US Grain Shippers Face Record-High Fuel Surcharges During Harvest Season

Railroad fuel surcharges on grain shipments in the US have more than doubled over the past year, causing transportation costs to skyrocket for farmers during harvest season. According to USDA data, 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.

The timing is particularly challenging for farmers, who are already struggling with higher production costs due to the US war with Iran, which has pushed crude oil and refined product prices sharply higher. As a result, diesel fuel surcharges are becoming a bigger part of grain shipping costs just as transportation demand increases.

With higher per-mile rates, surcharges accounted for 11% of total rail transportation costs for shipping corn and soybeans, compared with 5% a year ago. This means that growers typically see a weaker basis when they sell their crops to grain elevators, which can result in lower prices for farmers.

Gary Millershaski, a wheat and sorghum farmer in Kansas and chairman of US Wheat Associates, an export promotion group, said the basis is 'very sensitive' to changes in transportation costs. 'Whenever railroads pass excess costs on to shippers, growers typically see a weaker basis,' he explained.