Rural Reflections: Can you hear the whistle blowing?
The rumble of trains passing north of our house was a familiar sound when I was growing up. The tracks of the Milwaukee Road were about a quarter of a mile from our farmhouse. The engine and the whistle alerted us to its approach as we enjoyed farm life.
Rail is a primary way to move ag products out of this state and area. The problem with the lack of rail cars has caused rumbling of a different type as farmers and agricultural companies are impacted by delays in moving grains to markets.
Some producers will be meeting this week with those of the Surface Transportation Board, trying to explain what the impact is to their operations.
With prices for grain heading south, the availability of increased storage may be important for some producers. With the lack of rail cars, anyone who has the ability to store grain may need to do that if efforts don’t release the logjam. Putting up new grain bins may provide some flexibility in operations. The trick is in knowing when that cost can be too much.
The expansion of the facility loan program that is part of the new farm bill may be one way that those on the farm hold onto their grain until the railcars are available.
Farm Storage Facility Loan Program security requirements have been eased for loans between $50,000 and $100,000. Previously, all loans in excess of $50,000 required a promissory note and additional security, such as a lien on real estate. Now loans up to $100,000 can be secured by only a promissory note.
While some may build more storage, the underlying problems need to be addressed. Like many roads across the area, the rail system was not built for much of the traffic that the system handles each day. The bigger issue is the transportation of grains out of this area. Many elevators have facilities that can fill 110-railcars. Because of the aggressive nature of the oil boom in North Dakota, oil now comprises a greater a portion of available rail car space, leaving commodities sitting on the track.
There is some movement to fix the delays in moving rail cars. There have been 125 locomotives sent from the south, but infrastructure is a problem. In many spots there is no way for the 110-car trains to pass each other.
South Dakota Farmer’s Union president Doug Sombke of Conde said the rail problems have pushed the basis up for crops. At Aberdeen this last week there was an 80-cent basis on corn, $1.25 basis on soybeans. Doug said he could see the basis at $1.50 for corn by harvest time. That’s when storage will be a big key. If you can’t move it, you can’t sell it, and farmers will need to store it.
Doug said he’s been farming 35 years, and this year he said he’s actually scared of what will happen in the future. “Maybe earlier I was just too young and dumb. When I see prices go down and inputs go up with the rise in basis, that takes money out of the pockets of farmers. And they still have to pay their bills.”
Some farmers are trying to respond by marketing grains for this next year, but that’s also tough to do, as they don’t know what’s in the game.
“Basis is the thing that scares me,” Doug told me. “I’ve never seen it this volatile at this time of the year. We have to address this problem. And it’s the same for the elevators and cooperatives. They will have to make adjustments to pay their bills, too. If the grain is not flowing, then neither is the cash.”
Rail lines are integral for moving grains, but it seems that the need by the ag industry has been overshadowed by the demand for oil and gas.
Doug said that oil and gas are first on the list for the rail cars. Then it’s ethanol and distillers grains. Then it comes down to corn and soybeans. Other areas may not see as wide a spread of basis, but it’s sure to offer an alert to farmers as they head to the fields this spring.
Can you hear the whistle blowing?