US railroads are set to halt shipments of agricultural products and other key goods from Thursday as the industry braces for a possible labor strike that could cost the world’s largest economy over $2 billion a day.
Norfolk Southern Corp. plans to halt bulk freight unit train shipments on Thursday ahead of a possible freight strike the next day.
The railroad also said it would stop accepting automobiles for transit through its facilities beginning Wednesday afternoon. Other freight railways are expected to follow suit, according to an agricultural group.
“We’re hearing that several rail carriers are tentatively planning to cut shipments,” said Max Fisher, chief economist at the National Grain and Feed Association, which represents most U.S. grain handlers.
The halt in shipments of grain, fertilizer, fuel and other crucial items threatens to hamper the US economy at a time of runaway inflation and fears of a prolonged global economic slump.
Food supply chains are particularly at risk as farmers prepare for harvest and need to source from customers.
Crops are in high demand due to shortages caused by the war in Ukraine and severe weather around the world.
Corn prices for loading into barges along the Mississippi River rose Wednesday as demand to ship grain across the water increases.
This could accelerate as the harvest unfolds next month.
“Our members rely on about 27 million bushels of corn and 11 million bushels of soybean meal every week to feed their chickens,” said Tom Super of the National Chicken Council. “A lot of that is transported by rail.”
Wheat shippers are also heavily dependent on rail transportation.
The spring variety of the grain, used to make foods like bagels and pizza dough, is now in the final stretch of harvest.
“It is not practical, feasible or even possible to shift US wheat movements to another mode of transportation to supply it where it needs to go on a daily basis,” said Justin Gilpin, general manager of Kansas Wheat.
“Both parties to these negotiations must agree, it is an absolute imperative for the agricultural economy.”
A strike could also impact aerospace manufacturing.
Boeing Co. relies on freight railroads to ship frames of 737 wingless jetliners more than 1,800 miles from a supplier’s factory in Wichita, Kansas, to chains of aircraft manufacturer’s final assembly south of Seattle.
The narrow-body jet is a key source of revenue and profit for the aviation titan.
Representatives for Boeing and Spirit AeroSystems Holdings Inc., which builds 737 airframes, did not immediately comment on strike preparations.
Norfolk Southern intends to stop taking vehicle deliveries for transit beginning Wednesday at 5 p.m. local time and also close its intermodal gates at that time, the Virginia-based railroad said. in a notice.
Representatives from Union Pacific Corp. also indicated that they were prepared to reduce service as Friday’s deadline approached.
BNSF Railway Co., owned by Warren Buffett’s Berkshire Hathaway Inc., said Wednesday it had an intermodal and auto restriction plan in place ahead of a possible strike.
“BNSF remains committed to continuing to transport our customers’ cargo for as long as possible,” the Texas-based carrier said in a statement.
The precautionary stoppage of cargo by some railroads is intended to ensure that crews are not stranded in the event of a Friday morning work stoppage, Fisher said. Reuters previously reported on the plan.
Congested freight shipments would also interfere with commuter rail service in cities like Chicago.
It also prompts Amtrak to cancel all long-distance trains starting Thursday to avoid possible disruptions, although most travel in the Northeast Corridor, which includes routes connecting Boston, New York and Washington, will not be affected.
With less than two months to go until November’s midterm elections, Democratic President Joe Biden is personally trying to break the deadlock between industry and unions.
The White House has begun developing contingency plans to ensure critical materials can reach consumers in the event of a work stoppage, a sign that negotiations still have a long way to go.
U.S. Labor Secretary Marty Walsh led the negotiations between the unions and the railroads on Wednesday, with all parties pledging to stay at the table all day, according to a Labor Department statement.
According to the Association of American Railroads, railroads are no longer shipping ammonia, a major component of about three-quarters of all fertilizers, because it would be dangerous for the hazardous material to be blocked in a possible strike. railway.
Ammonia is used in explosives and is an essential nutrient for plants.
The halt in rail shipments of ethanol threatens to reverse the recent plunge in U.S. gasoline pump prices, which had hit an all-time high.
Nearly three-quarters of the nation’s supply travels by rail, mostly from factories in the Midwest — where corn is processed into a fuel additive — to the east and west coasts to be blended into gasoline.
The petrochemical industry could be forced to slow production at plants that produce plastics and other products needed by industries across the country if shipments of key hazardous chemicals needed are delayed for an extended period.
Coal-fired power plants would continue to operate, drawing down on-site inventory, but utility reserves fell to a 24-year low a year ago and haven’t risen much since then.
The miners would probably continue to dig up the fuel, as long as they have space in their facilities to let it accumulate.
“Once available storage is full, factories will need to cut rates,” Robert Stier, senior petrochemical analyst at S&P Global Commodity Insights, said in an email.
“These hazardous materials are the first products impacted. These are difficult to ship by means other than specialized wagons.