Rail Investment Keeps U.S. Soy Competitive

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Fertile soils in the heart of America – this is where farmers grow a majority of the nation’s soybeans. But with more than half the crop going to international customers every year, farmers’ ability to transport these soybeans thousands of miles to the coast for export is just as important as their ability to grow them.

With rail volume rapidly outgrowing its capacity, investment in new infrastructure is necessary to meet the needs of the growing energy and agriculture segments.

With rail volume rapidly outgrowing its capacity, investment in new infrastructure is necessary to meet the needs of the growing energy and agriculture segments.

A vital link in keeping U.S. soy competitive, railroads play a huge role in shipping product from the field to end users. But in order to uphold timely deliveries, continued investment is critical. Unlike trucks and barges that operate on infrastructure funded by taxpayers, rail companies are responsible for their own maintenance and expansion.

“If investments aren’t made to certain dilapidated areas, trains will have to reroute, which is very costly,” says Thomas Kersting, CEO of South Dakota Soybean Processors. “Investing in the railway system is critical because the health of agriculture depends on its reliability.”

Railroads have continued to make record investments, including $25.5 billion in 2012, according to the Association of American Railroads. This investment into new rail tracks, new locomotives and increased personnel is being directed to corridors that handle a large amount of agricultural products.

Growing with the future, rail lines have increased volume with the development of cars that can bear heavier loads, including double-stack trains. And with most rails rates operating on a per-car basis, shipping costs have decreased because more product is able to fit into each car.

But challenges remain. This year’s harsh winter wreaked havoc on the whole logistics system, and crude-oil production is on the rise in the upper Midwest. From 2009 to 2013, the number of car loads of crude oil skyrocketed from 11,000 to 400,000, giving soybean shippers less access to rail service than they had in the past.

More investment is needed in order to meet the agriculture and energy sectors’ growing rail needs, says Mike Steenhoek, executive director of the Soy Transportation Coalition, which is partly funded by the soy checkoff.

The soy checkoff is examining the U.S. railway system and its capacity to support future growth. Instead of exploring which rules and regulations could be imposed, the study looks at how to make rural America a more attractive place for investment.

“If investments grow, we’re going to see more movement by rail versus truck,” says Kersting. “And with rail using about one-third of the fuel per ton-mile compared to trucks, those improved efficiencies will ultimately benefit the farmer.”