Enhancing mobility of people and goods in rural America.

WHEAT MARKET TRANSPORTATION COMPETITIVENESS

Prepared for

North Dakota Wheat Commission

December 2010

Kimberly Vachal, PhDAgricultural and Industrial Freight Center

Upper Great Plains Transportation Institute, NDSU

April 2010

Enhancing mobility of people and goods in rural America.

Overview

• Background• Market Flows• Characteristics• Trends• Future Work

Enhancing mobility of people and goods in rural America.

Focus: Scope/Competitive Position US produces over 2B

bushels of wheat annual ND production

concentrated in HRS and durum – local, domestic, and export markets; imports also a factor

Canadian proximity/access

Intramodal, intermodal, product, and geographic competition factors

HRW43%

HRS22%

Durum4%

SRW20%

White11%

Source: NASS, USDA, 2010

US Wheat Production 2007/08 to 2009/10

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Competition

Intramodal Intermodal Product Geographic

Intramodal Competition

Rail Grain Originations, 1980

Rail Grain Originations, 2007

Source: American Association of Railroads

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Intermodal Competition

Barge Accessibility Local Processing – Trucks …Container?

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Producer Truck Investments

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Shuttle Investment

1999=7

2010=49*

*Update in Progress,.

Why is Rail Important?

HRS Wheat Durum

Why is Rail Important?

HRS Wheat Durum

2006

/07

2007

/08

2008

/09

2009

/10*

0%

10%

20%

30%

40%

50%

60%

70%

1-24 Cars25-49 Cars50-99 CarsTruck100 Cars or More

Mode, Share

of

Bush

els

2006/07 2007/08 2008/09 2009/10*

-10%

0%

10%

20%

30%

40%

50%

60%

70%

1-24 Cars25-49 Cars50-99 CarsTruck100 Cars or More

*Preliminary; Source: NDPSC Grain Movement Data

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Is Rail Important?

Rail Utilization for Wheat

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Is Rail Important?

U.S. Wheat Exports

Relative Dependence

Enhancing mobility of people and goods in rural America.

Is Rail A Factor?

0%

10%

20%

30%

40%

50%

60%

1990

/91

1992

/93

1994

/95

1996

/97

1998

/99

2000

/01

2002

/03

2004

/05

2006

/07

2008

/09

Impo

rts a

s Sh

are

of D

omes

tic U

se

HRW

HRS

Durum

Enhancing mobility of people and goods in rural America.

Waybill Market Flows, 2008North-

eastern Southern WesternSouth-

westernMountain

PacificThousand

BushelsNorth Dakota 2% 1% 61% 7% 28% 365,557 Kansas 0% 5% 17% 65% 13% 303,476 South Dakota 0% 1% 62% 26% 10% 145,451 Montana 0% 0% 6% 1% 93% 163,041 Canada 34% 21% 28% 11% 5% 84,650

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Market Concentration/Diversification

Canada

Kansa

s

Monta

na

Nort

h D

ako

ta

South

Dako

ta

0%

20%

40%

60%

80%

100%

NortheasternSouthernWesternSouthwesternMountain Pacific

State

Rail S

hare

Sh

ipp

ed

by B

EA

Ter-

rito

ry

Source: STB Public Use Waybill, U.S. DOT, 2008

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Waybill Market Flows2008 Avg 99-01 Avg 06-08 Avg 99-01 Avg 06-08

Grand Forks. ND-MNPortland-Salem. OR-WA 1,073,243 35,109 1,019,011 2% 25%Territory - Western 759,993 133,022 780,680 6% 19%Chicago-Gary-Kenosha. IL-IN-WI 611,932 584,339 203,977 26% 5%St. Louis. MO-IL 318,100 348,098 542,917 15% 13%Minneapolis-St. Paul. MN-WI-IA 197,101 187,894 185,820 8% 5%Houston-Galveston-Brazoria. TX 136,131 71,123 107,020 3% 3%

Minot. NDPortland-Salem. OR-WA 371,838 338,520 558,146 21% 26%St. Louis. MO-IL 336,573 155,130 266,924 9% 12%Territory - Western 195,989 33,290 353,712 2% 16%Chicago-Gary-Kenosha. IL-IN-WI 195,291 184,674 65,097 11% 3%Minneapolis-St. Paul. MN-WI-IA 73,579 92,793 89,750 6% 4%San Antonio. TX 69,524 16,571 37,550 1% 2%

Bismarck. ND-MT-SDChicago-Gary-Kenosha. IL-IN-WI 562,941 355,184 187,647 22% 8%Portland-Salem. OR-WA 275,010 461,367 336,733 29% 14%Minneapolis-St. Paul. MN-WI-IA 153,758 91,388 123,789 6% 5%Territory - Western 135,421 109,333 456,742 7% 19%Los Angeles-Riverside-OrangeCnty.CA-AZ 131,628 17,877 109,346 1% 5%St. Louis. MO-IL 121,397 147,367 270,662 9% 11%

Fargo-Moorhead. ND-MNChicago-Gary-Kenosha. IL-IN-WI 556,258 712,659 185,419 30% 7%Portland-Salem. OR-WA 556,194 118,968 546,296 5% 20%Territory - Western 328,330 114,445 580,568 5% 21%St. Louis. MO-IL 279,435 327,624 374,695 14% 14%Minneapolis-St. Paul. MN-WI-IA 172,891 201,901 127,376 8% 5%Rochester. MN-IA-WI 93,002 0 66,998 0% 2%

Shift East to West: Grand Forks BEA, 8% to 44% Minot BEA, 23% to 42% Fargo BEA, 10% to 52%

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Rail Industry Rate Trends

Source: Association of American Railroads, Freight Commodity Statistics. Adapted from USDA, 2010

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Grain and Oilseed Revenue per Ton

Source: USDA, 2010 from STB Waybill Summary.FCS, car premiums/discounts not included in tariff revenue.

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Grain and Oilseed Nominal RPTM, by Shipment Size

Source: USDA, 2010 from STB Waybill Summary.FCS, car premiums/discounts not included in tariff revenue.Approximately 37 bushels/ton and 3,333 bushels per car.

Enhancing mobility of people and goods in rural America.

Wheat – Average Shipping Rate Compared to Average Farm Price

Source: STB and NASS adapted from USDA, 2010 FCS, car premiums/discounts not included in tariff revenue.Approximately 37 bushels/ton and 3,333 bushels per car.

Enhancing mobility of people and goods in rural America.

Local Tariff Rate Trends, Wheat

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2008

2009$1,500

$1,700

$1,900

$2,100

$2,300

$2,500

$2,700

$2,900

$3,100

SingleMultiUnit/DET

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2008

2009$3,000

$3,200

$3,400

$3,600

$3,800

$4,000

$4,200

$4,400

$4,600

$4,800

SingleMultiUnitShuttle

Minneapolis Portland

Source: BNSF Published Tariff

FCS, car premiums/discounts not included in tariff rate.Approximately 37 bushels/ton and 3,333 bushels per car.

$ p

er

Car

$ p

er

Car

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Summary Points

The data reveal shifts in some of the origin-destination corridors

Concentration v. diversification in US and Canadian origin-destination patterns

A spike and non-traditional patterns in deliveries to the Duluth market is identified for the most recent marketing year as well as an increasing trend in durum imports for the U.S. consumer market.

Narrowing in rail rate spreads among shipment sizes Lower expenditures per bushel mile in rail wheat

markets, but unclear regarding implications related to competitiveness in rail alternatives and market access

Enhancing mobility of people and goods in rural America.

Future Research

• Factors for Focusing Efforts in Supply Chain Opportunities/Transport Competitiveness

• Expand Descriptive Analysis• Modeling

• Wheat Supply Chain Scenarios & Sensitivity• Optimization – Partial Equilibrium Model for

HRS and Durum Market Flows• Factorial Analysis – Role of Intramodal and

Intermodal Competition (1999, 2005, 2009)

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Discussion