By Tadeo Ruiz Sandoval
Growing diesel costs have been a pain for farmers who need the fuel to run equipment in their fields. Now, as harvest approaches, farmers face yet another obstacle as railroads have raised their shipping costs.
Railroad fuel surcharges have more than doubled in the past year as diesel prices have reached over $6 a gallon. Railroads carry about 1.6 million carloads of grain each year, according to the Association of American Railroads. That makes up 24% of domestic grain movements.
It’s not uncommon for railroads to add fees due to changing fuel costs. However, when these surcharges happen, the cost often trickles down to farmers in the shape of lower crop prices. That’s according to Mike Steenhoek, executive director of the Soy Transportation Coalition.
“Agriculture is a very competitive industry, and so what will often happen is if [grain shippers] try to pass those costs on to an importer from another country, what that importer very likely will do is say, ‘Well, I guess I'm going to buy more soybeans from Brazil or Argentina if you're trying to pass these costs on to me,’” Steenhoek said.
The grain shipper also doesn’t want to absorb those costs, which means the hot potato lands in farmers' hands.
“Farmers have options where they can sell to; maybe an elevator close by or a processor further down the road,” Steenhoek said. “But there is kind of a limit to how many points of sale a farmer has access to. So a lot of times the farmer just simply has to absorb that cost.”
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