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Fertilizer shippers seek carrier reforms to address supply chain snags

Changes to rail operations, truck weights, Jones Act should all be in the mix, according to industry suppliers

Fertilizer shippers are pressuring the Biden administration for transportation-related changes they say will help lower their costs and make them more competitive in world markets.

The industry’s recommendations, which include regulatory and other changes affecting trucking, rail and maritime, were in response to an information request published earlier this year by the U.S. Department of Agriculture’s Agricultural Marketing Services (AMS) in which the agency asked for help identifying issues affecting the ability to compete in domestic and international markets, along with potential policy solutions.

CountryRank% Global production
Nitrogen
China124.6
U.S.211.6
India311.3
Phosphates
China137.7
U.S.29.9
India39.8
Potassium (Potash)
Canada131.9
Belarus216.5
Russia316.1
U.S.110.8
Source: AFBF/International Fertilizer Association (2018 data).

AMS’ information request was a follow-up to President Biden’s July 9, 2021, executive order aimed at promoting competition throughout the U.S. economy.

Half of all food grown in the world is made possible by fertilizer according to The Fertilizer Institute (TFI), which represents companies involved in all aspects of the U.S. fertilizer supply chain. The three major building blocks that go into making it: nitrogen, phosphorus and potassium (see chart).

“Our industry is essential to ensuring that farmers receive the nutrients they need to enrich the soil and, in turn, grow the crops that feed our nation and the world,” wrote TFI President and CEO Corey Rosenbusch in comments submitted to AMS in July.

Reforming rail service

Pointing out that more than half of all U.S. fertilizer moves by rail, Rosenbusch said that rail rates to ship anhydrous ammonia (a source of nitrogen) have increased 206% over the last 20 years.

“Beyond rail rates, disruptions in rail service have limited the ability to move fertilizer. Currently, rail carrier cycle times are far worse than they were last year. Therefore, the industry is unable to ship as much fertilizer in the same time frame, which negatively impacts domestic production facilities that have limited site storage.”

Earlier this year, one TFI member faced $800,000 in additional freight costs because of poor service on just one rail carrier, he said. In addition, the implementation by the railroads of precision scheduled railroading, according to TFI, “has compromised rail carrier operational elasticity and the ability to handle unexpected issues such as sudden weather and the COVID pandemic.”

CF Industries, which produces ammonia for the fertilizer industry, saw its rail rates increase 8% in 2021. The company in April criticized Union Pacific’s plan to remove railcars off its network to reduce congestion, with CF asserting the measure would delay shipments.

“Inconsistent rail service and capacity restrictions on rail transport have … impacted the entire agricultural supply chain,” wrote Linda Dempsey, CF Industries’ vice president for public affairs, in comments to AMS.

Dempsey suggested that regulatory reforms “to boost inter- and intra-modal competition in the rail sector — including, for example, finalizing the Surface Transportation Board proposal regarding reciprocal switching — would improve the ability to ensure timely delivery of products when farmers most need them.”

Adjusting truck driver work rules

Because truck deliveries are also essential to the fertilizer supply chain, many comments were directed at supporting Biden administration efforts to expand the truck driver workforce, citing estimates from the American Trucking Associations that 80,000 driving jobs went unfilled in 2021.

But fertilizer shippers also called for specific reforms to driver work rules. The National Council of Farmer Cooperatives (NCFC) urged the administration to make several specific changes to the agricultural exemption to driver hours of service rules to help address “seasonal spikes” in fertilizer transportation.

The group wants the Federal Motor Carrier Safety Administration to eliminate the “planting and harvesting periods” requirements to the exemption to ensure uniformity within all states.

“Most states already have adopted a year-round agricultural exemption given the diverse range of crops and modern agricultural practices that result in truck movements throughout the year,” the group stated.

In addition, NCFC is seeking a regulatory change for fertilizer cargo to provide a 150-air-mile exemption from HOS regulations on the back end of a haul, building on the current exemption for the beginning of hauls at the source.

“Originally, the front-end exemption was put in place to give farmers and ranchers extra time to navigate rural roads safely and slowly, which frequently are minimally maintained and have significantly slower travel speeds,” NCFC noted. “This change also would avoid penalizing drivers for doing their job safely in remote areas away from major highways.”

Both the American Farm Bureau Federation (AFBF) and the Agricultural Retailers Association (ARA) support allowing six-axle trucks to exceed the federal 80,000-pound weight limit for fertilizer and other agricultural products.

“This would make U.S. farmers and businesses more competitive and reduce the number of trucks needed to haul the same amount of goods,” according to AFBF. “The U.S. Department of Transportation implementing this change would reduce infrastructure wear and tear, enhance capacity and benefit the environment by reducing vehicle miles traveled.”

ARA commented that the railroad industry “continues to oppose this as they view it as increased competition.”

Jones Act repeal to enhance competition

The Jones Act, which requires cargo shipments moving between U.S. ports be moved on U.S.-flagged and -owned vessels using American crews, has firm backing from President Biden. But ARA believes the century-old law makes the domestic fertilizer industry less competitive in reaching coastal markets and supports abolishing it.

“[The Jones Act] is one reason that the coastal markets have a higher share of supply from imports under normal conditions,” according to ARA.

“The original justification for the Jones Act was to support a U.S. merchant marine fleet that could be called upon in times of military need to transport materiel. This function has not been used in decades despite multiple deployments of U.S. military assets. Therefore, the fundamental justification for the Jones Act no longer exists.”

Funding waterway infrastructure, including upgrading and expanding lock capacity on the inland waterways for barge transport, will also help fertilizer shippers maintain competitive pricing, NCFC emphasized in its comments.

“Some of the locks are well past their engineered design life, too small for a modern barge tow, and the result is bulk fertilizers delivered inland by waterways … costs more due to higher transportation costs and are less competitive in a global market. We recommend the administration provide support for upgrading locks and dams and support congressional efforts to enact Water Resources Development Act bills every two years.”

Eliminating the cross-border vax mandate

According to AFBF, the U.S. receives 80% to 85% of its imported potash fertilizer from Canada, but approximately one-third of cross-border drivers moving that freight have been removed from the supply chain because of cross-border vaccine restrictions put in place in January.

“There is a great deal of potash and nitrogen fertilizer production in Canada just north of the U.S. border,” TFI asserted. “The most efficient way to reach farmers in the northern tier states is via truck. The cross-border vaccine mandate on transporters of essential commerce continues to raise costs and constrain supply, particularly for this region.”

The U.S. extended indefinitely its vaccine mandate for border-crossing truck drivers in April. In July, Canada announced that its own similar mandate would remain in place until at least Sept. 30. “The [Biden] administration should immediately rescind its cross-border vaccine mandate on transporters of essential commerce,” TFI’s Rosenbusch stated.

Click for more FreightWaves articles by John Gallagher.

2 Comments

  1. It would be a good start for the FMCSA to classify fertilizer as an agricultural product so the trucks would could use the 150 mile exemption, as the other agricultural products are.

  2. The Jones Act was created during a time period where the US had a sizeable merchant marine. That is no longer the case as it is cheaper to flag a vessel in a foreign country as well as cheaper to pay crew from foreign countries. The Jones Act today actually hinders the US merchant fleets and stifles trade.

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John Gallagher

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.