Truth, Inspiration, Hope.

US Rail Carriers Are Cutting Fertilizer, Grain, Coal Shipments

Neil lives in Canada and writes about society and politics.
Published: April 16, 2022
American rail carriers are cutting critical fertilizer, grain, and coal shipments as they struggle with staffing and logistics problems amid union wars.
A BNSF freight train hauling oil tankers on June 22, 2018, in Whitefish, Montana. CF Industries, one of the world’s largest fertilizer producers, told the public it cannot ship via Union Pacific rail lines for the foreseeable future as the carrier struggles with staffing issues. (Image: George Rose/Getty Images)

A major U.S. railway freight carrier has ceased business with one of the largest fertilizer producers in the country during the peak of planting season. 

In an April 14 press release, CF Industries informed the public that customers it services via Union Pacific rail lines should not only expect significant shipping delays for existing orders, but that CF will “be unable to accept new rail sales involving Union Pacific for the foreseeable future.”

CF explained that it utilizes Union Pacific for deliveries from its Iowa and Louisiana facilities headed to locales such as Texas, California, Kansas, and Nebraska.

The company also stated that products most affected would be urea and urea ammonium nitrate fertilizer (UAN), in addition to diesel exhaust fluid (DEF), which diesel engine vehicles such as semi-trucks require for their mandated emissions control systems.

RELATED READING:

According to the company, it is the largest supplier of UAN and DEF in North America, with its Louisiana plant being the “largest single production facility” for UAN and DEF on the continent. 

By market capitalization, CF Industries is an enormous $22.83 billion, the fourth largest in the world and second largest in the United States at the time of writing.

The company has soared in value as inflation and supply chain pressures have compounded. CF’s stock closed August of 2021 at $45.42 and has since more than doubled to $108.41 as of April 14 market close for the Easter break.

Similarly, America’s largest fertilizer producer, The Mosaic Company, has a $27.52 billion market cap and has more than doubled since December of 2021’s open at $35.19 to $76.05 at present.

Canada’s Nutrien, the largest in the world with a $62.13 billion market cap, closed July of 2021 at $59.40 and finished the second week of April at $112.00. 

For context, the company all retail investors have their eye on amid Tesla boss Elon Musk’s recent takeover attempt, Twitter, has a market cap of $36.09 billion, based on a price inflated after news of the billionaire acquiring a more than 9 percent stake in the Big Tech icon made waves.

The release states that CF was advised without advance notice on April 8 by Union Pacific to reduce its shipments by approximately 20 percent, effective immediately, and that “noncompliance will result in the embargo of its facilities by the railroad.”

On April 11, Union Pacific issued a public-facing Status of the Railroad missive where it explained, “Over the last few weeks, our network has experienced some setbacks – including numerous service interruptions, crew shortages in select areas and delays to our network – as we have seen our operating inventory continue to climb over the past 60 days.”

While CF states that it “understands that it is one of only 30 companies to face these restrictions,” the rail line’s public notice was more ambiguous, “We have already identified and notified those customers who can help us manage the current congestion by reducing their rail car inventories.”

“If we do not see reductions to the operating inventory through their voluntary efforts, then we will begin metering traffic after April 18th,” Union Pacific added.

The story has received little media attention, largely limited to a 270-word Associated Press rewrite of CF’s press release.

Industry publication Freight Waves also stated that the disruption wasn’t limited to one railway company. It reported that BNSF Railway Company informed regulatory body Surface Transportation Board (STB) in a March 30 reply to an inquiry by the agency that it had slashed service levels by 2 percent.

The STB’s inquiry was spurned by a March 24 call for help to the federal agency from the National Grain and Feed Association (NGFA) after farmers became unable to either purchase or supply grain because rail shipping was simply unavailable, specifically affecting the ability of the livestock industry to keep animals fed and alive.

“One NGFA member has spent an additional $3 million on secondary freight in the last month to try and keep animals fed,” the NGFA stated. “This is additional freight they should not have to purchase, and this reduces available freight to others and makes the secondary freight market even more expensive.”

The Association added, “Another example is an NGFA member that had to stop selling feed while it waited on a train that sat loaded at origin for 7 days due to a lack of available rail crews.”

The STB has summoned rail executives for an April 26 and 27 hearing to address the issues.

And it’s not just grain and fertilizer being affected. A trade association of ethanol producers recently complained that manifest and unit transportation delays of between 2 and 12 days have been suffered, while West Virginia coal producers have complained there aren’t enough rail cars to ship thermal or metallurgical coal at all.

Union wars

BNSF, like Union Pacific, emphasized a major attributing cause to its service disruptions as being staffing shortages. 

The firm’s reply to the STB stated that at the beginning of 2021, BNSF had almost 3,000 train, yard, and engine staff on furlough, but has since reduced that number to 450.

November of 2021 reporting by Freight Waves revealed that both BNSF and Union Pacific were in a fight with major labor unions over the implementation of a September Joe Biden Executive Order mandating COVID-19 vaccination for all employees.

RELATED ARTICLES:

By December, both companies had suspended the edicts after the Biden administration ran into resistance at the federal court level.

The Federal Railroad Administration lists Union Pacific and BNSF as two of the top seven Class 1 freight railroads in the nation.

However, the greater cause elucidated by the vaccine mandate wars may simply be ongoing and overarching disputes between the unions and their employers.

In January, a District Court judge prevented Union Pacific employees from striking, picketing, or conducting a “sickout” over complaints arising from the company’s COVID measures.

In late March, BNSF’s unions sought to pursue arbitration after opposing a recently implemented “Hi Viz” (high visibility) attendance policy that deploys a progressive discipline schema in response to various tiers of absences, such as weekends, holidays, or missed calls. 

The massive California maritime supply chain crisis in 2021 was likewise attributable to a dispute between the Pacific Maritime Association and the International Longshoreman and Warehouse Union, coiled around a contract negotiation set to come to a head in mid-2022.

In Canada, a March freight disruption that hit Canadian Pacific Railway was also rooted in a dispute with Teamsters Canada Rail Conference, whose members walked off the job amid an impasse over contract negotiations.