Market Matters Blog

It seems like everyone's got their back-of-the-envelope calculation of what this year's rail service delays have cost farmers and businesses throughout the Northern Plains.

The University of Minnesota put out a study arguing the railway bottlenecks cost the state's farmers almost $100 million between March and May, and it could cost $124 million more in lost revenue.

Now, bipartisan pair of senators is asking USDA to conduct a more thorough economic analysis of the challenges facing agricultural shippers. Sen. John Thune, R.-S.D., and Amy Klobuchar, D.-Minnesota, said in a letter to Secretary Vilsack that regional studies only tell part of the story, and a study that's broader in scope is needed.

"Therefore, we respectfully request that the USDA conduct a more detailed economic analysis of the ongoing transportation challenges facing producers and agricultural end users in our region, including food processors, livestock producers, and ethanol refiners," the senators wrote. "When completing this analysis, we request that the USDA also consider, as appropriate, commodity prices, food prices, and changes in agricultural exports. We hope that the information provided by this analysis will present a clearer picture of the challenges facing the agriculture industry as we work to help resolve them."

It sparked an interesting dialogue in our newsroom this morning.

DTN Analyst Todd Hultman's first impression: "I think what they are saying is: Since our farmers are getting hurt by the lack of rail service, let's take advantage of this to give money to some Midwest university to run a study so it looks like we are doing something when, of course, we are not."

DTN Cash Grains analyst Mary Kennedy: "One of the things that has never been 100% quantified is the loss of money to all businesses affected by the rail backlog. I think it would be good to have in order to 'drive the point home' if any legislation is going to change giving the STB more power. And even then that may not fly, but it's worth a shot in my opinion."

Sen. Thune and the chairman of the Senate Commerce Committee, Sen. Jay Rockefeller, D.-W.V., passed a bill out of their committee last month that would give the Surface Transportation Board, the railroad's governing body, a little more authority while streamlining some of its functions and allowing the board to only respond to complaints, it could initiate investigations.

But DTN's Ag Policy Editor doesn't give the bill much of a chance. "Don't hang your hat on any legislation coming out of Congress on this. The House is incredibly anti-regulatory and that will be the case even more so after the election. The Senate will become more anti-regulatory after the election as well. Moreover, you are dealing with these low prices affecting a wide swath of land that only affects a handful of congressional districts."

So here's my question: what's the end game?

Yes, the Senators want to pass a bill. Numbers might help them rally others to their cause, but like Chris said, it's an uphill battle.

I think farmers would like to be able to point to a study showing that they weren't crying wolf and making up wild tales of their misfortunes. The problem is a very real one for farmers, and I think most people within the agriculture industry know that farmers pay the cost of the transportation through lower cash prices.

But when I talk to friends who know nothing about agriculture, they still know about the oil boom in the Bakken. Fiery train explosions make headlines, and they can't help but look at a picture or two. It might take a very large number in a headline (thinking billions) to draw their attention to the economic damage farmers, grain shippers and exporters faced this past year. And even then, their attention will be fleeting.

The biggest outcome of a national study may be that it helps farmers and elevators put their losses into perspective. I'm sure everyone knows their neighbors are feeling the same pinch, but understanding how their losses fit into the bigger picture may reinforce the fact that they are far from alone.

(AG/CZ)