Mother Nature, Crude Oil, Grain and Ethanol Clog Rail Transportation in U.S. Midwest

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Researched by Industrial Info Resources (Sugar Land, Texas)--Big oil is pushing the supply chain of other businesses aside in the U.S. Midwest region, especially in the north, where crude oil is moving from the booming Bakken region.

Cold and snowy conditions in the upper Midwest have delayed grain deliveries to ethanol plants, and shipments of ethanol to refineries. It is estimated trains are running two to three weeks late. The delays are reducing ethanol supplies and driving up ethanol prices.

Utility companies are feeling the pinch as well, as railroads won't even serve coal-fired power plants until coal inventories are down to single-digit days, verses the usual 30-day supplies.

The Association of American Railroads (Washington, D.C.) reported mixed U.S. rail traffic for the week ended March 8, 2014, with 274,480 total U.S. carloads, down 1% compared with the same week last year. During that same period, coal rail cars still led with 109,030 cars, compared with 14,799 cars for petroleum products.

Most of the delay headaches appear to be coming from BNSF Railway Company, a unit of Berkshire Hathaway Incorporated (NYSE: BRKB) (Omaha, Nebraska), in a critical northern stretch of the company's Montana Operating Division, where it is shipping crude oil to east coast refiners.

"We found ourselves behind the curve now, we are finding we can't fill all of the demand as quickly as usual, said Bob Lease, BNSF vice president, service design and performance.

"As we come out of winter in the Midwest, rail traffic is expected to improve and get back to normal after April 1. But the rail industry is still facing capacity issues, and the railroad companies are expecting to invest some $14 billion in 2014 into additional track, rail cars, rail yards, refueling stations and unit train terminals."

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