced its rank and file had ratified the new West Coast labor contract with a 75% approval vote. According to the Journal of Commerce, the new 6-year contract includes a 32-percent wage increase, and is retroactive to July 21, 2022, when the previous contract expired. Additionally, the contract includes a bonus, totaling $70 million, to be spread across the nearly 20,000-person membership for working through the COVID-19 pandemic.
Weekly Highlights Representing the ocean carriers and marine terminal operators, the Pacific Maritime Association commended the contract as “an important framework for the hard work ahead to overcome new competitive challenges and to continue to position the West Coast ports as destinations of choice for shippers worldwide.”
Brazil Improves Its Grain Transportation System, Bottlenecks Remain
Brazil is a key U.S. competitor in the global grain market. According to USDA’s August World Agricultural Supply and Demand Estimates, Brazil will likely export more corn and soybeans than the United States, both in marketing year (MY) 2022/23 and current MY 2023/24. Although, historically, the United States has maintained a logistical edge over Brazil, a recent Reuters article highlights how that edge has slipped.
The article describes how new barge transshipment stations on tributaries of the Amazon River have allowed corn exports to shift from the Port of Santos in the south to northern ports. The change has resulted in savings of over $4 per ton of corn. The article also highlights recently completed highway, railroad, and port projects.
However, despite these new logistical assets, Brazil still lacks adequate storage for its grain, which strains the transportation system. Grain production in Mato Grosso, the top grain producing State, is now double the capacity of its storage space.
For the week ending August 24, unshipped balances of wheat, corn, and soybeans for marketing year (MY) 2022/23 totaled 6.87 million metric tons (mmt), down 13% from last week and down 34% from the same time last year.
Net corn export sales for MY 2022/23 were 0.072 mmt, up 416% from last week. Net soybean export sales were -0.051 mmt, down 113% from last week. Net weekly wheat export sales for MY 2023/24, were 0.329 mmt, down 19% from last week.
U.S. Class I railroads originated 13,312 grain carloads during the week ending August 26. This was a 16% decrease from the previous week, 26% fewer than last year, and 27% fewer than the 3-year average.
Average September shuttle secondary railcar bids/offers (per car) were $134 below tariff for the week ending August 31. This was $78 less than last week and $48 lower than this week last year. Average non-shuttle secondary railcar bids/offers per car were $138 above tariff. This was $8 less than last week and $100 lower than this week last year.
For the week ending September 2, barged grain movements totaled 122,300 tons. This was 40% less than the previous week and 49% less than the same period last year.
For the week ending September 2, 74 grain barges moved down river—66 fewer than last week. There were 455 grain barges unloaded in the New Orleans region, 14% more than last week.
For the week ending August 31, 23 oceangoing grain vessels were loaded in the Gulf—5% more than the same period last year. Within the next 10 days (starting September 1), 42 vessels were expected to be loaded—27% more than the same period last year.
As of August 31, the rate for shipping a metric ton (mt) of grain from the U.S. Gulf to Japan was $53.50. This was 3% more than the previous week. The rate from the Pacific Northwest to Japan was $28.50 per mt, 4% more than the previous week.
For the week ending September 4, the U.S. average diesel fuel price increased 1.7 cents from the previous week to $4.492 per gallon, 59.2 cents below the same week last year.
Visit www.ams.usda.gov to view the full report.