How a rail strike could cause food prices to spike

(The hill) – The nation’s food supply could suffer if railroad workers strike, raising grocery store prices and limiting U.S. grain exports to countries facing famine.

As early as next week, 115,000 freight rail workers could walk out if they cannot reach a new contract with the railroads, potentially shutting down the national rail network that transports 20 percent of all grain shipments.

While unions say they want to prevent a strike and Congress has the power to block it, America’s food industry is reeling from the prospect of a national rail shutdown in the middle of the peak harvest season.

“Devastating Ripple Effect”

Even a short-term outage “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 will be unable to receive materials and ingredients, and millions of Americans each day will be unable to receive the baked goods they rely on to feed themselves, their families and their communities,” she said.

A mid-September rail shutdown would quickly overload grain storage facilities, leaving farmers with few options to store their crops and increasing the chance of spoilage. Many grain processors will go out of business, driving up the prices of bread and other common products, while farmers will be burdened with huge harvests and lower 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 carry roughly half of the fertilizer, and farmers can’t afford delays, according to a Wednesday letter to congressional leaders from the Fertilizer Institute.

“If farmers don’t get fertilizer, it leads to lower yields, higher food prices and more inflation for consumers,” Cory Rosenbusch, the group’s chief executive, told lawmakers.

Rising food prices — which farm groups blame in part on existing rail disruptions — have hit American families particularly hard. Food prices rose 13.1 percent in the past year ending in July, the biggest annual increase in more than four decades, according to Labor Department data.

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

A nationwide rail shutdown would cost the U.S. economy more than $2 billion a day and lead to a backlog of containers at ports, according to estimates by the Association of American Railroads.

Grain exports and global food security

Since roughly one-third of U.S. grain exports move by rail, a shutdown would also reduce America’s ability to deliver food to foreign nations, particularly those in East Africa and the Middle East, which face the risk of famine after Russia’s invasion of Ukraine.

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

“Congress must be willing to act to ensure our farmers and ranchers can continue to help feed the world,” the groups wrote in a letter to top lawmakers on the transportation committees.

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 early in the invasion, cutting off nations that rely on Ukraine to provide large supplies of grain and oil.

The warring countries signed a deal to open Black Sea supplies in July, but Russian President Vladimir Putin on Wednesday criticized the deal, sparking fears he could abandon it altogether.

What’s ahead

American railroad workers could legally strike as soon as Sept. 16 after the White House-appointed Presidential Emergency Management Board (PEB) released recommendations last month aimed at bringing railroads and unions closer to a deal.

Five unions have reached tentative agreements with the railroads on a new contract based on the PEB’s recommendations, which call for 24 percent raises over five years and back wages, but ignore workers’ concerns for the grueling hours and limited free time.

The majority of railroad workers belong to non-bargaining unions. And a recent online poll by the grassroots group Railroad Workers United found that more than 9 in 10 railroad workers would vote to reject the PEB’s recommendations and strike.

If workers vote to strike, Congress is likely to step in to block it. They could then vote to fast-track a new contract. Railroads, retailers, manufacturers and other industries have largely urged lawmakers to simply implement the conditions laid out by the PEB.

Still, some business groups worry about the prospect of a slow congressional response to the railroad walkout, driven either by lawmakers’ lack of experience on the issue or political gamesmanship ahead of the midterm elections.

The Biden administration, eager to avoid more economic turmoil just before November, is pushing for unions and railroads to secure a deal before the issue comes before Congress. Labor Minister Marty Walsh joined a negotiating session Wednesday before the National Mediation Board.

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