Expanding America’s pipeline infrastructure would relieve the nation’s overburdened freight rail network and improve service for farmers nationwide, according to a new study from the American Farm Bureau Federation.
The booming energy business in the Upper Midwest spiked rail congestion and freight costs for farmers in the region and cut their profits by $570 million during the 2014 harvest. The AFBF study found that the average North Dakota corn farmer may have received $10,000 less than the traditional market rate for the crop. Increasing U.S. pipeline capacity – particularly in the Bakken region – is a prime solution for adding freight system capacity overall and relieving rail congestion, according to AFBF.
“American farmers depend upon rail freight to move their products to market. The surge in rail transportation of crude oil has affected that ability and timing in recent years,” AFBF Chief Economist Bob Young said. “Construction of new pipelines would certainly be a more effective way to move that product to market. It would take crude oil off the rails and, in doing so, improve the overall efficiency of the transportation system. Improved pipeline infrastructure will also help enhance American energy security for everyone.”
Study author Elaine Kub said farmers face challenges in getting their goods to market that others do not.
“Due to the nature of grain production and use, the industry is fairly inflexible about which freight methods it can use, so any time one of those methods is unavailable, crops are lost or cost more to transport,” she said. “This leads to more expensive food for families and less profitable incomes for farmers. Crude oil, however, can be more efficiently and affordably shipped through pipelines, and can be done without crowding already overstressed railways.”
The AFBF study also featured mathematically simulated scenarios showing how expansion of any freight method – truck, rail, barge, or pipeline – can reduce overall congestion and, in certain scenarios, could increase the annual volume of grain moved by as much as 14 percent.
To read the study, click here.
About Elaine Kub
Elaine Kub is the author of Mastering the Grain Markets: How Profits Are Really Made – a 360-degree look at all aspects of grain trading, which draws on her experiences as a futures broker, market analyst, grain merchandiser, and farmer. She grew up on a family farm in South Dakota and holds an engineering degree and an MBA.