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Rail snarl-ups drive ag groups to take to the road

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The snarl-ups in North America's rail network blamed on the cold winter have prompted agriculture groups to turn to road for crop transport, fuelling a doubling in trucking charges.

Legumex Walker, the Canada-based oilseeds processing group, said it had overcome both "challenges" in its outbound transport and threats to its inward supplies of seed for crushing by turning to trucks.

The first seed deliveries made under a programme for truck deliveries "have started arriving" at the group's 84%-owned Pacific Coast Canola processing plant in Warden in the US state of Washington, Joel Horn, the Legumex Walker chief executive, said.

The use of trucks is providing "a near-term solution to the limited seed availability due to the North American rail congestion", evident in large backlogs of grain for transport in both Canada and northern US.

Mr Horn added that the logistical rethink is helping the plant exploit crush margins which are "at historic highs" at a time when the site is "capable of running at full capacity", which is pegged at 350,000 tonnes of canola seed a year.

'Extremely tight'

The comments followed the announcement by Alliance Grain Traders that it had also seen its volumes threatened by the rail squeeze, which reflects the need to shorten train lengths and run at lower speeds, with air brakes less efficient at low temperatures.

Some observers have also criticised rail companies for focusing what capacity they have on oil, rather than grains, in both North Dakota and Canada.

Operations in the last quarter of 2013 at the group's pulse processing plant in Williston, North Dakota were "hampered by low utilisation due largely to rail and transportation problems associated with competition from the Bakken oilfield rail demand", Alliance Grain Traders said.

"The situation made rail car supply extremely tight reducing shipment volumes and margins in the US."

'Providing optimism'

However, in Canada, the group had relied on alternatives to rail, "such as more over-the-road trucking and bulk pulses exports", to avoid the rail hiccups limiting operations at some of its plants.

These alternatives are "providing optimism in [the group's] ability to manage its delivery chain and capitalise on market opportunities for pulses and staple foods to key consumption and import markets," Alliance Grain Traders said.

The greater use of trucks by groups such as crop processors has lifted trucking charges to some $4.50 per mile hailed, nearly twice the usual rate at this time of year, according to BulkLoads.com.

Alliance Grain Traders, which forecast "strong demand" for its North American operations in 2014-15, added that it was "optimistic" over measures introduced by Canada's government to force greater rail transport of grains.

The government earlier this month issued an emergency directive giving railways four weeks to double their grain shipments to a combined target of 1m tonnes per week, or face fines of Can$100,000 per day.

By Agrimoney.com

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