This article has been reprinted from the May 9 USDA Grain Transportation Report.
The Transportation Services Division (TSD) of USDA’s Agricultural Marketing Service (AMS) sponsored a session on agricultural transportation research during this year’s 60th Annual Meeting of the Transportation Research Forum (TRF). 1 The meeting was held May 2-4, 2019, in Washington, DC.
During the TRF Forum, presenters shared their latest findings on a range of research, spanning different modes, trends, policy, logistics, new technologies, and more.
In addition, TSD also sponsored a “Best Student Ag Transport Paper” award to encourage emerging scholars to conduct new, high-quality research.
Agricultural Transportation Session The agricultural transportation session contained four presentations from researchers whose work is funded through TSD cooperative research agreements.
This section provides a brief summary of the key points from each presentation.
Presentation I: “Prioritization of Agriculture Transportation Projects” Dr. David Ellis (recently retired from Texas A&M Transportation Institute) presented a method of explaining the importance of investing in transportation infrastructure projects using a cost/benefit analysis, from selected highway networks used to transport agricultural products.
The study identified six major components to measure the benefits of improving the transportation system: (1) vehicle operating cost saving; (2) business time and reliability cost saving; (3) personal time and reliability cost saving; (4) safety reduction value; (5) shipper logistics productivity improvement; and (6) social and environmental value.
The method ranks the overall value to agriculture of competing projects and relies on economic data to form a story, to which people—such as the public and policy makers—can relate.
Dr. Ellis offered the following steps to enhance the public’s awareness and increase the chances that beneficial transportation projects for agriculture receive funding: (1) clearly identify the problem; (2) recognize the best solutions; (3) estimate the costs of the best solutions; (4) identify and estimate the benefits; (5) identify potential partners to implement the solutions; and (6) always provide a solution.
Presentation II: “Measuring Market Power in Wheat Transportation” Dr. James Nolan and Chi Su, a research assistant, of the University of Saskatchewan, presented research that examined market structure (the level of competition) over time in two major rail-duopoly wheat corridors: (1) North Dakota to Minnesota, and (2) Kansas/Oklahoma to Texas.2 They developed three models for each region and applied data from the Surface Transportation Board’s Carload Waybill Sample (Waybill).
Their preliminary results suggest the Kansas/Oklahoma to Texas corridor is relatively more competitive than the North Dakota to Minnesota corridor.
Overall, the work attempts to better understand railroad price and behavior within major wheat transportation corridors.
Presentation III: “Rail Prices for Grain Shipments over Time and Geography” Dr. Wesley Wilson (University of Oregon) highlighted the need to better understand the factors behind rail rates for grain shippers.
His research shows transportation rates are a key determinant of grain shipment patterns, such as the degree to which grain shipments occur between certain origins and destinations, and the economic well-being of shippers.
He discussed trends in shipment characteristics and railroad rates, specifically focusing on trends for corn, soybeans, and wheat.
For instance, rail rates for grain (and other commodities) generally increased from about 2003 to 2014 and fell through 2016.
Rail shipment distances have increased for all three commodities, most notably for soybeans, which traveled about 650 miles (on average) in 2000 and 1,470 miles in 2015.
A major goal of the research was to identify the determinants of rail rates using an econometric model, which includes factors such as shipment characteristics and measures of intramodal and intermodal competition.
The study applied a variety of data using the Waybill and Waterborne Commerce Statistics from the Army Corps of Engineers.
The preliminary findings show rail rates (measured as revenue per ton-mile) tend to decrease as shipment sizes and distances increase.
The presence of railroad competition has resulted in lower rates, but the effect has lessened over time, while the discount for using private cars has declined as well.
Presentation IV: Dynamic Changes in Rail Shipping Mechanisms for Grain Dr. William Wilson, of North Dakota State University, described how grain transportation involves many sources of risk and uncertainty for shippers.
Mechanisms for pricing rail and allocating grain cars have evolved over the past few decades to deal with these challenges.
The primary and secondary railcar auction markets have emerged as the two key markets for procuring railcars.
They help allocate capacity across shippers, time, and space.
Two critical features to these markets, as explained by Dr. Wilson, are rail velocity and transferability.
Another key finding was these railcars markets are determined simultaneously with grain basis, the difference the local cash price and the futures price.
In other words, basis influences these railcar markets and these markets influence basis (e.g., when car value goes up, basis goes up; when basis goes down, car value goes down).
Best Student Ag Transport Paper Award The recipient of this year’s best student award paper was Satpal Wadhwa, a PhD candidate at North Dakota State University.
His paper was titled “An Agent Based Simulation Model for Inland Hard Red Spring Wheat to Determine the Impact of Market Factors on Wheat Flows.”
Satpal and his coauthors, Drs. Kimberly Vachal and Alan Dybing, applied geographic information systems (GIS) data and spatial analysis software to develop a simulation model to study the market behavior for hard red spring wheat shipments in North Dakota.
The model aims to assess the market impacts of policy, investment, and service level changes, which involves a complicated interplay among farms, elevators, and railroads.