Rail fuel surcharges on grain held at 48 cents a railcar mile in the week ending September 10, according to the Agriculture Department. That matched August and was 13 cents below the record 61 cents set in July. Grain elevators can pass some of the higher rail costs back to farmers by lowering the cash price they pay for crops at harvest.
The surcharge tracks diesel prices, which averaged $5.97 a gallon for the week ending September 7. That was up 36.8 cents from the week before and $2.20 from a year earlier. Crude oil has also climbed above $104 a barrel, its highest level since mid-May, as US-Iran tensions escalate, reports Reuters. Fuel surcharges now account for 11% of the rail cost to ship corn and soybeans, up from 5% a year ago.
Railcar demand is adding to the pressure. North Dakota’s spring wheat harvest was 86% complete as of September 6, ahead of the five-year average of 77%. Shuttle-train secondary bids were $742 above tariff last week, compared with $19 for non-shuttle cars.
One Kansas elevator’s basis, the local cash price relative to the futures price, has fallen to 70 cents below futures, versus its usual 40-cent discount, as it passes higher costs to farmers. North Dakota State University grain economist Frayne Olson said the industry operates on margins of only a few cents a bushel, meaning the surcharge can determine whether a farmer makes a profit.
Railroads collected $2.93 billion in grain fuel surcharges in the second quarter, up 90% from a year earlier.
