Missouri River Could Ease Grain Bottleneck on Railroads

The Missouri River might help alleviate grain backups caused by railroads hauling more crude oil in the northern U.S., though federal spending on infrastructure and changes in water allocations may be needed, said Michael Toohey, head of Waterways Council Inc.

A boom in shale oil fueled by the rise of hydraulic fracturing, or fracking, has pushed domestic production to the highest in 27 years, taxing rail systems needed to get both crude to refineries and grain to food producers.

“If they had a dependable 9-foot channel, you’d see more ag products moving on that waterway,” Toohey, president and chief executive officer of the group, said today in a meeting with Bloomberg News reporters and editors in Washington.

The U.S. Army Corps of Engineers gives priority on inland waterways to endangered species, recreation and other uses, making barges a “stepchild” on the Missouri, he said.

Railroads in 2013 transported 75 percent of the wheat crop and more than half of all corn and soybeans in the Dakotas, Minnesota and Nebraska. Increased oil production in North Dakota has created backlogs in grain shipments, creating bottlenecks for shippers including Cargill Inc. and holding up supplies for General Mills Inc. (GIS) and other foodmakers.

North Dakota

The volume of North Dakota crude transported by rail has increased more than 4,000 percent since 2008, according to the Transportation Department. Meanwhile, a proposal by TransCanada Corp. (TRP) to build the Keystone XL pipeline to boost the region’s energy transport capacity has languished over environmental concerns.

Record corn and soybean crops this year will push 2014 grain and oilseed supply to 27 billion bushels, USDA data show. That’s more than the 23.4 billion of storage on farms and grain-company silos as of Dec. 1, the government estimated in a Jan. 10 report.

The surge in crop supplies may exacerbate the squeeze on grain storage and shipping. BNSF Railway Co., owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/B), and Canadian Pacific Railway Ltd. (CP) struggled with “greater-than normal” demand from shippers of coal, oil and Midwest crops, the USDA said this month in a report.

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Elizabeth Wasserman

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