WASHINGTON — A potential shutdown of US railroads looms as supply chains are beginning to slacken and the fall corn and soybean harvests are getting underway.
“Our member companies depend on freight rail services every day to ensure the availability, affordability and accessibility of essential products,” said Tom Madrecki, vice president of supply chain and logistics for the Consumer Brands Association (CBA), Washington. “It would devastate the nation’s already struggling supply chains if a labor agreement between the freight railroads and their unions cannot be reached before the Sept. 16 deadline.”
The CBA is advocating for the adoption of the Presidential Emergency Board (PEB) recommendations to resolve labor negotiations and for Congress to intervene, if necessary. The PEB is an executive order signed by President Joe Biden in July to help resolve the dispute between rail carriers and the unions that work for them. As part of the PEB, the board investigated the dispute and has made recommendations about how it should be resolved. The report was issued in late August and showed stark differences in the two sides’ positions, particularly over wages. Rail carriers are offering general wage increases of 16% during the term of the agreement (five years) and the unions are seeking 28%. The board recommended a 24% increase.
“If a voluntary agreement cannot be reached, Consumer Brands supports congressional action to finalize negotiations based on the PEB recommendations and do what is in its authority to prevent service disruptions that will have a profound impact on the availability of critical products,” Mr. Madrecki said. “With product availability, inflation and cost challenges continuing to affect American consumers, the supply chains cannot afford another crisis in the form of a freight rail strike.”
The National Grain and Feed Association (NGFA) on Sept. 12 urged leaders of railroads and rail labor unions to remain at the negotiating table and commit to reaching an agreement by Sept. 16 to avoid a nationwide rail shutdown.
“A rail stoppage on Sept. 16 would hit right as the fall harvest accelerates in many parts of the United States,” Mike Seyfert, president and chief executive officer of the NGFA, wrote in a Sept. 12 letter. “The economic damages across the food and agricultural supply chain would be swift and severe.”
Railroads and rail labor have until Sept. 16 to reach an agreement that would prevent a lockout or strike after the Presidential Emergency Board published a proposed settlement on Aug. 17.
If the two sides can’t agree on a deal by the end of the week, Congress is expected to step in to block a strike because of the dire economic consequences, the Associated Press reported.
The Association of American Railroads (AAR) put out a report last week estimating that the US economy would take a $2 billion a day hit if the trains stop moving. The AAR also noted that railroads transport 1.5 million carloads of grain each year.
Class I railroads announced late last week that they would begin curtailing shipments of hazardous materials on Sept. 12 in anticipation of a possible strike.
That would include fertilizer products, such as ammonia — a key fertilizer and building block for approximately three-fourths of all fertilizer.
“Supply chains are already strained and there is currently zero elasticity in rail transportation,” said Corey Rosenbusch, president and CEO of TFI. “This situation will get exponentially worse every day there is no resolution. Over half of all fertilizer moves by rail year-round, and there are some fertilizer products that move almost exclusively by rail. If they can’t be shipped, farmers won’t have them and if they can’t move, production slows down. In the end, the consumer will be footing the bill for this inaction at a time when household budgets are already strained.”
While Congress could be called upon to settle differences in the event of an impasse in negotiations, the NGFA urged the parties to avoid that outcome.
“Economic challenges to livestock and poultry producers this year due to rail service delays are well-documented, and a shutdown would quickly cause additional problems and force producers to make difficult decisions regarding the viability of their animals,” Mr. Seyfert said, adding that grain processing and biofuels plants may have to scale back production and exporters may not be able to find viable transportation alternatives.
“NGFA urges all parties involved to continue good faith negotiations,” he said. “No one wins if a shutdown occurs — the agricultural value chain and consumers who rely on it stand to lose the most.”