How a railroad strike could send food prices soaring

The nation’s supply of food could take a hit if railroad workers go on strike, driving up prices at the grocery store and limiting U.S. grain exports to countries facing famine.  

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

While unions say they want to avert a strike, and Congress has the power to block it, the U.S. food sector is rattled by the prospect of a national railroad shutdown in the middle of peak harvest season.    

A ‘devastating ripple effect’ 

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

A railroad shutdown in mid-September would quickly overwhelm grain storage facilities, leaving farmers with few options to store their crops and boosting the chance of spoilage. Many grain processors would shut down, raising the price of bread and other common items, while farmers would be saddled with huge crop quantities 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 fertilizer, and farmers can’t afford delays, according to a Wednesday letter to congressional leaders from The Fertilizer Institute. 

“If farmers do not receive fertilizer, it results in lower crop yields, higher food prices, and more inflation for consumers,” Corey Rosenbusch, the group’s CEO, told lawmakers.  

Soaring food costs — which agricultural groups blame partially on existing railroad disruptions — have hit American families particularly hard. Grocery prices rose 13.1 percent over the last year ending in July, the largest annual increase in more than four decades, according to Labor Department data.  

There typically isn’t a backup plan for crops that are transported by rail, particularly when the trucking industry is already struggling to keep pace with demand. The same goes for coal, crude oil, steel, lumber, car parts and other items frequently loaded onto freight trains. 

A nationwide railroad work stoppage would cost the U.S. economy more than $2 billion per day and cause shipping containers to stack up at ports, according to estimates from the Association of American Railroads. 

Grain exports and global food security 

Because roughly one-third of U.S. grain exports travel by rail, a work stoppage would also cut down on America’s ability to ship food to foreign nations, particularly those in East Africa and the Middle East that face a risk of famine following Russia’s invasion of Ukraine.  

A coalition of food and agricultural groups, including the American Farm Bureau Federation, urged lawmakers on Thursday to block a freight rail strike, warning that 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 the top lawmakers on 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 nearing famine.  

Russia blocked off Ukraine’s access to the Black Sea at the onset of the invasion, cutting off nations that rely on Ukraine to provide large shipments of grain and cooking oil. 

The warring countries signed a deal to open up Black Sea shipments in July, but Russian President Vladimir Putin on Wednesday criticized the agreement, prompting fears that he could abandon it entirely. 

What lies ahead  

U.S. rail workers could legally strike as soon as Sept. 16 after the White House-appointed Presidential Emergency Board (PEB) released recommendations last month meant to bring railroads and unions closer to a deal. 

Five unions have reached tentative agreements with railroads on a new contract based on the PEB recommendations, which call for 24 percent raises over five years and back pay but don’t address workers’ concerns about grueling hours and limited time off. 

The bulk of rail workers belong to unions that haven’t struck a deal. And a recent online survey from grassroots group Railroad Workers United found that more than 9 in 10 railroad workers would vote to reject the PEB recommendations and go on strike.  

If workers vote for a strike, Congress would likely intervene to block it. They could then vote to fast-track a new contract. Railroads, retailers, growers and other industries are largely urging lawmakers to simply implement the terms laid out by the PEB.  

Still, some business groups are worried about the prospect of a slow congressional response to a rail walkout, driven either by lawmakers’ inexperience with the issue or political games ahead of the midterms. 

The Biden administration, eager to avoid more economic disruption just before November, is pushing unions and railroads to secure an agreement before the issue comes before Congress. Labor Secretary Marty Walsh joined a negotiation session Wednesday before the National Mediation Board.  

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