CF Industries Holdings Inc., Deerfield, Ill., on April 14 informed customers it serves by Union Pacific (UP) rail lines that railroad-mandated shipping reductions would result in nitrogen fertilizer shipment delays during the spring application season, and that it would be unable to accept new rail sales involving UP for the foreseeable future. CF said it understands that it is one of only 30 companies to face these restrictions.
CF ships to customers via UP primarily from its Donaldsonville Complex in Louisiana and its Port Neal Complex in Iowa. The rail lines serve key agricultural areas such as Iowa, Illinois, Kansas, Nebraska, Texas, and California.
Products that will be affected include urea, UAN, and diesel exhaust fluid (DEF). CF is the largest producer of those three products in North America, and the Donaldsonville Complex is the largest single production facility for the products in North America.
“The timing of this action by Union Pacific could not come at a worse time for farmers,” said Tony Will, CF President and CEO. “Not only will fertilizer be delayed by these shipping restrictions, but additional fertilizer needed to complete spring applications may be unable to reach farmers at all. By placing this arbitrary restriction on just a handful of shippers, Union Pacific is jeopardizing farmers’ harvests and increasing the cost of food for consumers.”
CF said UP informed it on April 8 of this decision, without advance notice that it was mandating certain shippers to reduce the volume of private cars on its railroad effective immediately. CF said it was told to reduce its shipments by nearly 20 percent.
CF believes it will still be able to fulfill delivery of product already contracted for rail shipment to UP destinations, albeit with likely delays. However, because UP has told CF that noncompliance will result in the embargo of its facilities by the railroad, CF may not have available shipping capacity to take new rail orders involving UP rail lines to meet late season demand for fertilizer.
CF said it intends to engage directly with the federal government to ask that fertilizer shipments be prioritized so that spring planting is not adversely impacted.
“CF Industries’ North American manufacturing network continues to produce at a high rate to meet the needs of customers, farmers, and consumers,” said Will. “We urge the federal government to take action to remove these Union Pacific rail shipment restrictions to ensure this vital fertilizer will be able to reach U.S. farmers when and where they need it.”
Both of the impacted facilities have the ability to truck shipments and one of the facilities can do barge sales, so the company will have alternative options, though they might be less attractive, said Alexis Maxwell, Green Markets Director of Research.
“Assuming that 20 percent of CF’s capacity at the impacted facilities moves by rail and CF reduces rail shipments by 20 percent in the second quarter, this would impact less than 1 percent of the company’s overall net production capacity,” added Maxwell. “CF’s stock price was up marginally on the news.”
UP said in a letter to customers that it would begin metering traffic after April 18 if customers don’t voluntarily reduce their inventory before then, according to Bloomberg. UP also said it is removing 2-3 percent of its own railcars and has added 50 locomotives since January, with plans to bring on 100 more to help move cars along.
“The operating inventory levels continue to rise on a daily basis,” Kenny Rocker, UP Sales and Marketing Chief, said in the letter published on the UP website April 11. “We have already identified and notified those customers who can help us manage the current congestion by reducing their railcar inventories.”
The industry has struggled with soaring freight since the pandemic drove higher demand for goods, choking the nation’s supply chain. The situation prompted the U.S. Surface Transportation Board to call public hearings later this month to hear from all the major railroads on steps to improve network fluidity, citing a broad worker shortage and railroads’ “bare bones” cost cutting.
“The railroads simply do not have a sufficient number of employees,” Board Chairman Martin Oberman said in a statement last week.
UP said in its letter that it has transferred 80 crew members to help in congested areas and has 450 employees in training that will be ready for locomotives in the summer.
The moves come after UP took steps last July to ease a backup in Chicago, where trailers weren’t being unloaded fast enough amid a crush of traffic. The company halted all containers at the time from Los Angeles to Chicago for about a week.
In a new statement, UP said the latest attempt to meter railcars will help it work through the backlog, echoing the “approach we successfully applied last year with West Coast intermodal traffic.”