Many Indiana farmers say supply chain issues have been negatively affecting their day-to-day operations. The rail industry is also feeling the pinch and that’s been impacting Hoosier farms.
Railways have always been an important piece of the supply chain and are usually a cost-effective and reliable way to get farm products to and from their destination. However, supply chain issues have led to an increase in unfilled rail car orders, as well as a spike in the overall cost to ship on a train.
“Unfilled orders refer to the number of rail cars a buyer like a grain elevator ordered but did not receive,” says Danny Munch, Economist with the American Farm Bureau Federation. “When a service contract between a shipper and a railway is not filled, shippers might look elsewhere to purchase railcar access. That often occurs in the secondary rail car market where shippers bid against other shippers for their contracts. Because there are so many unfilled orders, the demand in the secondary market has jumped up quite a bit.”
Munch says it’s part of the overall issue behind supply chain disruptions.
“Many of the issues we’ve been hearing about in trucking and ocean freight also contribute to these rail service disruptions,” says Munch. “There’s a significant shortage in rail crew labor, which is expected to be the largest contributor. During COVID-19, railways also sold off a lot of rail cars and other assets during that time of heavy uncertainty. So, now they’re facing railcar inventory shortages, and then more broadly, you’re seeing lockdowns across ports in China in response to their COVID issues tying up a huge portion of containers that could be used intermodally in our own domestic rail networks.”
Munch also says unfilled and delayed orders mean a disruption in products being delivered to and picked up from the farm.
“For example, milling operations reliant on the delivery of grain from elevators are forced to halt their operations, putting the flow of feed to livestock operations at risk,” according to Munch.
He says that long-term investments in on-farm storage and on-operation storage to improve the storage of grain could help transportation disruptions for Indiana farms and the farm economy.
Click BELOW to hear C.J. Miller’s report on how railway supply chain issues are impacting Indiana farms.
