Update on Rail Trends For Grain

This article has been reprinted from the Jan. 4 Grain Transportation Report.

Since the partial deregulation of railroads in the 1980s, railroads have been continuously innovating ways to reduce costs by scaling up the size of operations and capturing cost benefits through economies of scale. 

Some of the methods used for grain1 hauled by rail include increasing the number of cars per shipment, increasing the average shipment distance, and using larger car types. 

This article expands previous analysis on the use of longer and larger shipments to reduce operating costs by: 

(1) looking at the most recent data from the 2015 Carload Waybill Sample to assess the extent to which these trends have persisted, and 

(2) highlighting differences in these trends across specific grain commodities.

Grain Cars per Shipment

Railroads have increasingly combined more cars per shipment to reduce costs per ton. 

For all grain commodities, bigger shipments, in terms of the number of cars, have accounted for a growing share of tonnage moved. 

However, some individual commodities stand out—like corn, soybeans, and sorghum—because their shipments are predominately and increasingly 75+ cars. 

Because the trends for the three commodities are so similar, Figure 1 shows the combined tonnage for corn, soybean, and sorghum by the number of cars per shipment. 

The figure shows the tonnage share for 75+ car shipments grew in 2015, continuing a trend that has been happening for decades. 

In the mid-1990s, 75+ car shipments of corn, soybeans, and sorghum made up 20, 11, and 28 percent of tonnage, respectively. 

In 2015, 75+ car shipments for these commodities accounted for 71, 70, and 91 percent of tonnage. 

At the same time, all three of these commodities show a continued decline in the less-than-75-car categories. 

In contrast, Figure 2 shows how wheat shipments are more closely split between 75+ cars and 6-49 cars. 

Additionally, the share of 75+ car shipments of wheat tonnage has fallen in recent years.

Between 2013 and 2015, 75+ car wheat shipments fell from their peak share of 45 percent down to 38 percent, while 6-49 car shipments rose from 40 to 48 percent (Figure 2). 

The relative switch between these two categories may be due in part to reduced wheat exports in recent years. 

Distance Hauled

Grain continues to travel by rail over longer distances, with the average distance increasing almost every year since 1994. 

The average shipment distance for all grain commodities was 747 miles in 1995 and 1,311 miles in 2015. 

Shares of rail grain shipments of 1,001 to 1,500 miles and 1,500+ miles have
generally increased over the years, while the share of 20 to 500 mile shipments has fallen. 

However, this aggregate view does not reveal key commodity-level differences.

Figure 3 shows the share of soybeans moved over 1,500 miles by rail increased substantially in the late 1990s and 2000s. 

While that growth has steadied in recent years, the share of soybean shipments in the 1,001 to 1,500 mile category increased slightly in 2015 compared to 2014. 

Similarly, the trip length for wheat shipments has increased, with more shipments traveling over 1,000 miles (Figure 4). 

Wheat shipments of 501 to 1,000 miles are still the most prevalent, but its share—which averaged almost 50 percent in the 2000s—fell to 42 percent in 2015.

Not only has railed grain tended to move in longer shipments and over longer distances, it has increasingly moved in larger cars. 

In the past few decades, grain by rail has relied primarily on two car types—C-113 covered hopper cars and C-114 covered hopper cars, where the former car type holds 263,000 pounds when loaded and the latter holds 286,000 pounds. 

The use of larger hopper cars has resulted in reduced costs to railroads and some savings to shippers by improving labor and locomotive efficiencies, and reducing rail congestion through the use of fewer cars. 

Since 1994, the use of larger C114 cars has increased; its share exceeded the proportion of C-113 grain shipments by 2007 (Figure 5).

However, the adoption pattern has differed among crops. 

For instance, corn shipments saw relatively rapid growth in the use of C-114 cars in the 1990s, where wheat adoption has been more gradual. 

The shift to larger grain cars has been the most gradual for small grains produced in relatively low volumes, such as barley, oats, and rye. 

The share of barley and oat shipments using C-114 cars did not exceed C-113 cars until 2013 and 2015, respectively. 

Rye still predominantly moves by rail in C-113 hopper cars, with its share averaging 80 percent of shipments from 2011 to 2015.

Conclusion

The trend of railroads capturing economies of scale through larger shipments, greater distances, and bigger cars has generally persisted through 2015, though there is variation across grain commodities.

Soybean shipments have generally used more cars and bigger cars to the greatest degree because they tend to involve larger volumes, both in total and because soybeans are consolidated on fewer routes.

Wheat, in contrast, has some large volume routes, like from origins in northern plains States to destinations in Washington, but it also has many smaller volume routes, such as shipments to the South and East via Chicago. 

In these cases, wheat tends to travel in shipments made up of fewer cars. 

Trends in car types follow a similar pattern, where smaller volume commodities were slower to adopt bigger cars (e.g., barley and oats), or have not adopted them at all (e.g., rye). 

For all grains, rail service is very different than it was only a decade or two ago. At the same time, grain volumes continue to grow.

Given increasing volumes in grain production, it is possible these trends in grain rail service will persist