|South Dakota's agriculture industry depends upon timely rail service to ship grain and other commodities to market and deliver fertilizer, feed and other inputs. Rail delays throughout the fall and winter brought South Dakota Farmers Union Marshall County President, DuWayne Bosse to Washington D.C. to testify before the Surface Transportation Board on behalf of South Dakota Farmers Union (SDFU) April 10.
Bosse, a fourth generation family farmer from Britton, discussed concerns farmers currently face due to service problems in the United States rail network.
"These rail service problems have begun to negatively impact our producers," he said. "While we understand the challenges that the rail industry faced due to the extreme cold, there is a legitimate concern about how the delays and lack of service are affecting the agriculture industry."
Bosse highlighted three areas of concern facing farmers and the agriculture industry as a whole: market fluctuation, grain storage and capacity. He added that the rail issues are also negatively impacting the regions' renewable fuels industry.
"As a farmer, basis is critical in the marketing of crops. It helps us determine when it is best to sell or hold our crops. We use it as a way to hedge, evaluate cash contracts, and cash prices at a specific point in time. Basis can determine whether or not we make a profit on our grain," said Bosse, who is also the founder and co-owner of Bolt Marketing a commodity brokerage firm. "Typically during the spring the basis narrows and is strengthened, but this year it continues to dramatically widen because of the increased demand for trains to move commodities in the Midwest."
Basis is the term used to describe the futures price for grain commodities minus the local cash price. It is calculated using a variety of components including storage costs, profit margins for sellers, quality variations from those listed in the futures contracts specifications, local market conditions, and most importantly, transportation costs.
"Last year, North Dakota produced 396 million bushels of corn. Comparing the widening of the basis from last year to this year, the result for corn production would be a $297 million loss in farmer income. For soybean production the loss in farmer income from last year to this year would be $62 million and in wheat it would be $82 million," Bosse said. "For the three major grain commodities that is a combined estimated loss of $441 million in lost farmer income, simply from the change in basis attributable to transportation costs."
Bosse spoke alongside other South Dakotan's testifying at the Surface Transportation Board (STB) hearing including; U.S. Senator, John Thune, South Dakota Secretary of Agriculture, Lucas Lentsch, Midwest Cooperative General Manager, Milt Hancock, and South Dakota Wheat Growers Board President, Hal Clemensen.
"We appreciate Senator Thune's leadership on this issue," said Doug Sombke, SDFU President. "He brought to light the fact that this is not a singular issue. There are disruptions and delays in rail service all across South Dakota."
SDFU is hopeful that the STB hearing is a step in the right direction.
"We will continue working with our members, South Dakota's Congressional delegation, and like-minded agricultural groups to find a short-term fix to the delays and a long-term solution to the lack of service," Sombke said. "Our producers must be assured that we will have fertilizer for the upcoming planting season and that grain facilities will be empty in time for harvest."
The STB hearing in Washington D.C. was held following an informal meeting that South Dakota Farmers Union and North Dakota Farmers Union had with STB officials March 27 at Fargo, N.D.