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Grain Shippers Seek Fluid Network In And Out Of Pacific Northwest

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As the U.S. harvest season kicks into high gear over the next month, grain shippers will be watching whether freight railroads' train speeds will be able to keep up with a potentially sudden ramp-up in demand, according to shippers at the recent annual National Grain Car Council meeting hosted by the Surface Transportation Board.

Low grain demand over the summer has masked velocity issues, grain shippers said. However, the rail network could potentially find itself stressed over the next 30 to 45 days not just because there will be more shuttle trains carrying grain, but also because many of those trains are heading to the Pacific Northwest.

More grain traffic is poised to head to that region than to the Gulf Coast for export because high freight rates are making it more favorable to ship out of the Pacific Northwest.

"Coordination is going to need to be on point to move smoothly through the first two to three weeks of harvest," said Ross Edwards, vice president of transportation for Gavilon, a commodity management firm.

There are also concerns about whether there will be enough train crew employees to handle the potential ramp-up in demand and whether freight rail resources will be consumed by the intermodal sector, which is grappling with supply chain congestion.

But the railroads are aware of these concerns, said those on the grain shipper panel.

Although the pricing spread between the Pacific Northwest and the Gulf Coast favors the former, grain shippers are also watching the velocity of grain trains destined for East Coast ports, as well as the velocity and service at the first mile and last mile, according to Ross Trentadue of Zen-Noh Grain Corp. Trentadue is a merchandiser for the company.

In addition to shippers' reports and updates about the U.S. railcar market and the broader economy, the meeting included updates from all the Class I railroads, as well as a number of Class II and III railroads.

BNSF representative Jim Titsworth said his railroad is well prepared to handle harvest and is adequately staffed for forecast volumes.

BNSF (NYSE: BRK.B) has been getting railcars out of storage and repairing them at car shops to prepare for the ramp-up in demand for railcars, said Titsworth, a general director for agricultural marketing for BNSF. BNSF has also pre-positioned locomotives and cars and employees, while technological applications help reduce delays in the inspection process, he said.

Union Pacific representative Jacob Thomas said even though his railroad expects supply chain issues for intermodal to persist through the end of the year, that congestion is related more to intermodal ramps and isn't expected to impact grain movements.

UP (NYSE: UNP) has added resources to its mechanical forces as it takes locomotives out of storage, as it is also seeking to restore network fluidity.

UP anticipates strong demand going into the Pacific Northwest, and as part of the planning process, UP has put the crew into place to handle that demand, in addition to conducting pre-harvest meetings with customers to gauge where to place resources, said Thomas, who serves as UP's senior director of economic development.

Twin Cities & Western Railroad representative Dave Long says communication with the Class I railroads is key so that his railroad can have a crew ready when a grain train arrives at an interchange. Long is vice president of marketing and sales for the company.

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