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Crop, car shipments set to halt on U.S. rail strike threat

Sept. 14, 2022 Updated Wed., Sept. 14, 2022 at 6:23 p.m.

While 10 of 12 railroad workers’ unions have struck new labor deals, the two holdouts account for more than 90,000 rail employees.  (Kyle Grillot/Bloombrg )
While 10 of 12 railroad workers’ unions have struck new labor deals, the two holdouts account for more than 90,000 rail employees. (Kyle Grillot/Bloombrg )
By Kim Chipman </p><p>and Ryan Beene Bloomberg

U.S. railroads are poised to stop shipments of farm products and other key goods starting Thursday as the industry braces for a possible labor strike that could cost the world’s biggest economy more than $2 billion a day.

Norfolk Southern Corp. plans to halt unit train shipments of bulk commodities on Thursday ahead of a potential freight strike the following day.

The railroad also said it would stop accepting automobiles for transit at its facilities starting Wednesday afternoon. Other freight railroads are likely to follow suit, according to one agriculture group.

“We are hearing several rail carriers are tentatively planning to wind down shipments,” said Max Fisher, chief economist at the National Grain and Feed Association, which represents most US grain handlers.

A halt to shipments of grains, fertilizer, fuel and other crucial items threatens to hobble the U.S. economy at a time of rampant inflation and fear of a prolonged global economic slump.

Food-supply chains are especially at risk as farmers are gearing up for harvest and need to get their supplies to customers.

Crops are in high demand due to shortages from the war in Ukraine and weather woes across the globe.

Prices for corn for loading into barges along the Mississippi River were rising Wednesday, as demand to ship grain on the water increases.

That could accelerate as the harvest gets going over the next month.

“Our members rely on about 27 million bushels of corn and 11 million bushels of soybean meal every week to feed their chickens,” said Tom Super of the National Chicken Council. “Much of that is moved by rail.”

Wheat shippers also are heavily dependent on rail transportation.

The spring variety of the grain, used to make foods like bagels and pizza dough, is now in the final stretch of harvest.

“It isn’t practical, feasible or even possible to shift U.S. wheat movements to an alternate mode of transport to supply it where it needs to go daily,” said Justin Gilpin, chief executive officer of Kansas Wheat.

“Both sides in these negotiations have to come to terms, it’s an absolute imperative for the agriculture economy.”

A strike could ripple through aerospace manufacturing as well.

Boeing Co. relies on freight railroads to ship wingless 737 jetliner frames more than 1,800 miles from a supplier’s factory in Wichita, Kansas, to the plane maker’s final assembly lines south of Seattle.

The narrow body jet is a critical source of revenue and profit for the aviation titan.

Representatives of Boeing and Spirit AeroSystems Holdings Inc., which builds the 737 fuselages, didn’t immediately comment on strike preparations.

Norfolk Southern intends to cease taking vehicle deliveries for transit as of 5 p.m. local time Wednesday and close its intermodal gates as well at that time, the Virginia-based railway said in a notice.

Representatives for Union Pacific Corp. also signaled it was prepared to curtail service as the Friday deadline looms.

BNSF Railway Co., owned by Warren Buffett’s Berkshire Hathaway Inc., said on Wednesday it has implemented an intermodal and automotive in-gate restriction plan ahead of a possible strike.

“BNSF remains committed to continue moving our customers’ freight as long as possible,” the Texas-based carrier said in a statement.

The preemptive halting of cargoes by some railways is aimed at ensuring crews aren’t stranded if a work stoppage occurs Friday morning, Fisher said. Reuters earlier reported on the plan.

Snarled freight shipments also would interfere with commuter rail service in cities including Chicago.

It also is prompting Amtrak to cancel all long-distance trains starting Thursday to avoid possible disruptions, though most travel within the Northeast Corridor, which includes routes connecting Boston, New York and Washington, wouldn’t be affected.

With November midterm elections less than two months away, Democratic President Joe Biden is personally trying to break the logjam between industry and labor unions.

The White House has started crafting contingency plans to ensure critical materials can reach consumers in the event of a work stoppage, a sign negotiations still have a long way to go.

U.S. Labor Secretary Marty Walsh on Wednesday led negotiations between the unions and railroads, with all parties committed to staying at the table through the day, according to a Labor Department statement.

Fertilizer, plastics

Railways are no longer shipping ammonia, an important component of about three quarters of all fertilizer, because it would be dangerous if the hazardous material was stranded during a potential rail strike, according to the Association of American Railroads.

Ammonia is used in explosives as well as being an essential nutrient for plants.

A halt to rail shipments of ethanol threatens to reverse the recent slide in U.S. gasoline pump prices from a record high.

Almost three-quarters of the nation’s supply is moved on trains, mostly from Midwest plants – where corn is made into the fuel additive – to the East and West Coasts for blending into gasoline.

The petrochemical industry may be forced to slow down production at plants that churn out plastics and other products needed in industries across the nation if shipments of key hazardous chemicals necessary are delayed for an extended time.

Coal-fired power plants would continue to operate, drawing from on-site inventory, but utilities’ reserves fell to a 24-year low a year ago and haven’t increased much since then.

Miners would likely continue to dig up the fuel, as long as they have space at their facilities to let it pile up.

“Once available storage is full, the plants would have to cut rates,” Robert Stier, senior petrochemicals analyst at S&P Global Commodity Insights, said in an email.

“These hazardous materials are the first products impacted. These are difficult to ship by any other means than specialized rail cars.”

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