Since last year's disappointing fall harvest, grain's been a pain for U.S. railroads. Through 2009's first 37 weeks, the volume of corn, soybean, wheat and other agricultural products moving along their networks has dropped about 22 percent compared with volume from the same 2008 period.

In Canada, last year's near-record grain crop has helped railroads at least keep traffic in the black so far in 2009, albeit by only a less-than-1-percent margin. Mexican railroads are the only ones in North America to register a significant boost in '09 grain traffic, which is up more than 16 percent year over year primarily because of strong demand for corn — the nation's food staple — although a severe drought is expected to impact the next crop.

The good news for both U.S. and Canadian railroads is that grain volumes are expected to soar for the former and, at the very least, remain stable for the latter.

Among the primary reasons for a U.S. grain surge:

• the U.S. Department of Agriculture is projecting a corn harvest around 13 billion bushels — which would be the second-largest crop in the nation's history — and a 100 million-bushel jump in corn exports, while domestic ethanol production is expected to increase significantly and DDG exports to China are forecasted to rise 18-fold vs. 2008;
• South American regions that produce soybeans, predominantly in Argentina, experienced a severe drought earlier this year, and Asian consumers are improving their diets by increasing fat and oil intake, presenting a golden opportunity for soybean exports into next year; and
• wheat volumes are expected to be about equal to or slightly better than last year despite sluggish domestic demand, high prices in worldwide markets and the nation's role as a residual global supplier.

A bountiful corn harvest is encouraging to CSX Transportation, which primarily moves grain to feed and processing markets, and also transports corn to eastern ethanol plants.

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