Rail Fuel Surcharges Hit Record Highs, Squeezing U.S. Farmers

U.S. rail fuel surcharges on grain shipments have skyrocketed to record highs, leaving farmers struggling during harvest season. The average fuel surcharge rate on grain shipments climbed to 48 cents a mile per rail car in the second week of September, up 153% compared with the weighted average a year earlier.

This increase is particularly concerning for farmers, as it coincides with higher production costs and increased demand for transportation. Gary Millershaski, a wheat and sorghum farmer in Kansas, noted that the basis at his local grain elevator was around 70 cents per bushel below Chicago Board of Trade K.C. hard wheat futures.

The railroads' fuel surcharges are pegged to the U.S. On-Highway Diesel Fuel Index, which has risen about 60% year over year. The surcharge escalates as the index rises, and railroads collected $2.93 billion in fuel surcharges in the second quarter, up more than 90% from the year-earlier period.

Farm groups worry that a potential merger between Union Pacific and Norfolk Southern could further exacerbate transportation costs and hurt farmers' cash prices for grains.