“Railroad Rates for Wheat” Article – USDA Grain Transportation Report (June 15, 2017)

The USDA Agricultural Market News service published an article on “Railroad Rates for Wheat” in the June 15, 2017 edition of the Grain Transportation Report.

The article addresses the potential causes of higher rail transportation costs that currently exist for U.S. wheat than for other U.S. grains over similar rail routes.  The full June 15, 2017 USDA Grain Transportation Report is available at the following web address:

https://www.ams.usda.gov/services/transportation-analysis/gtr

Following is the key feature article of this report addressing “Railroad Rates for Wheat

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U.S. Corn Transportation Profile from the USDA Ag Marketing Service – August 2014

The USDA Agricultural Marketing Service has published a Corn Transportation Profile (August 2014).  This report was authored by Marina R. Denicoff, Marvin E. Prater, and Pierre Bahizi.

Following is the Executive Summary, with the full report available at the following web address:  http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5108805

Executive Summary

America’s farmers depend on transportation as the critical link between the fields of growers and the tables of consumers, both here and abroad. Transportation is a derived demand because the production and consumption of an agricultural commodity create the demand for transportation services. As such, it is an essential part of marketing; any change in supply or demand of the underlying commodity or commodities that compete for transportation services can affect the transport system’s efficiency by bringing about either shortages or surpluses in transportation capacity. This report examines transportation implications of the recent trends and outlook for U.S. corn.

Key highlights:

* Since the mid-1990’s, U.S. corn production has increased by 88 percent, but acreage devoted to growing corn has increased by only 34 percent. As demand for corn increased dramatically between 2006 and 2013, especially for ethanol production, U.S. farms responded by boosting production and acreage.

* The United States remains the world’s largest exporter of corn. The U.S. market share of world corn exports, however, has been declining as the world corn trade has been increasing.

* Corn prices, transportation costs, and the price of feed substitutes (such as distillers’ dried grains and feed-quality wheat) influence foreign demand for U.S. corn. Unexpected changes in export demand pose logistical challenges for U.S. grain shippers and carriers.

* If the projected long-term growth in corn exports materializes over the next 10 years, demand for barge and rail services will increase because corn exporters rely on these two modes of transportation to move the crops from the primary production regions of the United States to the ports on the West Coast, the Gulf of Mexico, the Atlantic Ocean, and the Great Lakes.

* The projected increase in feed use could also result in additional demand for truck and rail service.

* Lower total transportation costs are a major variable in keeping U.S. agriculture competitive in overseas markets.

* The majority of corn exports are shipped through the Mississippi Gulf Coast (65 percent of 2013 corn exports), but ocean shipping cost spreads between the Mississippi Gulf Coast (MGC) and the Pacific Northwest (PNW) exceeding $30 generally lead to a greater proportion of Asia-bound corn being shipped by rail to ports in the PNW.

Following are couple of the key graphics from the USDA AMS report, dealing with “2013 U.S. Corn Production, Ethanol Plants, Export Port Regions, and the GCAUs by State” (Figure 5), and “Corn Export Inspections by Port Region, 2013” (Figure 8).:

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