WASHINGTON — With scant time remaining before a potential rail strike or lockout in early December, Congress needs to take action promptly to avoid disaster for the food and agricultural sector and the US economy, according to the National Grain and Feed Association.
“A rail strike or lockout combined with existing challenges in the rail system and other modes of transportation, including trucking shortages and low water levels on the Mississippi River hindering barge shipments, would be catastrophic for the US economy,” said Mike Seyfert, president and chief executive officer of the NGFA. “The rail network has experienced significant service disruptions at different times throughout the past year. Any additional disruption of rail service would immediately impact the nation’s food and agriculture and broader supply chains. The risk in both domestic and international markets is real. Congress must take bipartisan action to prevent a strike or lockout from occurring.”
The crisis dates back several months, when railroads and rail workers failed to reach an agreement on new labor contracts. In the face of a deadlock, the Biden administration in July established an emergency board to investigate the dispute between the railroads and the rail workers. In a process facilitated by the administration, representatives of the railroads and unions reached a tentative deal in September, subject both to a cooling off period and ratification by the unions. Mr. Biden called the agreement a “win for tens of thousands of rail workers.”
A late October rejection of the agreement by 2 of 12 unions prompted the NGFA and other ag groups to send a letter Nov. 3 asking Congress to prepare to take steps to prevent a rail strike or lockout, warning of “devastating consequences to our national and global food security.”
Urging “swift action by Congress,” the letter was signed by dozens of groups, including the American Bakers Association, the North American Millers’ Association, the National Association of Wheat Growers, the National Pasta Association and the Consumer Brands Association.
The gravity of the situation deepened Nov. 21 when one of the larger unions, the Sheet Metal, Air, Rail and Transportation Workers (SMART-TD) train and engine service members, in a very close vote, decided to reject the proposed contract. SMART-TD yardmaster members voted to accept the agreement.
In total, 8 of 12 labor unions have ratified the labor agreement, which provides employees with a 24% wage increase over five years (ending in 2024) and preserves what the American Association of Railroads (AAR) called “best-in-class health care coverage.” The unions voting down the agreement took issue with the level of the pay increase given current inflation levels as well as a failure to address demands to make work schedules more flexible.
The AAR said the agreement creates a path for addressing “important issues related to schedule predictability and job assignments on a railroad-by-railroad basis for engineers whose work assignments, similar to conductors, can be dependent on train schedules that vary.”
The AAR contended that voting down the agreement represents a rejection of a “pathway for further scheduling negotiations.”
With the four unions voting to reject, one of the unions may go on strike as soon as Dec. 5 and three others could strike beginning Dec. 9.
Congress has a wide range of choices in terms of steps it could take, Max Fisher, senior economist at the NGFA, told Milling & Baking News on Nov. 22.
“We want them to have all options at their disposal,” he said.
Among potential actions Congress could take include facilitating negotiations, requiring the parties to go into arbitration or even mandating that the agreed upon contract take effect.
Mr. Fisher called the decision for Congress “tough.” Regardless, “action is needed,” he added.
“It’s increasingly unlikely this will get resolved without congressional actions now that we have four unions that have rejected the agreement,” he said.
About one fourth of all US grain is moved by rail, and a similar quantity of processed agricultural products also move by rail, Mr. Fisher said.
“There are a number of agricultural operations that cannot operate very long without rail service,” Mr. Fisher said. “We’re talking about a few days before they would need to shut down. It would be immediate when it comes to exports.”
In the case of flour milling, most mills have grain elevators capable of storing weeks, if not months, of wheat. The problem in many instances is a reliance on rail for shipping flour.
“It is the outbound that shuts down a lot of the plants first,” Mr. Fisher said. “They may have enough raw commodity, but they have no place to store that product before it goes out. If you have nowhere to move rail cars, you can’t continue operating.”
While mills may add additional cars to their rail siding to fill and essentially store flour during a shutdown, many already maximize the number of cars used for such a purpose, Mr. Fisher said.
Similar dynamics would be in play for other processors, including oilseed processing, wet corn milling and ethanol.
For the milling industry, the risk of a rail strike compounds chronic service problems that have worsened in recent years, said Kim Z. Cooper, director of government affairs for NAMA.
"NAMA has been urging Congress to take action quickly if the parties are not able to reach agreement on their own,” she said. “Millers rely heavily on rail transportation to receive grain and to ship finished products. Our members have long been experiencing the effects of understaffing on railroad service, or rather, lack thereof. Regularly unpredictable service makes it harder for shippers who have some storage capability to frontload deliveries ahead of a possible stoppage. Further, there is simply not enough truck capacity to make up for a system-wide rail disruption. A strike would be devastating to the entire US economy and consumers will quickly see the impact on grocery store shelves, right as the holiday season arrives."
While there never would be a good time for a rail strike, Mr. Fisher said the present time is especially poor.
“There is limited trucking capacity to pick up the slack,” he said. “River water levels down, so river transportation can’t pick up the slack. In fact, because of the precarious situation on the river, rail has been picking up the slack (from the river). And we’re at a time of year when you have the most demand from ag for rail service, immediately following harvest when the supply chain is full.”