Railroad and rail union representatives have reached a preliminary agreement in time to avert a nationwide rail shutdown in advance of Friday’s deadline. The action was welcomed by those in the agricultural sector who had already begun to see slowdowns in shipments of fertilizer and ethanol and expressed concerns over the impact to the economy.

Many agricultural groups during the week had written Congress and the White House asking them to take any necessary actions to avoid the strike. President Joe Biden, Agriculture Secretary Tom Vilsack, Transportation Secretary Pete Buttigieg and Labor Secretary Marty Walsh all were involved in helping broker the agreement between the unions and railroads.

Walsh held a meeting with union and rail representatives Wednesday morning to discuss options to avoid a strike. Late in the day Wednesday, Sen. Richard Burr, R-N.C., requested unanimous consent on the Wicker-Burr resolution that would implement the recommendations of the Presidential Emergency Board to halt the impending strike. Sen. Bernie Sanders, I-Vt., opposed the request, blocking it from advancing.

“The solidarity shown by our members—essential workers to this economy who keep America’s freight trains moving—made the difference in our Unions obtaining agreement provisions that exceeded the recommendations of the Presidential Emergency Board,” according to a joint statement from Jeremy Ferguson, president of the SMART Transportation Division, and Dennis Pierce, president of the Brotherhood of Locomotive Engineers and Trainmen.

The agreement provides rail employees a 24% wage increase during the five-year period between 2020 and 2024, while also paying out an immediate $11,000 upon adoption. The labor unions have agreed that they will not strike while the agreed-upon deal goes through the ratification process.

The tentative agreement calls for an immediate wage increase of 14% once compounded with an additional 4% on July 1, 2023, and 4.5% on July 1, 2024. In addition, wage increases of 3%, effective July 1, 2020, 3.5%, effective July 1, 2021, and 7%, effective July 1, 2022, will be fully retroactive, for a compounded increase of 24% over the five-year term of the agreement. The agreement also includes annual lump-sum bonus payments totaling $5,000. The union says most importantly that, for the first time ever, the agreement provides its members with the ability to take time away from work to attend to routine and preventive medical care, as well as exemptions from attendance policies for hospitalizations and surgical procedures.

“The tentative agreement reached tonight is an important win for our economy and the American people. It is a win for tens of thousands of rail workers who worked tirelessly through the pandemic to ensure that America’s families and communities got deliveries of what have kept us going during these difficult years. These rail workers will get better pay, improved working conditions, and peace of mind around their health care costs: all hard-earned,” says President Joe Biden in a statement. “The agreement is also a victory for railway companies who will be able to retain and recruit more workers for an industry that will continue to be part of the backbone of the American economy for decades to come.”

Ag welcomes action

A newly released Association of American Railroads report found that a nationwide rail service interruption would dramatically impact economic output and could cost more than $2 billion per day of a shutdown. 

Mike Steenhoek, executive director of the Soybean Transportation Coalition, says he’s extremely pleased both sides were able to arrive at an agreement. Ahead of the agreement he explains farmers are already on the eve of harvest, so any further delay of an agreement could be much worse if it penetrated into later September, October, or into November.  

“A strike, lockout, or significant slowdown would have imposed significant harm on agriculture – particularly on the eve of harvest,” Steenhoek says. “The tentative agreement allows farmers and U.S. agriculture to proceed with doing what they do best – being the highest quality, most reliable provider of food to the world.”

Steenhoek explains the inland waterway system or the trucking sector doesn’t have the ability to fully absorb what the rail system transports, especially as some areas of the country are far removed from the inland waterways. Trucking is already congested and oversubscribed with significant shortages. He says one single train freight’s hauling capacity is the equivalent of 400 semis.

National Grain and Feed Association President and CEO Mike Seyfert commended parties for reaching an agreement. “The efficient operation of our rail network, which moves 25% of all U.S. grain, is crucial to a functioning agricultural economy. NGFA members, which include 1,000 companies that handle U.S. grains and oilseeds, commend both parties for working in good faith toward an agreement and preventing severe economic damage,” Seyfert says. 

Wheat farmers are uniquely reliant on rail due to the large distances between production and consumption. Rail has moved over 1 billion bushels of wheat over the last five years, with one car containing enough wheat to make 250,000 loaves of bread.

“Our country’s reputation as the world's most reliable wheat supplier depends heavily on functioning rail transportation and that won't change in the future,” says U.S. Wheat Associates President Vince Peterson. “So, we welcome this tentative agreement and hope both sides continue to work together to serve shippers like the U.S. wheat industry.”

The production and movement of fertilizer is heavily dependent on rail, both for finished product and production inputs. Many of those products have already been removed from the rails in preparation for a potential rail stoppage. “For every day this uncertainty continues, we essentially lose five shipping days because of the ramp down and ramp up,” explains The Fertilizer Institute President and CEO Corey Rosenbusch.

Nearly all finished gasoline in the United States is 10% ethanol (E10) and much of the ethanol required for fuel is transported from the midcontinent via rail. Rail service for the ethanol industry is already known to be problematic and a cause of production cuts at some facilities.

Renewable Fuels Association President and CEO Geoff Cooper explains that 70% of ethanol produced domestically moves by rail. “It's been a precarious situation across that supply chain, really for quite some time coming out of the pandemic. The prospect of any stoppage or any further slowdown could really be calamitous for the industry,” Cooper says.

In an update late Wednesday afternoon, Alison Rivera, executive director of government affairs at the National Cattlemen’s Beef Association, says the biggest concern for beef producers is the impact on feed and fuel. “We are seeing a lot of drought and wildfires out West. Those feed supplies are even more important now than ever,” Rivera explains. “We already have high input costs, so the last thing we want to see is supply chain disruptions and further increases to those inputs.”

Futures for a number of products rose on the threat of a strike. Natural gas futures jumped 10% because a decrease in coal shipments would add further pressure on natural gas. Corn futures rose 5% as a strike would hit during the key harvest season.

Agricultural Retailers Association President and CEO Daren Coppock, says, “Our ag retailers and the farmers they serve depend on timely delivery of large quantities of supplies to produce the nation’s agricultural bounty, and that can’t happen without rail service. The prospect of a rail strike would have further disrupted a supply chain that is already strained. We hope the unions will quickly ratify the agreement so this cloud of uncertainty can be cleared away.”

Agricultural retailers and other ARA members were already feeling the impact of a potential strike as railroad carriers started to cancel shipments of critical fertilizer products such as anhydrous ammonia and impacting domestic fertilizer production earlier this week.