“The timing of this action by Union Pacific could not come at a worse time for farmers,” said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. “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. 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.”
On Friday, April 8, 2022, Union Pacific informed CF Industries without advance notice that it was mandating certain shippers to reduce the volume of private cars on its railroad effective immediately. The Company was told to reduce its shipments by nearly 20%. CF Industries believes it will still be able to fulfill delivery of product already contracted for rail shipment to Union Pacific destinations, albeit with likely delays. However, because Union Pacific has told the Company that noncompliance will result in the embargo of its facilities by the railroad, CF Industries may not have available shipping capacity to take new rail orders involving Union Pacific rail lines to meet late season demand for fertilizer.
The application of nitrogen fertilizer is critical to maximizing crop yields. If farmers are unable to secure all the nitrogen fertilizer that they require in the current season because of supply chain disruptions such as rail shipping restrictions, the Company expects yield will be lower. This will likely extend the timeline to replenish global grains stocks. Low global grains stocks continue to support high front month and forward prices for nitrogen-consuming crops, which has contributed to higher food prices.
Shareholder positions:
CF Industries Inc - (Fertilizer)
https://www.wallstreetzen.com/stocks/us/nyse/cf/ownership
Union Pacific Railroad
https://www.wallstreetzen.com/stocks/us/nyse/unp/ownership
Press release:
https://www.cfindustries.com/newsroom/2022/union-pacific-shipping-restrictions