Fertilizer maker faults Union Pacific’s plan to reduce congestion

A Union Pacific locomotive hauls a hopper car and tank cars.

Fertilizer producer CF Industries is criticizing Union Pacific’s plan to reduce the number of railcars on UP’s network in order to reduce congestion, saying the measure would result in delays to customers’ shipments during the spring application season.

CF Industries, a Deerfield, Illinois-based manufacturer of hydrogen and nitrogen products, also said it would be unable to accept new sales involving UP (NYSE: UNP) for the foreseeable future.

UP said Monday in a service update that it would be removing 2% to 3% of UP-controlled cars from the network across multiple commodity groups to maintain fluidity and reduce inventories on the system.

UP’s plan to improve network fluidity also includes adding more employees and locomotives.

CF Industries said it would appeal UP’s actions to the federal government and ask that fertilizer shipments be prioritized ahead of the spring season.

“CF Industries’ North American manufacturing network continues to produce at a high rate to meet the needs of customers, farmers and consumers,” said Tony Will, president and chief executive officer, CF Industries Holdings Inc. “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 U.S. farmers when and where they need it.”

CF Industries said it would be one of 30 companies affected by UP’s plan. According to the company, UP informed CF Industries that the measure would take effect immediately.

The fertilizer manufacturer said it received UP’s notice without advance notice and that UP’s measure would reduce CF Industries’ shipments by nearly 20%.

CF Industries might not have the shipping capacity to take new rail orders on UP-served lines should there be any late-season demand for fertilizer.

The company’s Donaldsonville complex in Louisiana and Port Neal complex in Iowa use UP to serve destinations in Iowa, Illinois, Kansas, Nebraska, Texas and California. Products that would be affected include nitrogen fertilizers, such as urea and urea ammonium nitrate, and diesel exhaust fluid, an emissions control product required for diesel trucks.

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

In response to CF Industries’ comments, UP said the removal of UP-controlled cars is meant to ease congestion. The railroad said it asked customers to reduce their own growing inventories.

Other efforts to address the impact of service disruptions include adding 100 more locomotives to the active fleet, training 450 new employees and relocating approximately 80 new crew members to support high demand areas, UP told FreightWaves. It is also working with customers to meter traffic on UP’s network, which the railroad said will allow UP to continue to serve all customers while simultaneously working through a backlog of cars.

BNSF (NYSE: BRK.B) is taking actions similar to those of UP. It told federal regulators that it is seeking to better manage the active car inventory on BNSF’s network by reducing levels by approximately 2%.

“While this measure may cause short-term capacity adjustments for some shippers, the long-term benefit of quicker network recovery and improved fluidity and velocity will be felt across the network,” BNSF President and CEO Katie Farmer said in a March 30 letter submitted to the Surface Transportation Board in response to service concerns raised by the National Grain and Feed Association.

STB last week asked executives of UP, BNSF, CSX (NASDAQ: CSX) and Norfolk Southern (NYSE: NSC) to explain in a public hearing at the end of the month why there are service issues and what the railroads plan to do to address those issues. The railroads have said that COVID-19-related absences have been partly to blame for the service delays.

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