Industry News

BNSF Holds Second Shuttle Auction—Bids Reach $1.2 Million

In its May 29 auction for grain shuttle trains, BNSF Railway sold 28 shuttles for $30.7 million. The winning bids ranged from $859,000 to $1.2 million. These winning bids are higher than the previous week’s auction, according to the U.S. Department of Agriculture’s May 23 Grain Transportation Report. Assuming an average of 2.5 turns per month, a $1.2 million yearlong shuttle contract represents about $364 per car.

Ahead of the new marketing year, BNSF already has held three auctions for 110-car grain shuttle trains (on May 22, May 29, and June 5) As the combined total for all three events, 89 shuttle trains will be auctioned for yearlong bookings. In the upcoming fall harvest season, BNSF plans to run a total of 140 grain shuttles—down from an average of about 155 grain shuttle trains for the past three harvest seasons.

Union Pacific Railroad (UP)—the other Class I railroad with a shuttle-train program—also held a late-May auction for shuttle trains in the new marketing year. UP offered a total of 49 shuttle trains, and it sold 39 of those offers—all for $0. These results suggest, in contrast to BNSF’s auction, that shippers perceive an adequate supply of UP shuttle trains for the upcoming harvest.

Potential Strike Lingers

The potential strike by the Teamsters Canada Rail Conference (TCRC) could significantly disrupt U.S.-Canada cross-border trade. The contracts for TCRC locomotive engineers, conductors, and yard workers at Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) expired on December 31, 2023. According to Canadian labor law, these agreements extend until new contracts are agreed upon by both sides. After a 60-day conciliation period that began on May 1, the parties entered a mandatory 21-day "cooling off" period, which includes federal mediation.

The primary disagreement revolves around adequate fatigue management and worker rest provisions. Recently, at the request of Canada’s Labor Minister, the Canada Industrial Relations Board (CIRB)—an independent tribunal overseeing certain labor matters—is evaluating what rail services, if any, must continue during a strike. Under Canada’s Labor Code, the CIRB can mandate certain rail services to prevent immediate and serious danger to public safety or health. A work stoppage requires at least 72 hours' notice and cannot

proceed until the CIRB has weighed in. Comments were initially due by May 21, with replies extended to June 14. CPKC does not expect the CIRB to make a decision until mid-July.

Uncertainty surrounds the potential strike following CIRB intervention. At a recent investor event, CN executives warned that a CIRB order mandating the movement of certain commodities during a work stoppage would create "operational chaos" since the network is not designed to isolate single commodities for shipment. Despite ongoing negotiations and the apparent stalemate, the delay in any potential strike due to the CIRB process provides additional time for resolving the dispute.

Canada, a major U.S. trade partner, relies heavily on rail transport, so a Canadian rail strike could significantly impact U.S. agricultural trade, producers, and consumers—particularly for grains and grain products.

The strike by some union workers at CN and CPKC has been delayed again amid rising concerns over fuel and food supplies. If it proceeds, it will not begin until after June 17 at the earliest. The CIRB, investigating federal government concerns, has postponed reply comments to June 14 from May 31, with initial comments due by May 21. If the CIRB rules on June 15, the TCRC would need to give CN and CPKC three days' notice before striking. However, a strike might not occur for another 60 days. If the CIRB issues any orders, the parties likely wouldn't be in a position to strike or lockout for two months, according to CPKC's statement on May 16. TCRC members had authorized a strike to start as early as May 22.

The railroads and union met with the CIRB to discuss comments filed by groups potentially affected by a strike. Canadian Minister of Labour Seamus O'Regan requested the CIRB to consider requiring some rail services to continue during a strike to mitigate health and safety issues related to propane supply. Several concerns have been raised, particularly about the impact on commercial and economic interests. Specific comments highlighted the importance of delivering propane and diesel to critical areas, including remote communities in northern British Columbia. Transportation is also vital for Manitoba, which relies on rail to deliver fuel due to a Winnipeg products pipeline.

Other comments focused on domestic and global food security, noting that some sectors depend on rail transportation for items such as fertilizer, potash, and canola products. Additionally, the immediate impact on the supply of water treatment materials for several municipalities was emphasized. Some commentators called for advance warning of a strike, asking the CIRB to provide notice of when a decision would be made or to extend the notice period required before a strike or lockout.

Export Sales

For the week ending May 16, unshipped balances of wheat, corn, and soybeans for the marketing year (MY) 2023-24 totaled 17.15 million metric tons (mmt). This represents a 4% decrease from the previous week but a 28% increase compared to the same period last year. Net corn export sales for MY 2023-24 reached 0.91 mmt, marking a 23% rise from the previous week. Net soybean export sales were 0.28 mmt, up 5% from the previous week. However, net weekly wheat export sales were 0.018 mmt, showing a significant decline of 77% from the prior week.

Rail

During the week ending May 18, U.S. Class I railroads originated 23,136 grain carloads. This figure is a 16% increase from the previous week, 8% higher than the same week last year, but 6% below the three-year average. For the week ending May 23, average June shuttle secondary railcar bids/offers per car were at $0 above tariff, which is $44 less than last week but $238 more than the same period last year. Average non-shuttle secondary railcar bids/offers per car stood at $79 above tariff, $96 less than last week but $129 more than the same time last year.

Barge

For the week ending May 25, barged grain movements totaled 547,850 tons, a 23% decrease from the previous week and 32% lower than the same period last year. In the same week, 389 grain barges moved downriver, which is 69 fewer than the previous week. However, 479 grain barges were unloaded in the New Orleans region, reflecting a 74% increase from the previous week.

Ocean

For the week ending May 23, 19 oceangoing grain vessels were loaded in the Gulf, a 21% decrease compared to the same period last year. Within the next 10 days starting May 24, 32 vessels are expected to be loaded, 9% fewer than the same period last year. As of May 23, the rate for shipping a metric ton (mt) of grain from the U.S. Gulf to Japan was $61.50, down 1% from the previous week. The rate from the Pacific Northwest to Japan was $33.00 per mt, unchanged from the prior week.

Fuel

For the week ending May 27, the U.S. average diesel price was $3.758 per gallon, a decrease of 3.1 cents from the previous week and 9.7 cents below the same week last year.

U.S. Agricultural Exports Fiscal Year 2024

Forecast Unchanged at $170.5 Billion; Imports Revised Upwards to $202.5 Billion

U.S. agricultural exports for fiscal year (FY) 2024 are projected at $170.5 billion, unchanged from the February forecast. Higher exports of livestock and dairy, as well as increased ethanol sales, largely offset reductions in grains and feeds, oilseeds, and horticultural products. Overall, livestock, poultry, and dairy exports are forecast $800 million higher, reaching $38.5 billion, led by increases in dairy and beef. Dairy exports are forecast up $300 million to $8 billion due to higher cheese export prospects to Southeast Asia. Beef exports are raised $200 million as global demand remains strong. Ethanol exports are forecast at $4 billion, $400 million higher than the February outlook, due to competitive U.S. prices facilitating a record volume projection.

Grain and feed exports are forecast at $37.6 billion, down $600 million from the previous projection, largely due to lower prices for corn and wheat. Oilseeds and products are forecast at $35.8 billion, down $400 million from the February forecast, primarily due to lower soybean exports as a result of increased competition from Brazil. Horticultural product exports are down $500 million to $39 billion on lower miscellaneous product shipments. Cotton exports remain unchanged at $6 billion.

At $27.7 billion, China is projected to fall below Mexico and Canada as the third largest U.S. agricultural market. The export forecast for China is cut by $1 billion from the previous quarter, largely due to continued strong competition in soybeans and corn. Exports to Mexico are forecast to rise by $300 million to $28.7 billion, while exports to Canada are forecast up $400 million to $28.4 billion, both record highs.

U.S. agricultural imports in FY 2024 are forecast at $202.5 billion, a $1.5 billion increase from the February projection, predominantly driven by higher imports of horticultural products as well as livestock and dairy. Horticultural product imports are forecast up $1.5 billion to $99.6 billion, led by increases in fresh fruits and vegetables. Livestock, poultry, and dairy imports are up $600 million to $28.7 billion, buoyed by higher dairy and livestock projections. These forecasts are based on policies in effect at the time of the May 10, 2024, World Agricultural Supply and Demand Estimates (WASDE) release and the U.S. production forecasts therein.

Source: U.S. Department of Agriculture, Agricultural Marketing Service. Grain Transportation Report. May 23, 2024.