September 10, 2014 / 6:34 PM / 4 years ago

U.S. grain glut is testing rail and storage system -official

WASHINGTON, Sept 10 (Reuters) - A stockpile of U.S. Midwest grain will likely increase in the coming months and tax farmers already desperate to house or haul corn, soybeans and other products ahead of an expected record harvest, a U.S. Department of Agriculture official said on Wednesday.

Grain stocks this harvest season are expected to exceed permanent storage facilities by about 694 million bushels, or about 3.5 percent of expected harvest totals, said Arthur Neal, who analyzes market and transportation issues in the agriculture sector.

That overstock could fill roughly 174,000 jumbo hopper rail cars with South Dakota, Indiana, Missouri and Illinois among the states most impacted, he said.

“Because 2013 grain is reportedly still in storage and waiting to be moved before the 2014 harvest, it is critical to move as much of the 2013 grain crop as quickly and efficiently as possible,” Neal told a hearing of the Senate Commerce Committee.

The glut is causing snarls along train lines and driving other transportation costs higher.

Barge rates along the Mississippi and Illinois rivers, for instance, are roughly 50 percent higher than the five-year average.

Neal was testifying at a hearing about congested rail lines which have been burdened in recent months by a bump in agriculture production, coal deliveries and oil train shipments.

Senator Jay Rockefeller of West Virginia, the committee chairman, said rail operators had the resources to cover the costs of improving service.

“We know that the railroads are financially strong,” he said in an opening statement. “I want to hear something more (from them) than ‘we are investing a record amount.’”

Neal, deputy administrator of the Agriculture Department Transportation and Marketing Program, said BNSF Railway Co and Canadian Pacific Railway Company were two of the principal operators serving the region hit by the grain glut. (Additional reporting by Karl Plume in Chicago; editing by Matthew Lewis)

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