Union Pacific curtails fertilizer rail shipments, prevents new orders – CF

HOUSTON (ICIS)–US based CF Industries informed customers it serves by Union Pacific rail lines that railroad-mandated shipping reductions would result in nitrogen fertilizer shipment delays during the spring application season.

Further, the producer said that it would be unable to accept new rail sales involving Union Pacific for the foreseeable future.

UP did not immediately respond to a request for comment.

CF added that it understands that it is one of only 30 companies to face these restrictions. Service cuts will impact rail shipments from Louisiana and Iowa production centres with the volumes affected including urea and urea ammonium nitrate (UAN).

CF Industries ships to customers via Union Pacific rail lines primarily from its Donaldsonville Complex in Louisiana and its Port Neal Complex in Iowa. The rail lines serve key agricultural areas such as Iowa, Illinois, Kansas, Nebraska, Texas and California.

CF Industries is the largest producer of urea and UAN in North America, and its Donaldsonville Complex is the largest single production facility for the products.

“The timing of this action by Union Pacific could not come at a worse time for farmers. Not only will fertilizer be delayed by these shipping restrictions, but additional fertilizer needed to complete spring applications may be unable to reach farmers at all,” said Tony Will, CEO of CF Industries.

“By placing this arbitrary restriction on just a handful of shippers, Union Pacific is jeopardising farmers’ harvests and increasing the cost of food for consumers.”

CF said it was informed on 8 April that Union Pacific, without advance notice, was mandating certain shippers to reduce the volume of private cars on its railroad effective immediately. The company was told to reduce its shipments by nearly 20%.

Despite this action, the producer said it should be able to fulfil delivery of product already contracted for rail shipment to Union Pacific destinations, albeit with likely delays.

However, because Union Pacific has told CF that noncompliance will result in the embargo of its facilities by the railroad, the company worries it may not have available shipping capacity to take new rail orders involving the railroad carrier to meet late season demand for fertilizer.

CF highlighted that the application of nitrogen fertilizer is critical to maximising crop yields. If farmers are unable to secure all the nitrogen that they require in the current season because of supply chain disruptions such as rail shipping restrictions, the company expects yields will be lower.

If this materialises, CF said the situation will likely extend the timeline to replenish global grains stocks, with lower stocks continuing to support high front-month and forward prices for nitrogen-consuming crops, which has contributed to higher food prices.

Such crops include corn, which the US uses to make ethanol.

The producer plans to engage directly with the federal government to request that fertilizer shipments be prioritised so that spring planting is not adversely impacted.

“CF Industries’ North American manufacturing network continues to produce at a high rate to meet the needs of customers, farmers and consumers,” Will said.

“We urge the federal government to take action to remove these Union Pacific rail shipment restrictions to ensure this vital fertilizer will be able to reach US farmers when and where they need it.”

The market has yet to react to this development, but there are bound to be considerable concerns from traders as well as sellers and buyers over how this new difficulty could impact both the producer and its end users right in the peak of the prime US period for fertilizer consumption.

Thumbnail shows a railroad. Image by Shutterstock.