The Effects of Rail Rate Increases on Iowa Grain Shippers and Transportation Modes Thomas Alan Narigon Iowa State University
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Iowa State University Capstones, Theses and Retrospective Theses and Dissertations Dissertations 1980 The effects of rail rate increases on Iowa grain shippers and transportation modes Thomas Alan Narigon Iowa State University Follow this and additional works at: https://lib.dr.iastate.edu/rtd Part of the Agricultural and Resource Economics Commons, Agricultural Economics Commons, and the Economics Commons Recommended Citation Narigon, Thomas Alan, "The effects of rail rate increases on Iowa grain shippers and transportation modes" (1980). Retrospective Theses and Dissertations. 17034. https://lib.dr.iastate.edu/rtd/17034 This Thesis is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital Repository. It has been accepted for inclusion in Retrospective Theses and Dissertations by an authorized administrator of Iowa State University Digital Repository. For more information, please contact [email protected]. ~ ' The effects c f rail rate inc reases on I owa grain snippers and t ransportatio n mcaes ) ? . ' by .!Vlt.7 c. :.i Tho mas Alan Narigon A Thesis Submitted t o the Graduate Fac ul~y i n Partial Fulfil l me n t of the P.equireme~ts f o r ~r.e De gree of ~1...?i.S '!' ER OF S CIENCE Department : Economi cs Major : Ag ricultu r al Economi c s Signatures have been redacted for privacy Iowa State Cniversity P.me s, I o v.'a 19ao 1 315468 ii TABLE OF CONTENTS Page CHAPTER I . INTRODUCTION l Objectives 4 CHAPTER II . METHODS OF ANALYSI S 5 The Study Areas 5 The Model 9 Constraints 14 CHAPTER III. THE DATA 17 The Supply of Grain 17 The Basis 19 Grain Transportation Rates an d Estimated Costs 29 Truck Rate Estimates 37 Rail Rates 37 Est imate~ G1ain Handling and Storage Investment Costs 39 CHAPTER IV. RESULTS 41 Method of Presentation 42 Eastern District Re sults 47 S~mrn a ry of the Eastern District 63 Western District Results 66 Summary of the We$tern District 81 CHAPTER V . SU!-W'J>.RY At~D CONCLU SIONS 85 Conclusions 8 6 Suggestions for rurther Research 89 iii Page BIBLIOGRAPHY 91 ACKNOWLEDGMENTS 93 i v LIST OF MAPS Page Map 1 . Locations of the study areas and final ma rkets 7 Map 2. The eastern district 8 Map 3. The western district 10 v LIST OF TABLES Page Table 1. Estimated storage , receiving , load-out , and drying capacity of elevators in the study areas in 1977-1978 18 Table 2 . Estimated beginning and e nding st~cks, recei pts, and shipments of corn and s oy- beans by e l evators in t he western district in 1977- 1978 by quarter in thousands of bushels 20 Table 3 . Estimated beginning and ending stocks , receipts, and shipments of corn and soy- beans by elevators in the eastern district in 1977-1978 by quarter in thous ands of bushe ls 21 Table 4 . Flows of soybeans from the eastern district to findl markets in thousands o= bushels duri ~g the 1977- 1978 marketing year a s repor ted in the elevator survey 22 Table 5. Flows of corn from the eastern district to final markets in thousands of bushels during the 1977- 1978 marketing year a s reported in the e lei.-a tor survey 2 3 Table 6 . Flows of corn from the weste~n Qistrict to final markets in thousands of bu3hels during the 1977- l978 marketing year ~ s repor ted i n the elev a tor survey 2 4 Table 7 . Flows of soybeans from the wes~ern district to final markets in thousand s o f bushels dur ing the 1977- 1978 marketing year as reported in the e l evator survey 25 Table Ba . Esti~ated averaga delivered corn basis at selec t ed markets in dollars per bushel by quarter and mode of delivery, September 1977 to August 1978 27 vi Page Table 8b . Estimated delivered soybean basis a t sele cted markets in doll ars per bushel by quarter and mode of delivery, September 1977 t o August 1978 28 Table 9 . Speed- d istance r e l a tio n s hip for grain transportation by types of v ehi~les in miles per hour 34 Table 10 . Estiffiated costs of hauling grain in tractor-trailer and tandem t rucks by trip distance and s peed in late- 1977 36 Table 11. Railroad rates for transportiDg corn and s oybeans from select ed Iowa o rig ins to s elected mar kets by size of shipment in cents per hund r edweight a t Ex Parte 349 rate levels , eastern and western distric t s 38 Table 12 . Estimated variable cost of receiving and loadi~g out grain at country elevators and subterwinals in cents per bushel , 1974 and 1978 40 Table 1 3 . Estimated variable costs for storing corn and soybeans into the fol lowing q uarter d uring the 1977-1978 crop year , in do llars per hundredweight, a t elevators and by study area 40 Table 14 . Estimated value of the o b jective f unction for five comput e r solutions , eastern district , in dollars 47 Table 15. Esti.mated corn and soybean shipments in bushels by mode from the eastern d iscrict by computer solution 49 Table 16. Estimated c hange in the cost cf marketing corn and s oybeans over the base solution, eastern district , i n cents per bushel by type and size of shipper 51 Table 17. Estima~ed ch a nge in the cost o f ma rketing corn and soybea ns over the b2s c solution in cents per bushel , eastern d~_s trict , by amount elevators shipped by rail in 1977- 1978 mark~ting year 53 vii Page Table 18 . Estimated change in the cost o f marketing corn and s oybeans over the base solution in cents per b ushel, eastern district by predominant d istance elevators shipped in the 1977- 1978 marketing year 53 Table 19 . Estimated rail and truck revenues from corn and s oybean shipments, eastern district, by c omputer s olution 55 Table 20 . Esti~ated thousands of ton- miles of corn and s oybean shipments by rail and truck , eastern distric t, by computer solution 55 Table 21 . Estimated thousands of rail ton- miles by maximum size of elevator rail loading capacity , eastern district , by computer solution 57 Table 22 . Estimated thousands of rail ton- miles by percent of corn and soybeans e l evators shipped by r ail in the 1977-1978 marketing year, eastern district by computer solution 58 Tabl e 23. Estimated thousands of rail ton- miles by d istance e l evators shipped corn and soybeans , eastern district , by computer solution 59 Table 24 . Eastern d istrict quarterly ~o tal s for corn in thousands of bushels by compu te~ solution 61 Table 25 . Eastern district quarterly totals for soy- b eans in tho usands of bushels by computer soluti on 64 Table 26. Estima ted value of the objecti ve function for five c omputer s olutions , western district , in dollars 67 Table 27 . Estimated corn and s oybean shipme nts by mode from the western district by computer solution 68 Table 28 . Estimated change in t he cost cf marketing corn and s oybeans o ver the base s olution, western district , in cents per bushel , by s ize of shippe r 69 viii Page Table 29 . Estimatec change in the cost of marketing corn and soybeans over the ba2e solution in cents per bushel, western district , by amount elevators shipped by rail in ~ he 1977- 1978 marketing year 7 0 Table 30 . Estimated change in the cost of marketing corn and s oybeans over the base s olution in cents per bushel, western district by pre- dominant distance e l evators shipped in the 1977- 1978 marketing year 71 Table 31 . Estimated rail a nd truck revenues from corn and s oybean shipments , western d istrict , by computer solution 73 Table 32 . Esti mated thousands of ton - ~iles of corn and soybean shipments by rail and trnck , western district , by computer solution 74 Table 33 . Esti mated thousands of raii ton- miles by maximum size of elevator rai l l oading capacity , western district , by computer solution 76 Table 34. Estimated thousands of rail ton- miles by per cent of corn and soybeans elev~tors shipped by rail in the 1977- 1978 ma rekting year, western cistrict by computer solution 77 Table 35 . Estimated thousands of rail ton - ~i les by dis tance elevators shipped corn a nd soybeans , western d i strict, by computer s olution 77 Tabl e 36. We s tern district quarterly totals for corn i n thousands of bushels by computer s o l ution 79 Ta ble 37. Western district quarterly totals for s oy- beans in thousands of bushels by computer solution 82 1 CHAP~ER ! . INTRODUCTI ON The farmers i n Iowa typically p roduce a large surpl u s of corn and soybeans that must be transported to p r ocessors and export markets . In 1979 , railroads hauled 53 percent of all g rain moved to ma r kets in the U.S., and 51 percen~ of all grain destined to export markets (2) . As the demand for U. S. g rain grows worldwide, and new markets develop nationally , the rail- roads will continue to play a major part in the transportation of grain . However, the average return on investment of all Class I railroads in 1978 averaged only 1. 6 percent (3) .