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jEOX FP)1.0 CANADIAN TRANSPORTATION RESEARCH FORUM Lip LE GROUPE DE RECHERCHES SUR LES TRANSPORTS AU CANADA

20th ANNUAL MEETING

PROCEEDINGS

TORONTO, ONTARIO MAY 1985 379

THE POTENTIAL IMPACT OF CROW RATE RATIONALIZATION FOR DIVERTING CANADIAN GRAIN EXPORTS THROUGH UNITED STATES GULF PORTS

JERRY E. FRUIN LONNIE DICKERSON

Department of Agricultural & Applied Economics University of Minnesota, St. Paul, Minnesota

BACKGROUND

As long as rail rates for Canadian export grain movements were restrained by law (the "Crow Rates") to a level substantially below variable costs, there was no incentive for Canadian export grain to be moved by low-cost land or water routes through the United States. However, our pre- vious research (1) indicated that as transport costs increase as a result of Crow Rate rationalization, the total logistics costs for some of Canada's export grain shipments could be reduced by utilizing barge transportation on the

Mississippi River system or unit trains to deep-water ports on the U.S. Gulf. The objectives of this study were to de- termine the quantities of Canadian export grain that would be moved through the U.S. and the resulting, cost savings if such routes were utilized while minimizing the total logistics costs of Canadian grain exports. Our analysis included several combinations of possible rail rate levels and Mis- sissippi barge rate levels. The study looked at actual exports in 1981-82 and projected exports for 1990.

Fruin & 1 Dickerson 380

THE GENERAL MODELA/

A linear programming cost minimization transshipment model was constructed. The model provided for moving three export grains from 21 supply regions over five possible routes to North American ports, and then by ocean vessel to

34 importing ports serving 32 importing countries. The three grains were the major export crops of durum, wheat other than durum, and barley.

The 21 supply origins were formed by combining 47 crop reporting districts in western Canada so that each supply region had historical shipments totaling one to 1.5 million tons of wheat, durum and barley. A central location in each supply region was selected as the country elevator rail shipping point for that region.

Each of the 21 shipping points had linkages (i.e. ,they could ship) to any of the five export ports. Three of the five export routes were by direct rail to the export elevators at Prince Rupert and Vancouver on the West Coast, and to Galveston, Texas on the U.S. Gulf coast. The fourth route from the country shipping points was by rail to Min- neapolis/St. Paul for transshipment by Mississippi River barge to Gulf export elevators on the lower Mississippi.

The fifth route was by rail to Thunder Bay for transshipment

by laker to export elevators on the Gulf of St. Lawrence.

Major grain ports for each of the thirty-two importing

countries were selected as destination points. The

/ The model and all data are described in detail in (2).

Fruin & 2 Dickerson 381

thirty-two destination countries were those which one or more received more than .5% of Canadian exports of accounted of the three grains in 1981-82. These countries exports (3). for approximately 98% of total Canadian grain corresponding to Three Russian destinations were included

Baltic, Black Sea and Far Eastern ports. and the 34 Ocean routes between the five export ports the 170 importing ports completed the model. About 80% of included Possible routes were considered feasible and were in the model.

EXPORT AND IMPORT QUANTITIES periods: the Quantities were determined for two time years actual data was obtained for 1981-82 (the most recent for which complete data was available), and projections based were made for 1990. Export Aupplies for 1981-82 were elevators on the shipments in that crop year from primary ex- in each of the 21 supply regions. Projections of 1990 developed port supplies for each of the supply regions were for from production estimates for 1990 found in Prospect are the Prairie Grain Industry, 1990 (4). These projections of based on a production target for the prairie provinces a 50 million metric tons of all grains. This represents over Production increase of about 9 million metric tons

1981. The 1990 projections assume an increase in exports of about 18%.

Country imports for each grain for 1981-82 were set equal to their imports from Canada in that year. Import

3 FbiCRetson 382 projections by country for 1990 were estimated by determin- ing each country's average percentage of Canadian exports of each grain for the four years 1979-80 to 1982-83 and applying that percentage to Canada's 1990 projected grain exports (3).

TRANSPORTATION AND HANDLING COSTS

All costs were stated in U.S. dollars. Canadian rates and costs were converted to U.S. dollars at the 1981-82 average exchange rate of U.S. $0.8225 per $1 Canadian (5, p. 20). Model runs using the 1990 grain export projections used 1981-82 costs and rates rather than attempting to esti- mate 1990 cost levels. This can be interpreted as assuming that the cost relationships between modes will be propor- tionately the same in 1990 as in 1981-82 regardless of changes in the general price level.

The following logistics costs were included in the cost minimization computations.

a. Rail charges from each of the 21 country shipping

points to the five exporting or transshipping

points. All rail charges from country locations

to points in the U.S. were set at "compensatory

levels" using estimates of rates equal to approxi-

mately 110% of variable costs. These estimates

were derived from a mileage-based linear regression

function obtained from actual 1981 U.S. unit train

rates (2).

Rail charges from country shipping points to

Fruin & 4 Dickerson 383

analy- Canadian locations varied depending on the of sis and included the Crow Rates and estimates U.S. var- compensatory rates approximating 110% of

iable unit train rates derived from the regression

function described above. Examples of these

rates and rate estimates are shown in Table 1. b. Fobbing costs at the five export ports and two costs transshipping points. These were the average

for Canadian ports in 1981-82 (3) and are shown in

Table 2. Export fobbing at Galveston was set equal.

to those at the Canadian west coast ports. Minnea-

polis fobbing was set equal to Thunder Bay, and

Mississippi River Gulf seaboard fobbing was set

equal to St. Lawrence seaboard fobbing. c. 'Lake transportation costs from Thunder h.ay to St.

Lawrence ports. The 1981-82 average of U.S.

$13.01 was obtained from Canadian Grain Exports(3). d. Barge transportation costs from Minneapolis/

St. Paul to Gulf export ports. Barge transporta-

tion rates on the Mississippi River are determined

by market demand and can be anywhere from 100 to

400% of the tariff rates in Bargeload Bulk Grain

Tariff (6). Barge rates are negotiable and highly

variable depending on season, points of origin,

and supply and demand conditions.

The average barge rate from Minneapolis to the

Gulf during 1981 and 1982 was approximately 170%

Fruin & 5 Dickerson 384

TABLE 1 EXAMPLES OF RAIL RATES PER METRIC TON IN U.S. DOLLARS Variable • Cost Shipment Rail Crow Based Point To Mileage Rate Rate

Brandon, MT Thunder Bay 553 2.90 11.64 MB2 Vancouver 1,333 5.44 37.83 PrinceRupert 1,626 5.44 47.68 Minneapolis 578 _.... 12.47 Galveston 1,896 __ 56.74 Swan River, MT Thunder Bay 720 3.45 17.24 MB5 Vancouver 1,359 5.44 38.71 Prince Rupert 1,551 5.44 45.16 Minneapolis 745 -- 18.08 Galveston 2,063 ...... 62.35 Gravelbourg, SK Thunder Bay 954 3.99 25.10 SN4 Vancouver 1,397 5.62 39.98 Prince Rupert 1,588 5.62 46.40 Minneapolis 789 ...... 19.56 Galveston 2,107 _.... 63.83 Saskatoon, SK Thunder Bay 899 3.99 23.26 SN6 Vancouver 1,088 4.35 29.60 Prince Rupert 1,280 4.35 36.05 Minneapolis 915 ...... 23.79 Galveston 2,262 __. 69.04 Medicine Hat, AB Thunder Bay 1,076 4.35 29.20 AA1 Vancouver 871 4.35 22.32 Prince Rupert 1,353 4.35 38.51 Minneapolis 976 ...... 25.84 Galveston 2,294 ...._. 70.11 Calgary, AB Thunder Bay 1,244 4.71 34.84 AA3 Vancouver 642 3.63 14.62 Prince Rupert 1,185 3.63 32.86 Minneapolis 1,153 -- 31.79 Galveston 2,049 ...._ 61.88 Edmonton, AB Thunder Bay 1,228 4.71 34.31 AA5 Vancouver 765 3.63 18.76 Prince Rupert 957 3.63 25.20 Minneapolis 1,241 _.... 34.74 Galveston 2,243 68.40

•

Fruin & 6 Dickerson 385

This was the rate of tariff or U.S. $11.60 (7). study, although the generally used throughout the in several impact of barge rates was analyzed rate levels are scenarios. The different barge

shown in Table 3. American export e. Ocean freight rates from North Average ocean ports to the importing ports. % were obtained freight rates for wheat in 1981-82 In some in- from World Wheat Statistics (8,9). to specific stances, rates were not available ports in the countries, and rates to importing from World Wheat same geographic area were obtained Drewry's Shipping Statistics. Actual rates from instances where Statistics (10) were used in some Wheat Statistics. rates were not available in World distances and phys- Because of the great variability in the costs of move- ical facilities, logistics costs such as elevator ments from farm to the country elevator, country importing storage and handling and movement costs from considered. Ports to interior destinations were not

MODEL RESULTS Rates Baseline Scenario CanadianPorts and Crow simulate the A baseline scenario was developed to and limiting actual 1981-82 crop year using the Crow Rates s through U.S. hipments to Canadian ports. No shipments obtained. One al- Ports were allowed. Two solutions were Bay and Vancouver. lowed unlimited capacity at both Thunder Fruin & 7 Dickerson 386

TABLE 2

FOBBING AND TRANSSHIPPING COSTS IN U.S. DOLLARS PER METRIC TON

Vancouver and Prince Rupert Seaboard Fobbing

Thunder Bay Transshipping

St. Lawrence Seaway Seaboard Fobbing

Source: Canadian Grain Exports 1981/82. p.27. Rates given in US $ at an average exchange rate for 181-'82 of US $0.8225/Canadian $1.

TABLE 3 BARGE RATE LEVELS Barge Rate • Barge Rate Percent of Barge Rate Plus Fobbing / Level Published Ratel U.S. $ of U.S. $4.44

0 130 8.87 13.31 1 170 11.60 16.04 2 210 14.32 18.76 3 250 17.05 21.49 4 290 19.78 24.22 5 330 22.51 26.95

/ Barge rates on the Mississippi River are quoted as a percentage of Freight Tariff 7, Bargeload Bulk Grain Tariff of the Waterways Freight Bureau. (6)

Fruin & Dickerson 387

The other solution limited the total West COast grain ex-

porting capacity to 10,000,000 metric tons per year.

Table 4 compares the results of the two runs with the ac-

tual export shipments in 1981-82.

The results of the baseline run with no capacity re-

strictions indicate that under cost minimization conditions,

approximately 12% of total Canadian grain exports (almost

one-fourth of the grain exported from Thunder Bay) would

have been more efficiently shipped from the Pacific Coast

Ports given the actual demand, Crow's Nest rail rates, and

the ocean freight rates in effect in 1981-82. The results

of the baseline run restricting the West Coast capacity to

10,000,000 metric tons indicates that the total logistics

cost of this restriction was $25 million or an average of

$1.10 per metric ton.Y

Scenario Al--Crow Rates to Canadian Ports, Variable Cost Rail Rates to U.S. Ports and No Capacity Constraints.

Table 5 shows the results of runs using the 1981-82 export and import quantities, Crow Rates from country elevators to Thunder Bay, Vancouver and Prince Rupert, and the variable cost-based rail rates from country elevators to

Galveston and Minneapolis. Barge rates were varied from

130 to 330% of tariff, i.e., export movement was allowed by either direct rail to Galveston or by Mississippi River barge via Minneapolis.

This is the per ton average increase in logistics cost. The additional cost per diverted ton is, of course, much higher.

Fruin & 9 Dickerson 388

TABLE 4

COMPARISON OF BASELINE RUNS WITH 1981-82 ACTUAL SHIPMENTS USING CROW RATES

1981-82 Actual

St. Lawrence, Thunder Bay, Vancouver/ Atlantic Seaboard, Churchill Prince Rupert

Wheat 8,965,819 6,695,637 Durum 1,847,809 462,481 Barley 2,574,099 2,946,615

TOTAL 13,387,727 10,104,733 (57%) (43%) Actual - No objective value

Baseline Run - No West Coast Capacity.Constraints

Vancouver/ Thunder Bay Prince Rupert MT MT Wheat 7,620,689 7,590,375 Durum 796,791 1,425,483 Barley 1,870,287 3,577,238

TOTAL 10,287,767 12,593,096 (44.96%) (55.04%) Objective Value: $851,427,291 ($37.21/MT)

Baseline Run - West Coast Shipments Limited to 10,000,000 Metric Tons Vancouver/ Thunder Bay Prince Rupert MT MT Wheat 8,374,915 6,836,149 Durum 1,860,847 361,427 Barley 2,645,101 2,802,424

TOTAL 12,880,963 10,000,000 (56.30%) (43.70%) Objective Value: $876,541,778 ($38.31/MT)

Fruin & 10 Dickerson 389

TABLE 5

SCENARIO A1-1981-82 CROP YEAR

CROW'S NEST RATES TO CANADIAN PORTS VARIABLE COST-BASED RATES TO UNITED STATES PORTS

1) Barge Rate = $8.87 (130 Percent of Tariff) Vancouver/ Thunder Bay U.S. Gulf Prince Rupert MT MT MT

Wheat 5,466,981 2,153,708 7,590,375 Durum 748,926 47,865 1,425,483 Barley 1,714,028 156,259 3,577,238

TOTAL 7,929,935 2,357,832 12,593,096 (34.66%) (10.30%) (55.04%) Objective Value: $844,131,831 ($36.89/MT)

2) Barge Rate = $11.60 (170 Percent of Tariff) Vancouver/ Thunder Bay U.S. Gulf Prince Rupert MT MT MT

Wheat 6,299,840 1,320,849 7,590,375 Durum 748,926 47,865 1,425,483 Barley 1,817,293 52,994 3,577,238

TOTAL 8,866,059 1,421,708 12,593,096 (38.75%) (6.21%) (55.04%) Objective Value: $848,524,956 ($37.08/MT)

3) Barge Rate = $14.32 (210 Percent of Tariff) Vancouver/ Thunder Bay U.S. Gulf Prince Rupert MT MT MT

Wheat 7,177',003 443,686 7,590,375 Durum 787,328 9,463 1,425,483 Barley 1,817,293 52,994 3,577,236

TOTAL 9,781,624 596,143 12,593,096 (42.75%) (2.21%) (55.04%) Objective Value: $850,758,587 ($37.18/MT)

Fruin & 11 Dickerson • 390

At a barge rate of U.S. $8.87 (130% of tariff), even

with the Crow Rates in effect, the lowest cost solution in-

dicates that 10% of Canadian exports or 2.4 million metric

tons should have been sent down the Mississippi River. The

least cost solution is a total of 7.3 million or 32 per

ton less than in the baseline solution with unrestricted

West Coast capacity.

At a barge rate of U.S. $11.60 (170% of tariff), which

approximates the 1981-82 average, 6% of the Canadian export

grain would have gone down the Mississippi River. The cost

savings would be $2.9 million or 13 per metric ton from

the baseline solution with unrestricted West Coast capacity.

At a barge rate of U.S. $14.32 (210% of tariff), 2% of

the exports should still use the Mississippi River route.

This would allow a total cost saving of $670,000 or an

average of 3 per ton if West Coast capacity was unrestrict-

ed.

At barge rates of 250% of tariff or higher, with no

restrictions on West Coast capacity, grain would not move

down the Mississippi River with the Crow Rates in effect.

It should be noted that although exports were diverted

to the Mississippi River at 130, 170 and 210% of tariff,

the variable cost all rail-routes from Canadian origins

through the U.S. to Galveston were not used.

Scenario A2--Crow Rates with U.S. Export Routes and West Coast Port Capacity Constraints.

In Scenario Al, all the exports that used the river

route were diverted from Thunder Bay and the Seaway. There

Fruin & 12 Dickerson 391

ports. were no diversions from the Canadian West Coast the As noted earlier, when there were no U.S. routes, least cost solutions would route more export grain through the West Coast than the actual capacity in 1981-82. Al- is though this situation is changing as West Coast capacity expanded, a capacity limit of 10,000,000 total metric tons was assigned to the West Coast ports to more closely simulate the actual 1981-82 conditions. The results are shown in Table 6. Under these conditions, and allowing movement through the U.S., the grain diverted from the West Coast all goes to Thunder Bay, i.e., there is no increase in movement to the Gulf.

Scenario B --Variable Cost-Based Rail Rates to All Ports.

In this set of runs, all rail rates were estimated using the unit train cost regression function previously described. An initial run was made without the export routes through the U.S. and with no constraints on Canadian

West Coast capacities. The general pattern of grain flows was very similar to that obtained in the corresponding run using the Crow Rates. The only change was. that 194,000 metric tons of barley was exported through Thunder Bay rather than to the West. The total grain flow went 45.8% through Thunder Bay and 54.2% to the West as compared to

45.0% and 55.0% using the Crow Rates.

Table 7 shows some results when grain movements through the U.S. were allowed. Using the variable cost-based rail rates with barge rates at 130% of tariff, all the Thunder

Fruin & 13 Dickerson 392

TABLE 6

SCENARIO A2--1981-82 CROP YEAR

CROW'S NEST RATES TO CANADIAN PORTS VARIABLE COST-BASED RATES TO UNITED STATES PORTS WEST COAST CAPACITY RESTRICTED TO 10,000,000 METRIC TONS

Barge Rate = $11.60 (170 Percent of Tariff)

Including the U.S. Gulf:

Vancouver/ Thunder Bay U.S. Gulf Prince Rupert MT MT MT

Wheat 7,054,066 1,320,849 '6,836,149

Durum 1,812,982 47,865 361,427

. Barley 2,592,107 52,994 2,802,424

TOTAL 11,459,155 1,421,708 10,000,000 (50.08%) (6.21%) (43.70%) .

Objective Value: $873,639,443 ($38.18/MT)

Frui41 & 14 Dickerson 393

TABLE 7

SCENARIO B1-1981-82 CROP YEAR

VARIABLE COST-BASED RATES TO CANADIAN AND UNITED STATES PORTS

1) Barge Rate = $8.87 (130 Percent of Tariff) Vancouver/ Thunder Bay U.S. Gulf Prince Rupert MT MT MT

Wheat -- 7,620,689 7,590,375 Durum __. 1,329,000 893,274 Barley 2,145,985 3,301,540

TOTAL' 11,095,674 11,785,189 (48.49%) (51.51%) Objective Value: $1,155,655,545 ($50.51/MT)

2) Barge Rate = $11.60 (170 Percent of Tariff) Vancouver/ Thunder Bay U.S.' Gulf Prince Rupert MT MT 'MT

Wheat 4,181,527 3,439,162 7,590,375 Durum 375,805 796,791 1,049,678 Barley 932,442 1,213,543 3,301,540

TOTAL 5,489,774 5,449,496 11,941,593 (23.99%) (23.82%) (52.19%) Objective Value: $1,183,669,365 ($51.73/MT)

3) Barge Rate = $14.32 (210 Percent of Tariff) Vancouver/ Thunder Bay U.S. Gulf Prince Rupert MT MT MT

Wheat 5,466,981 2,153,708 7,590,375 Durum 375,805 420,986. 1,425,493 Barley 1,989,726 156,259 3,301,540

TOTAL 7,832,512 2,730,953 12,317,408 (34.23%) (11.94%) (53.83%) Objective Value: $1,192,937,277 ($52.14/MT)

Fruin & 15 Dickerson 394

Bay-Seaway grain was diverted to the Mississippi River. In addition, 614,000 tons, primarily of durum, was diverted to the Gulf from the West Coast. The potential savings from using the Mississippi route at 130% of tariff would exceed 3/ $46 million or $2.44 per metric ton.-

Table 7 shows that at 170% of barge tariff, approximately half of the diverted grain would return to the

Thunder Bay route and only a small amount of the previously barged grain would go west. At 210% of barge tariff, approximately three-fourths of the grain flow would have re- turned to Thunder Bay, but nearly 12% of the total Canadian exports should still be routed down the Mississippi River.

Although not shown in Table 7, runs were made at the other barge rate levels. At 250% of tariff ($17.05 per

ton) and 290% ($19.78), 10.8% and 9.2% of the export grain should be routed down the Mississippi. At 330% or $22.51

per ton, the Mississippi River would still be the optimal

route for 4.5% of the grain. The total logistics cost per

ton would be $52.45, $52.72 and $52.95, respectively.

Scenario B2--Variable Cost-Based Rail Rates to All Ports with West Coast Capacity Constraints.

Table 8 shows the results of simulations for the 1981-

82 crop year using variable cost rail rates, a barge rate

of 170% of tariff, and West Coast capacity limited to

10,000,000 tons. Under these conditions, 27.7% of the grain

would flow to the Gulf. This contrasts with 23.8% when the

A/This is a lower bound on savings as no control run was made. The upper bound is $73 million.

Fruin & 16 Dickerson 395

TABLE 8

SCENARIO B2--1981-82 CROP YEAR

VARIABLE COST-BASED RATES TO CANADIAN AND UNITED STATES PORTS

Barge Rate = $11.60 (17.0 Percent of Tariff)

Including the U.S. Gulf:

Vancouver/ Thunder Bay U.S. Gulf Prince Rupert MT MT MT

Wheat 4,844,508 4,096,469 6,270,087

Durum 640,085 1,031,034. 551,155

Barley 1,055,224 1,213,543 3,178,758

TOTAL 6,539,817 6,341,046 10,000,000 (28.58%) (27.72%) (43.70%)

Objective Value: $1,193,400,022 ($52.16/MT)

Fruin & 17 Dickerson 396

West Coast capacity is not constrained. This forced diversion from the West Coast is divided with 1,050,000 million tons going through Thunder Bay and 890,000 tons going down the Mississippi. The total logistics cost of $1,193 million when Mississippi River shipments are allowed at 170% of barge tariff with variable cost rail rates is $36 million or $1.55 per metric ton from less than when the West Coast capacity is restricted and barge shipments aren't allowed.

Scenario C--1990 Crop Year, Variable Cost-Based Rail Rates, No Port Capacity Constraints.

As previously described, the Canadian Wheat Board has established a production target of 50 million metric tons

of all grains for 1990 and has estimated that exports of

wheat, durum and barley total 27.7 million metric tons.

This is an increase in exports of nearly 18% over the

1981-82 crop year.

Estimates of supply quantity by region were developed

from (4) and estimated import demands were prorated to im-

porting countries based on their four-year average from

1978-79 to 1981-82 (2). This set of model solutions then

simulated the projected 1990 conditions.

Table 9 presents the results of selected runs. At

130% of tariff, 12.9 million tons or 46.7% of Canadian ex-

ports would go by Mississippi River barge. Almost all of

this is diverted from Thunder Bay as only 180,000 tons are

diverted from the West Coast. The total logistics cost

savings due to use of the Mississippi barge route is $76 million or an average of $2.74 per ton. At 170% of tariff, Fruin & 18 Dickerson 397

TABLE 9

SCENARIO C--THE YEAR 1990

VARIABLE COST-BASED RATES TO CANADIAN AND UNITED STATES PORTS

Barge Rate = $8.87 (130 Percent of Tariff) Vancouver/ Thunder Bay U.S. Gulf Prince Rupert MT MT MT

Wheat 10,115,239 10,565,717

Barley 2,807,754 4,198,290

TOTAL 12,922,993 14,764,007 (46.67%) (53.33%) Objective Value: $1,437,763,991 ($51.93/MT)

Barge Rate = $11.60 (170 Percent of Tariff) Vancouver/ Thunder Bay U.S. Gulf Prince Rupert MT MT MT

Wheat 5,247,491 4,867,748 10,565,717

Barley 1,282,348 1,395,931 4,327,765

TOTAL 6,529,839 6,263,679 14,893,482 (23.59%) (22.62%) (53.79%) . Objective Value: $1,471,835,400 ($53.16/MT)

Barge Rate = $22.51 (330 Percent of Tariff) Vancouver/ Thunder Bay U.S. Gulf Prince Rupert MT MT MT

Wheat 8,476,954 1,638,285 10,565,717

Barley 2,536,984 90,108 4,378,952

TOTAL 11,013,938 1,728,393 14,944,669 (39.78%) (6.24%) (53.98%) Objective Value: $1,508,102,725 ($54.47/MT)

Fruin & 19 Dickerson 398

Thunder. Bay regains 6.5 million tons of grain exports and

Mississippi River barges have 6.3 million tons. Diversion

from the West Coast to the Mississippi River is only 51,000

tons. Cost savings are $1.51 per metric ton. Although not

shown in Table 9, at barge rates of 210%, 250% and 330%,

between 10 and 12% of the grain would be shipped by barge

at an average cost savings of $1.10, $0.78, and $0.47 per

ton, respectively.

Table 9 indicates that even at barge rates of 330% of

tariff ($22.51 per ton), 1.7 million tons would move by

barge. Total logistics cost savings would be $5.4 million

or $0.20 per ton.

CONCLUSIONS

1. At the recent low levels of U.S. Mississippi River

barge rates, it would have been advantageous to ship as much as 10% of Canadian export grain by barge to Mississip-

pi River Gulf ports--even with the Crow Rates in effect.

The shortage of logistics facilities on the Canadian West

Coast does not have much impact on this result.

2. Similarly, at a barge rate of 170% of tariff, which is

somewhat higher than the actual average barge rate for

1981-82, 6% of the Canadian grain exports could have been

advantageously moved by barge even with the Crow Rates in

effect. Some movements would be economical at even higher

levels of barge rates.

3. At low levels of Mississippi River barge rates and unit 1

Fruin & 20 Dickerson 399

vari- train rail rates to Canadian ports equal to 110% of able costs, 100% of the grain moving through Thunder Bay and the Seaway along with small amounts of West Coast grain could be advantageously shipped by barge to Gulf ports. rates, With variable cost-based rail rates and higher barge between 200 and 300% of tariff (higher than the last several years and equal to or exceeding full cost), 9 to 12% of total Canadian grain exports could advantageously be moved down the Mississippi River. This grain would all be diverted from Thunder Bay and the Seaway.

4. The same results generally hold for the 1990 projection.

Ten to twelve percent of Canadian grain exports can profit-

ably be sent down the Mississippi even if barge rates were

above full cost if Canadian rail rates are at or above

variable costs. Most of this traffic would be diverted

from Thunder Bay and the Seaway.

Fruin & 21 Dickerson 400

REFERENCES

1. Fruin, Jerry E. "Potential Impacts of Crow's Nest Rate Rationalization on Midwestern United States Grain Flows and Logistics Facilities." Proceedings of Seventh Annual Meeting of the Canadian Transportation Research Forum, Vol. 1, Montreal, Quebec: Canadian Transporta- tion Research Forum, 1982, pp. VII-76-111.

2. Dickerson, S. Yolanda. "An Economic Analysis of the Effects of Crow's Nest Rate Rationalization on Canad- ian Export Grain Transportation," Unpublished Masters Thesis, University of Minnesota, St. Paul, MN, 1985. 130 p.

3. Canada. Canadian Grain Exports, 1981/82, Canadian Grain Commission, Economics and Statistics Division. various issues.

4. Canada. Prospects for the Prairie Grain Industry-1990, by G. D. Weaver, M.J. Nilsson and R.E. Turney. Canada Grains Council, Winnipeg, Manitoba, 1982.

5. United Nations. FAO Trade Yearbook 1982. Food and Agriculture Organization, Basic Data Unit Statistics Division. Rome: Food and Agriculture Organization of the United Nations. various issues.

6. Waterways Freight Bureau. Supplement 76 to Freight Tariff #7 (Bargeload Bulk Grain Tariff). Washington: Waterways Freight Bureau, 1974.

7. Halbach, D., J.E. Fruin, S. Wulff and C. Eldridge. 1984 Barge Rates for Upper Mississippi River Commodi- ties, Department of Agricultural and Applied Economics, University of Minnesota, November 30, 1984.

8. International Wheat Council. World Wheat Statistics 1984. London: International Wheat Council, 1984.

9. International Wheat Countil. World Wheat Statistics 1983. London: International Wheat Council, 1983.

10. Shipping Consultants, Ltd. Shipping Statistics and Economics. London: H.P. Drewry. various issues in 1981, 1982 and 1983.

Fruin & 22 Dickerson