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Railroads Reopen Yards; Wheat’s Bitter Harvest; Inflation Chops Margins

By Paul Page

 

A Norfolk Southern freight train passes a train on a siding in Homestead, Pa. PHOTO: GENE J. PUSKAR/ASSOCIATED PRESS

Rail yards are starting to rumble with activity again as freight railroads invest in expanding capacity and improving service. Norfolk Southern and Union Pacific have recently reopened several “hump yards,” where trains are broken down and reassembled for their next destinations. The WSJ’s Esther Fung writes the yards were among operations that had been significantly curtailed in the industry’s yearslong push to operate more efficiently by using fewer trains and holding them to tighter schedules. The cost-cutting shutdowns helped boost profits, but shippers say they have paid the price through service disruptions and delayed shipments. Norfolk Southern says it has improved dwell time for its cars since reactivating a yard in Bellevue, Ohio. Shippers say they see the railroads’ efforts to improve service, but added that they are still dealing with delays and have to use pricier truck transport more than they would prefer.

  • The National Mediation Board ordered U.S. railroad negotiators and union leaders back to the bargaining table this week in an effort to avert a strike. (Railway Age)
 

Quotable

“Right now, railroads are constrained by capacity, not by weak demand.”

— Bascome Majors, a research analyst at Susquehanna International Group
 
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Commodities

Wheat is loaded onto a bulk carrier at Australia’s Port of Geelong. PHOTO: CARLA GOTTGENS/BLOOMBERG NEWS

Australia’s projected bumper wheat crop may be running into supply-chain constraints. The country is projecting its second-largest wheat harvest ever following above-average rainfall on its east coast. The WSJ’s Stuart Condie reports the yield could bring a windfall to farmers at a time of record-high wheat prices and help calm global markets concerned about food security. But much of the country’s storage capacity is already full, ports are operating at capacity and exporters face trouble finding capacity in a bulk shipping sector that has been knocked sideways over the past year. Russia’s invasion of Ukraine has disrupted grain-supply routes that were already strained by the pandemic. Australia has been exporting more than 75% of its grain due to outsize harvests over the past two years. But container shortages and potential shipping delays have left Australian wheat fetching less than the global average price, undercutting the potential financial gains. 

  • Rates for mid-sized panamax bulk vessels show signs of rebounding as pricing in the rest of the bulk sector deteriorates. (TradeWinds)
 
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Commodities

A Smithfield Foods plant in Sioux Falls, S.D., early in the pandemic. PHOTO: ASSOCIATED PRESS

Meatpacking supply chains are improving but profits are shrinking. U.S. pork companies that struggled with production early in the pandemic now say they are paying more for hogs from farmers and are exporting less meat to China. The WSJ’s Patrick Thomas reports that thinning margins at companies including Tyson Foods and Seaboard are one sign of the impact that higher prices are having as they course through supply chains. The rising costs are catching up with the roughly $43 billion U.S. pork industry. Consumer demand for pork is weakening, while rising costs for grain, fuel and other supplies are leading farmers to shrink their herds, making the hogs scarcer and more expensive. Tyson has already lowered its outlook for its pork business. CEO Donnie King says the company expects tight hog supplies and declining export demand to slice into sales volumes for the rest of the year.

 
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Number of the Day

59.7

The Logistics Managers’ Index for August, down 1 percentage point from July and the fifth straight monthly decline, reaching the lowest level of the measure of logistics activity in the U.S. since May 2020.

 

In Other News

China’s exports rose 7.1% in August, a sharp slowdown from July and the weakest expansion since April. (WSJ)

The Institute for Supply Management’s purchasing managers’ survey showed the U.S. service sector expanded last month. (WSJ)

German factory orders fell in July for the sixth straight month. (Dow Jones Newswires)

Orders for Class 8 heavy-duty trucks nearly doubled from July to August but remain well behind year-ago levels. (Dow Jones Newswires)

Struggling home-goods retailer Bed Bath & Beyond sought to reassure markets with the appointment of an interim executive to lead its finances. (WSJ)

Oil and minerals companies Sitio Royalties and Brigham Minerals are merging in a $4 billion agreement. (WSJ)

An investigation found BMW’s joint-venture partner in China lost $1.2 billion in funds embezzled through illegal “ghost” transactions. (Caixin Global)

Russia is seeking to build an automotive supply chain largely independent of Western suppliers. (Automotive Logistics)

Blue Alpha Capital says container lines earned a combined $63.7 billion in profits in the second quarter, up $5 billion from the first quarter. (Seatrade Maritime)

A union representing security guards at the ports of Los Angeles and Long Beach authorized a strike. (Journal of Commerce)

China’s Shanghai port opened a large facility for handling only empty containers. (Splash 247)

Online pet products retailer Chewy opened its third highly automated U.S. fulfillment center. (Retail Dive)

Subcontracted drivers for Amazon in Japan are protesting working conditions and low pay. (Japan Times)

The head of U.K. parcel and logistics company DX Group resigned ahead of the results of a corporate governance inquiry. (Motor Transport)

The Philadelphia International Airport plans to build cargo facilities to lure freight operators away from New York. (The Loadstar)

 

About Us

Paul Page is editor of WSJ Logistics Report. Reach him at paul.page@wsj.com.

Follow the WSJ Logistics Report team: @PaulPage, @bylizyoung and @pdberger. Follow the WSJ Logistics Report on Twitter at @WSJLogistics.

 
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