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As Some Grain Has Shifted to Rail From River, Railroad Strike Looms, Diesel Fuel Supply a Concern

Esther Fung reported in today’s Wall Street Journal that, “One of the country’s largest railroad unions said Monday that its members voted to reject a new wage deal brokered by the White House, splitting with another large union and moving closer to a labor strike as soon as early December.

“Union leaders said Monday they believed that a compromise could still be reached to avoid a work stoppage that could disrupt the flow of goods around the U.S. Four out of 12 unions have now rejected the proposed contract, while the other eight have ratified the deal. Both sides have agreed to a cooling-off period until early December.

“Members of the SMART Transportation Division, which represents about 36,000 rail workers, narrowly rejected the contract proposal, while the Brotherhood of Locomotive Engineers and Trainmen, which has 24,000 members, narrowly ratified it. The groups were the final two unions reporting the ratification of votes in the protracted labor dispute.”

The Wall Street Journal (Page B3 – November 22, 2022).

Fung explained that, “Leaders of SMART-TD said they would head back to the negotiating table with the railroads for a revised deal with a Dec. 8 deadline. Without another agreement, workers will be allowed to strike on Dec. 9.”

The Journal article added that, “Freight railroads move about 40% of U.S. long-distance cargo and deliver freight such as feedstock, coal, lumber, construction material and automotive parts. Even a short strike could lead to diversions and cascade to delays and congestion, pushing back recovery in some supply chains.

“Congress, given its power under the Railway Labor Act, might intervene to impose a settlement on the two sides to prevent or shorten any work stoppage. The last national rail strike, in 1991, lasted about 24 hours before Congress passed and President George H.W. Bush signed legislation ordering the workers back to their jobs.”

Associated Press writer Josh Funk reported in today’s Los Angeles Times that, “Even the threat of a work stoppage could tangle the nation’s supply chains, because railroads could freeze shipments of chemicals and other goods that could create hazards if their delivery is stalled.”

Los Angeles Times (Page A9 – November 22, 2022).

It appears increasingly likely that Congress will have to step in to settle the dispute. Lawmakers have the power to impose contract terms if both sides can’t reach an agreement. Hundreds of business groups have urged Congress to be ready to intervene if needed,” Funk said.

Meanwhile, Washington Post writers Lauren Kaori Gurley, Jacob Bogage and Toluse Olorunnipa reported yesterday that, “The U.S. economy could lose $2 billion a day if railroad workers strike, according to the Association of American Railroads.”

And Joey Garrison reported in today’s USA Today that, “A rail strike or lockout could paralyze the economy by halting the shipment of many foods, particularly grain, and critical goods before next month’s holiday season.”

USA Today (Page B1 – November 22, 2022).

Garrison noted that, “President Joe Biden has not intervened in the dispute since September when his administration helped reach a tentative agreement to resolve a three-year stalemate between the rail unions and companies.”

More specifically with respect to agriculture, Bloomberg writers Michael Hirtzer and Elizabeth Elkin reported late last week that,

American farmers who already were losing access to export markets due to record-low Mississippi River water levels now face a renewed threat of a US rail strike that would further curb shipments of crops and fertilizer.

“The Mississippi River and its tributaries typically handle a trillion pounds of shipments, some of which have shifted to rail as drought prevented barges from floating. However, some rail cargoes were at risk of being halted ahead of a potential strike of 125,000 union members in early December.”

Hirtzer and Elkin pointed out that, “Grain shipments on US railroads in the latest week were up 4% from last year and 6% above the three-year average, according to a US Department of Agriculture report Thursday.”

The Bloomberg article added that, “Meanwhile, leading industry group the Fertilizer Institute said some of its members received notice from Union Pacific Railroad that it would restrict shipments at some facilities, according to a letter seen by Bloomberg. Kristen South, Union Pacific’s director of corporate communications, said in an email that due to congestion, the railroad is asking some customers to voluntarily reduce car inventory and has issued some temporary embargos.”

Elsewhere, DTN Ag Policy Editor Chris Clayton reported last week that, “The pinch point for navigation on the Mississippi River has moved upstream from Memphis, Tennessee, to St. Louis as the Army Corps of Engineers starts to reduce flows from the upstream Missouri River dams this weekend.

“Lower water flows coming from the Missouri River will lead to longer dredging operations on the Mississippi River around St. Louis to keep a navigation channel open.

“Barge movements remain slow, but the New Orleans area grain terminals last week reported a 35% increase in barges they were able to unload compared to a week earlier, according to a weekly USDA report.”

The DTN article indicated that, “Brad Rippey, a meteorologist at the USDA Office of Chief Economist, said Friday on a webinar that spot barge rates have dropped from $110 a metric ton in October down to closer to $40 a metric ton now. The rate had run at $20 a ton for much of the year.

“For farmers, Rippey said this has translated to some producers on the lower Mississippi River receiving $2 less per bushel for both corn and soybeans.”

And in other transportation related news, Bloomberg writers Chunzi Xu, Jack Wittels, and Elizabeth Low reported yesterday that, “No fuel is more essential to the global economy than diesel. It powers trucks, buses, ships and trains. It drives machinery for construction, manufacturing and farming. It’s burned for heating homes. And with the high price of natural gas, in some places it’s also being used to generate power.

“Within the next few months, almost every region on the planet will face the danger of a diesel shortage at a time when supply crunches in nearly all the world’s energy markets have worsened inflation and stifled growth.

“The toll could be enormous, feeding through into everything from the price of a Thanksgiving turkey to consumer bills for heating homes this winter. In the US alone, the surging diesel cost will mean a $100 billion hit to the economy, according to Mark Finley, an energy fellow at Rice University’s Baker Institute of Public Policy.”

Keith Good Photo

Keith Good is the Farm Policy News editor for the farmdoc project. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.

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