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With Bakken crude oil shipments putting carload pressures on BNSF the past few years, grain producers were left griping about shipping delays and premium per car prices.
“We had a lot of grain on the ground about 18 months ago,” Tom Tunnell, the president and CEO of the Kansas Grain and Feed Association, noted in Midwest Producer. “The cost to get rail cars was extremely high, way above normal. The premiums were in the thousands of dollars per car range, but all that’s gone away. We’re back down into a more normal range.”
A Winter of Discontent
Back in the winter of 2014, grain shipments were running weeks late with the shipping time from the Midwest grain belt to the Pacific Northwest running a whopping 22 days. The delays added substantial costs to grain producers, as they paid ocean-going freight ships between $30,000-$50,000 per day to sit in port waiting for the delayed grain.
So far for 2015 BNSF grain shipments are up a solid 10.7% year-to-date over the same period in 2014. Shipments increased from 219,747 carloads in 2014 to 243,268 carloads in 2015.
“We have substantially better Ag shuttle turns per month as compared to last year,” a BNSF official said in May. “Last year we were below 2 turns per month, and now we are over 2.5 turns per month.”
The increase comes despite crude oil shipments only having minor 1.41% decrease in carloads. Despite the collapse in worldwide oil prices, oil train shipping still moved 245,356 tank cars of petroleum, as compared to 248,868 tank cars for the same period in 2014.
Adding Capacity
BNSF is working hard to eliminate grain shipping bottlenecks, including adding 900 new cover-hopper grain cars as part of the 7,800 rail cars it is purchasing in 2015. BNSF’s $6 billion in capital improvements in 2015 is a record for any railroad, and also includes 300 new locomotives.
The most critical time for grain shipments is August through October, and hopefully BNSF will be ready to meet the demand with increased capacity and fewer delays.
© 2015 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.