How a rail strike could drive up food prices

How a rail strike could drive up food prices

The country’s food supply could be hit if railroad workers go on strike, driving up grocery prices and limiting US grain exports to countries facing famine.

As early as next week, 115,000 rail freight workers could leave if they fail to secure a new contract with the railways, which could lead to the closure of the national rail network which carries 20% of all grain shipments .

With unions saying they want to avoid a strike and Congress has the power to block one, the US food industry is rocked by the prospect of the National Railroad shutting down in the middle of the peak harvest season.

A “devastating ripple effect”

Even a short-lived disruption “would create a devastating ripple effect” on the nation’s fragile supply chains, said Lee Sanders, senior vice president of government relations and public affairs at the American Bakers Association.

“Rail-dependent facilities could not receive materials and ingredients, and millions of Americans a day could not receive the baked goods they depend on to feed themselves, their families and their communities,” a- she declared.

A railway closure in mid-September would quickly overwhelm grain storage facilities, leaving farmers with few options for storing their crops and increasing the risk of spoilage. Many grain processors would close, raising the price of bread and other everyday items, while farmers would grapple with huge harvests and falling commodity prices.

“It’s kind of a double whammy when you hit both the beginning and the end of the supply chain,” said Max Fisher, chief economist at the National Grain and Feed Association.

Freight railroads also move about half of the fertilizer, and farmers can’t afford delays, according to a letter to congressional leaders from The Fertilizer Institute on Wednesday.

“If farmers don’t get fertilizer, it leads to lower crop yields, higher food prices and higher inflation for consumers,” group CEO Corey Rosenbusch told lawmakers. .

Soaring food prices — which farming groups attribute in part to existing rail disruptions — have hit American families particularly hard. Grocery prices rose 13.1% over the last year ending in July, the largest annual increase in more than four decades, according to Labor Department data.

There is usually no back-up plan for crops transported by rail, especially when the trucking industry is already struggling to keep pace with demand. The same is true for coal, crude oil, steel, lumber, auto parts and other items frequently loaded onto freight trains.

A nationwide railroad work stoppage would cost the U.S. economy more than $2 billion a day and cause shipping containers to pile up at ports, the Association of American Railroads.

Cereal exports and world food security

Because about a third of US grain exports travel by rail, a work stoppage would also reduce America’s ability to ship food to foreign countries, especially those in East Africa and in the Middle East who are at risk of starvation following Russia’s invasion of Ukraine. .

A coalition of food and farm groups, including the American Farm Bureau Federation, urged lawmakers on Thursday to block a freight train strike, warning it would have “devastating consequences” for global food security.

“Congress must be prepared to act to ensure that our farmers and ranchers can continue to help feed the world,” the groups wrote in a letter to key transportation committee lawmakers.

The United Nations estimates that the number of people facing acute food insecurity has risen from 145 million to 345 million since 2019, and 50 million people in 45 countries are close to starvation.

Russia blocked Ukraine’s access to the Black Sea at the start of the invasion, cutting off nations that depend on Ukraine to supply large shipments of grain and cooking oil.

The warring nations signed an agreement to open Black Sea shipping in July, but Russian President Vladimir Putin on Wednesday criticized the deal, raising fears he might abandon it entirely.

What awaits us

US rail workers could legally strike as early as September 16 after the White House-appointed Presidential Emergency Board (PEB) released recommendations last month aimed at bringing the railroads and unions closer to a deal.

Five unions have reached tentative agreements with the railways on a new contract based on PEB recommendations, which provide for 24% increases over five years and wage arrears, but do not address workers’ concerns about the grueling hours and limited holidays.

The majority of railway workers belong to unions that have not reached an agreement. And a recent online survey by grassroots group Railroad Workers United found that more than 9 in 10 railroad workers would vote to reject PEB recommendations and go on strike.

If workers vote for a strike, Congress will likely step in to block it. They could then vote to fast-track a new contract. Railroads, retailers, producers and other industries are widely urging lawmakers to simply implement the terms set out by the PEB.

Still, some business groups are concerned about the prospect of a slow congressional response to a rail walkout, driven either by lawmakers’ inexperience on the issue or political games before midterms.

The Biden administration, keen to avoid further economic disruption just before November, is pushing unions and the railroads to strike a deal before the issue goes to Congress. Labor Secretary Marty Walsh took part in a negotiation session before the National Mediation Board on Wednesday.

“We are confident that the parties will make every effort to negotiate in good faith toward a mutually acceptable solution, and we urge both parties to do so promptly,” a White House official said in an email.

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