RAILS STRAIN TO SERVICE MIDWEST GRAIN HARVEST

RAILS STRAIN TO SERVICE MIDWEST GRAIN HARVEST

The U.S. Midwest's rail network, normally no stranger to the crunch of the fall harvest, is beginning to strain this year under the weight of strong demand, tight car supply and skyrocketing prices.

Conditions are so tense in Iowa that farm trade associations will hold a Grain Transportation Summit on Thursday in Des Moines to vent their frustrations with some rail carriers, while seeking ways to ease the problem before soybean harvests begin in a few days."Grain is hot. Export demand is huge and will continue to be that way in the foreseeable future," said Jim Higgins, an analyst for Donaldson, Lufkin & Jenrette in New York.

As an industry, railroads boosted grain carloadings 23 percent in August

from a year ago. Burlington Northern Railroad led the pack with a 28 percent increase, followed by Union Pacific Railroad at 19 percent.

That higher traffic volume is proving to be little comfort to Iowa shippers.

"We are sitting with most of our facilities full," said Dawn Carlson of the Iowa Institute for Cooperatives. "People are getting concerned. Every day that goes by is tacking on more and more charges and the farmer will get less and less for the grain delivered. If we don't get the grain moving, we'll have a lot of grain sitting on the ground."

Arthur Breenken, manager for the Farmers Co-Op Society in Wesley, Iowa, said, "The Soo Line is shipping cars but they are not supplying them fast enough." He said the problem was that much Iowa grain is moving to the Gulf of Mexico instead of the Mississippi River, which lengthens the round trip time to more than 30 days.

John Bromley, a spokesman for Union Pacific, blamed rail unions for not allowing UP employees to work in Iowa, where the railroad is short staffed. UP is hiring and training new workers now, he said.

Without those industrywide increases, the Association of American Railroads would have been 1 percent lower than last year.

"Our export projections are strong," said Brad Clow, director of transportation for Sparks Commodities in Memphis, Tenn. "In some commodities, shipments could outdo USDA forecasts."

With export demand strong and the corn and soybean harvests expected during the next several weeks, industry observers see no changes in the rate and car supply situation.

"We expect cars to remain tight until January or February," Mr. Clow said.

"It would surprise me if we didn't continue to have this shortage problem for a while," said Steve Strege, who directs the North Dakota Grain Dealers Association in Fargo. "We're just getting into the usual crunch time. I don't know if there is much precedent for us to have a problem at this time of year and have it relax at the time of corn and soybean harvest."

With shippers paying premiums of up to $500 a car to guarantee availability of covered hopper cars for grain shipments late in 1995, Mr. Strege said he believed rates will continue to climb.

"We have people willing to pay a hell of a premium for cars," one official said.

"These programs (for ordering cars in advance) give signals to the railroads that they should or can raise their rates," Mr. Strege said.

Other forces are influencing the 1995 grain shipping picture.

Operating under a strike threat last year, CP Rail System's Soo Line unit posted meager grain carloadings in August 1994 that were nearly quadrupled last month.

Barge freight markets are facing similar pressures, several industry observers said.

One factor affecting the barge markets is the continued strong northbound river movements of aluminum ore, steel and other products that have reduced availability of barges to haul grain, said Jerry Fruin, a transportation economist for the University of Minnesota in Minneapolis.

"Even with the recent fall in rates in the past week, we expect barge freight rates will continue to remain very strong as we move into harvest," Mr. Clow said.

The traffic picture is brightening for some other commodities but remains dim for manufactured goods.

Coal traffic could pick up this month, Mr. Higgins said, because of the hot summer and a resulting reduction in utility stockpiles that have to be replenished.

Export traffic is showing some cyclical strength driven by demand for some steam coals and metallurgical coal, he said.

August carloadings were 2 percent below last year.

"We're expecting a strong fourth quarter (for coal)," said Dave Rohall, director of planning for CSX Transportation.