Technical Reports

Assessing the Potential for Improved Functioning of the Grain Merchandising/Transportation System

  • 01
  • Mar
  • 1994
AUTHOR: Apogee Research, Inc.
SUBJECT: Freight Operations
KEYWORDS: Grain Car, Transportation Capacity, Grain Car Shortage, Common Carrier Obligation
ABSTRACT: Since the end of the surplus grain car situation that characterized much of the 1980s, sudden surges in demand have strained the rail grain transportation system with greater frequency, creating recurring problems for shippers and carriers. Public debate has tended to narrowly identify the problem as a grain "car shortage." This study examines the functioning of the grain merchandising/transportation system, of which car supply is only one aspect. It provides a description of the commercial functioning and efficiency of the grain merchandising/transportation system in periods of "normal" and "surging" demand, and an analysis of the trends in rail capacity for grain movement, including factors that affect it. The study found that the term "car shortage" is somewhat of a misnomer. During periods of peak demand, there have been no reports of grain shortages, i.e., feeders/processors ceasing operation, or long queues of ships at ports waiting to load grain. In many respects, the problem centers on the allocation of profit opportunities among competing grain traders, when profit or trading margins are unusually wide. As one approach to solving the problem, the study recommends the use of market pricing of rail grain cars/grain transport to clear the market and to allocate grain transportation capacity to its most efficient use. Market pricing should also be used to govern access of privately-owned cars to railroad systems.