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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (2642)	11/26/2003 10:19:02 AM
From: russwinter	Read Replies (3) \| Respond to of 110194

More signs of a maladjusted economy and commodity inflation: US grain railcar shortages seen continuing into winter Reuters, 11.26.03, 9:55 AM ET By Julie Ingwersen CHICAGO, Nov 26 (Reuters) - Rail car shortages that have slowed movement of grain across the United States are likely to persist through the winter, railroad and grain industry officials said. "We are likely to see continued strong demand for rail cars and service-related issues for the next three months or so," National Grain and Feed Association spokesman Randy Gordon told Reuters in an interview. The scarcity of both grain hopper cars and crews has contributed to month-long delays and built up premiums in the spot market for wheat, corn and soybeans ready for immediate shipment, grain dealers said. Wheat rail shipments this week into Minneapolis, a key terminal for the U.S. milling sector, were running 30 to 35 days behind normal, one dealer said. While short-term rail backlogs are common in the U.S. grain belt following the fall harvest, the problem is "more significant this year than it has been in the past three or four," Gordon said. "The situation this year seems to be more national in scope," he said. Observers attribute the freight squeeze to several factors, including larger than normal U.S. wheat crops and a record large 10-billion-bushel corn crop. A booming export market for grain has also drawn rail cars to terminals along the U.S. Gulf coast, the Pacific Northwest and the U.S.-Mexico border. John Bromley, a spokesman for Union Pacific Corp (nyse: UNP - news - people), parent of the largest U.S. railroad, said brisk grain sales to Mexico, for example, have caused traffic congestion at Nogales, Arizona, a rail gateway. "The fact that we have rail cars going down into Mexico makes for a longer haul, and that increases the cycle time before those cars get back," Bromley said. Another factor has been the long U.S. economic downturn, which prompted railroads to cut costs by shedding equipment and personnel. When shipping demand picked up at harvest this summer and fall, carriers found themselves scrambling to train new crews and redirect grain cars and locomotives. "We were caught early on in the year with an economy that didn't turn out to be as flat as we thought it would be," Bromley said. He said Union Pacific has been hiring and training new crews, most of whom will be in place by March. Gus Melonas, a spokesman for Burlington Northern Santa Fe Corp (nyse: BNI - news - people), another major U.S. carrier, said the company has added more than 2,200 hopper cars to its grain fleet and 232 locomotives since August. "There has been a strong demand for resources. We're optimistic that the backlog will work down over the next few months," Melonas said. North Dakota Gov. John Hoeven took Burlington Northern to task in a November 5 statement in which he said delays were creating economic hardships for the state's grain elevators. But industry officials said relief may not arrive until March as crew shortages ease and the South American harvest begins to siphon export business from the United States. "Even then, (demand) may continue to be pretty strong because of tight general world stock conditions for grain," Gordon said. For the current 2003/04 season, USDA export inspections for wheat are running 24 percent ahead of a year ago. Corn inspections are up 23 percent, soybeans up 5 percent, sorghum up 5 percent. Total export inspections for all grains are up 18 percent from last season at 1.312 billion bushels. Gordon said the National Grain and Feed Association added a session on rail service issues to its upcoming conference in Kansas City on Dec. 7-9.