Grain: on the move again

Railway Age, May, 1995 by Gus Welty

In 1988, railroad carloadings of grain added up to 1,588,171. Since then, grain traffic has been on a roller coaster, with sharp dips. Last year's loadings, 1,339,458 cars, were the lowest since 1986.

No other major commodity is as susceptible to the whims of weather, market demand, and government policy. As one railroad's grain marketing manager put it, "If I could predict production, demand, and policy, I wouldn't be working here, I'd be off somewhere else making real money.

But at this point, rail grain traffic for 1995 does look pretty good. Grain carloadings for the first quarter were up by 15.7%

Total non-intermodal loadings for the period were up by 6.3%, with rain far and away the leader. The next largest commodity increase was metals and products, up by less than 8%. Coal, always the commodity leader in carloadings, showed just a 5.6% gain in 1995's first quarter. And intermodal posted just a 5.2% increase, on an 11% jump in container loadings and a small decrease in trailer loadings.

* Where the action is. Some of the numbers recorded by major grain haulers in the weeks leading up to April 1 were mind stretching. In terms of actual loadings, Burlington Northern led the way with just over 40,000 cars for the five-week period, up by more than 28%. Union Pacific, second in car count at 29,600, showed a gain of more than 14%.

On a percentage basis, Santa Fe checked in with a whopping 45% increase. Elsewhere in the West, Illinois Central had a 22% gain, and Chicago & North Western was up by almost 11%. Only Kansas City Southern showed a decline in grain movements, down by 9.5%, but KCS is the smallest of these six western carriers in terms of grain handled.

Southern Pacific has not been a significant originator of grain traffic, but that could be changing, under terms of the agreements worked out under which SP will not be opposing the proposed Burlington Northern-Santa Fe consolidation (p. 18).

What accounts for the good showing thus far in '95? And what are the factors leading railroad grain marketing people to be optimistic regarding the rest of the year?

The weather, with a few geographic exceptions, has been cooperating. This year shapes up as a good one for crop production.

Domestic demand is expected to be stable. Export demand is always an iffy thing, but some markets have tended to be relatively stable. and the China market has been growing rapidly. Not many transporters even think much about the Russian market today, because of the instability there. even though it had been one of the largest years ago.

* A bigger, busier fleet. Government policy is also iffy. Set-aside programs are causing some concern. So are on-again/off-again policies related to trade with the People's Republic of China.

As for the usual question raised about rail movement of grain - car supply - if demand climbs to unexpected levels, it could be a problem, but none of the main grain haulers today are expecting anything worse than tight supply, at periods of highest demand. The fleet of grain cars has grown, thanks mostly to heavy acquisition programs by Burlington Northern and Union Pacific, and car utilization has also improved.

But at this point, it doesn't appear that the Interstate Commerce Commission - if, in fact, it continues in business - will need to conduct another one of its many inquiries into the adequacy of the grain car fleet.

Railcar manufacturers, certainly, have the designs to fill the needs: Trinity Industries, Thrall Car, Johnstown America, ACF Industries, and the newly acquired Trenton shops of Greenbrier. Trenton has never exported a car to the U.S., but it's building 1,000 high-cube grain cars for the Canadian market this year, and Greenbrier is looking for U.S. opportunities to take advantage of the Nova Scotia carbuilder's capacity.

Grain car capacity is important, of course, and the cars coming out today are 286,000-pound weight-on-rail. The largest cube may be Thrall's 6,250-cubic-foot-capacity car, ordered by Archer-Daniels-Midland last year. But both Trinity and Johnstown America have a dozen or so cars out for revenue test now. These are aluminum cars with lightweight advantages as well as cube advantages. Cargill has ordered 500 of these aluminum cars, with the order split between Trinity and Johnstown America almost evenly.

In terms of car numbers, the total U.S. railroad covered hopper fleet (all types) peaked in 1988 and has dropped since then, to 160,000-plus cars coming into 1995. At the same time, the private fleet has been increasing almost without a break for the last decade, going from 144,700 cars in 1986 to 177,153 cars entering 1995.

For high-cube cars (4,000-cubic-foot-capacity and higher), the numbers are 131,231 railroad owned, 160,842 private. And these are numbers for all covered hoppers, not j u st grain cars.

The China factor. As for transportation demand, export is where the action will likely be. The Wall Street Journal headlined a story "Farm Exports Brighten U.S. Trade Picture." Business Week had a news piece headed "China Gives the Farm Belt a Hand."