Railroad strike could have created 'tremendous' backlog during South Dakota harvest season, ag groups say
Representatives with South Dakota's major agriculture organizations are worried the state's largest industry could be indirectly held hostage should the pending freight rail strike come to pass this Friday.
This comes as the state prepares for the upcoming harvest season. Most farmers are expected to begin reaping their corn crop between mid- and late September, while soybean growers will likely pick up their part of the harvest in October.
As of early Thursday morning, however, President Joe Biden announced a tentative railway labor agreement had been reached, according to the Associated Press. That agreement still must go forward to a vote by union members, after a cooling off period of several weeks, the AP reported.
South Dakota Soybean Processors CEO Tom Kersting told Farm Forum on Wednesday even a minor disruption would be detrimental to farmers and the industry as a whole.
"I don't think people realize how important this is and the long-reaching impacts on everyone. Rail drives this country, and it's a really serious issue," Kersting said. "Even a very short strike period – even just for the weekend and into early next week – is going to be very bad."
Kersting, who also sits on the Brookings Area Chamber Board of Directors, said the strike would create a major backlog this fall, because grain elevators would struggle to find or make space for the millions of tons of harvested crops.
"Absolutely, this is not a good thing. There will be an impact on corn growers," DaNita Murray, executive director of South Dakota Corn Growers Association, told Farm Forum Wednesday.
She said SD Corn is among the state ag groups monitoring the situation.
Jerry Schmitz, executive director of the South Dakota Soybean Association, expressed relief that a pending agreement has been reached. However, he added the threat of a strike still has major implications for the industry, which continues to struggle with supply chain issues.
"Rail, I view it as a circulatory system. It brings in fresh supplies and it sends our products out; it's kind of our lifeblood. Things still haven't settled, so when something like this happens, where we question if the supply chain is going to be there, that is just huge," Schmitz said.
Compounding issues for farmers
Chet Edinger, a farmer from Mitchell and former president of South Dakota Wheat, said any such railroad strike would result in a series of compounding costs on crop farmers.
First, there's the storage issue: Farmers typically deliver their harvested crops to nearby grain elevators to store it for sale at a later date. This incurs a handling fee for moving the shipment into the grain bins.
Without a way to export the supply, however, the elevator managers will be forced to pile the crop outside their grain bins, which comes with an additional fee on top of the risk of exposing the supply to the elements.
"When you live in the middle of the continent like you do in South Dakota, more of our product is railed out. We do have some production with crushers and feeders and whatnot," Edinger said. "[But] the rail affects everything in the state – not only the supply coming in, but the supply going out."
Edinger said there are alternative ways to freight products, but they are less than ideal.
Truck shipping, he said, becomes an expensive mode of transportation for destinations more than 500 miles away. Barge shipping, on the other hand, is cheaper than truck – the closest regional port is in Sioux City, Iowa – but this shipping method can't handle as much bulk commodities as railroad shipping, he said.
On the other hand, rail is "a least cost option," Schmitz said, for moving crop in bulk and other farm essentials, like fertilizers, fuels and equipment.
"It's like a three-legged stool: You knock one of the legs out, the stool falls over," Edinger said. "[When] a rail basically runs the way our system is set up, it's not great to come to a screeching halt."
A concerned Edinger said an extended strike could also reduce imports of fertilizers this fall and consequently raise their price. That part of the chain already saw a supply crunch during the start of the Russo-Ukraine war, NPR reported in April.
In the meantime, farmers and ag groups alike, along with the rest of the nation, will nervously watch to see if the agreement holds.
"Harvest is coming up," Edinger said. "When the combines start rolling, everything gets full and nothing moves out, it becomes very hard, logistically, to handle all that."