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ZEEB ROAD, ANN ARBOR, Ml 48106 18 BEDFORD ROW, LONDON WC1R 4EJ, ENGLAND 7906144 | I FELDENS, ARAY MIGUEL A transportation .s t o r a g e n e t w o r k a n a l y s i s o f WHEAT ANO SOYBEANS i n Rio GRANDE DO SUL, I BRAZIL. THE OHIO STATE UNIVERSITY, PH.D., i i I I I International 300 n . z e e b r o a d , a n n a r b o r , mi 4s io g (£) Copyright by Aray Miguel Feldens 1978 A TRANSPORTATION-STORAGE NETWORK ANALYSIS OP WHEAT AND SOYBEANS IN RIO GRANDE DO SUL, BRAZIL DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University By Aray Miguel Peldens, B.S., M.S. # * * # * The Ohio State University 1978 Reading Committee: Approved By Donald W. Larson <Q * n i \ 1 ^ "'v Richard L. Meyer UJ Norman Rask Adviser Department of Agricultural Economics and Rural Sociol< Dedicated with affection to my parents. ii ACKNOWLEDGMENTS Anyone who has completed a doctoral program is fully aware that many people have contributed to its development and completion. I wish to express my gratitude to some whose support was made clear throughout my graduate studies at OSU. I wish to express deep appreciation to Dr. Donald W. Larson, who served as my major adviser. His guidance, encouragement, and friendly way of always being available were crucial and more than vital in the development of this dissertation. The suggestions and assistance gave by Drs. Norman Rask and Richard Meyer made a positive contribution to this research report. Many professors influenced the development of this investigation; among them I would like to thank Dr. Francis E. Walker for the valuable suggestions and comments about the methodological aspects of this work. This investigation was supported by many Brazilian people and institutions. Special gratitude is expressed to the Centro de Estudos e Pesquisas Economicas (IEPE) at the Universidade Federal do Rio Grande do Sul (UFRGS). This institution made possible my doctoral studies and iii gave great support to the data collection phase of this investigation. Special thanks are extended to Professor Eli de Moraes Souza, director of IEPE, and Dr. Humberto V. Richter, coordinator of the Programa de Ensino Agricola Superior (PEAS). Finally, I thank my family who have encouraged my educational efforts and especially to my wife, Maria das Gracas, for accepting my "absence" for such a long time and for sharing with me the rejoice of completing this proj ect. My doctoral program and much of the work reported herein were made possible by a fellowship from the Agency of International Development (AID). The Agency’s support is gratefully acknowledged. To the many unnamed, a very special thanks. iv VITA December 16, 1 9 ^ ............Born - Cruzeiro do Sul, Rio Grande do Sul, Brazil. 1968..........................B.S., Paculdade de Agronomia, Universidade Federal do Rio Grande do Sul, Porto Alegre, Rio Grande do Sul, Brazil. 1972..........................M.S., Centro de Estudos e Pesquisas Economicas, Univer­ sidade Federal do Rio Grande do Sul, Porto Alegre, Rio Grande do Sul, Brazil. 1973-197 8 .................... Assistant Professor, Departa- mento de Ciencias Economicas, Universidade Federal do Rio Grande do Sul, Porto Alegre, Brazil. 1974-197 8 ............. •....... A.I.D. Fellow FIELDS OF STUDY Major Field: Agricultural Economics Studies in Economic Theory. Professors Edward J. Ray, Tetsunori Koizumi, William G. Dewald and Edward J . Kane Studies in Quantitative Methods. Professors Steven C. Reimer, Wilford L. L'Esperance and~Francis E. Walker Studies in International Trade. Professor Edward J. Ray Studies in Agricultural Marketing. Professors Donald W. Larson and Dennis R. Henderson v TABLE OP CONTENTS Page DEDICATION....................................... 11 ACKNOWLEDGMENTS.................................... iii VITA ............................................. v LIST OP T A B L E S ................................... viii LIST OP FIGURES.................................. x CHAPTER I. INTRODUCTION........... 1 Problem and Justification ............. 2 Organization of the Dissertation. 7 II. SOYBEAN AND WHEAT PRODUCTION, MARKETING TRANSPORTATION IN RIO GRANDE DO SUL . 9 Production Regions of Wheat and Soybeans................................... 11 The Wheat Industry........................ 17 The Soybean Industry...................... 21 Grain Storage in the State of Rio Grande do S u l ........................ 24 The Transportation Network in the State of Rio Grande do Sul................30 The Present Highway System.............. .30 The Railroad Network................... 32 The Waterway Network................... 34 The Highway/Railroad/Waterway Complex . 34 III. METHODOLOGY ............................ 3 6 Theoretical Considerations. .... 36 Review of Literature................... 44 The Analytical Instrument ............. 49 IV. THE RIO GRANDE DO SUL WHEAT, SOYBEAN NETWORK AND A FRAMEWORK FOR PRICING TRANSPORT SERVICES..................... 57 The Time Periods. 57 The Network Model 61 Estreia Port and Terminal Operations. The Highway Network ................... The Railroad Network............. The Waterway Network................... A Framework for Pricing Transport Services................................ RESULTS AND ANALYSIS................... The Wheat Model ........................ The Soybean/Soymeal Model ............. Derivation of the Demand Curve and Elasticities for the Estreia Port . 1 The Cross Elasticities................... 1 VI. SUMMARY, CONCLUSIONS AND IMPLICATIONS . 1 Introduction.............................. 1 Summary of the Wheat Model............... 1 Summary of the Soybean/Soymeal Model. 1 Conclusions ............................ 1 Implications for Transportation and Storage Policy. ................. 1 Implications for Farmers................. - Implications for the Wheat and Soybean Industry..........................1 Future Research and Limitations of the Investisation ..................... - APPENDICES Municipios Included in the Study by Region ..................... 3 The Estimated Fixed and Variable 4- 4- I: 4- OJ C O U J lo ro lv i to I--* I—1 VO CO CO I - J Cost of the Estreia Port. 1 co o ‘-o men over o —i i- e>\ vo tr to to u\ ut h uj t Railroad Revenue, Costs and Rate Estimations.............................. 151 BIBLIOGRAPHY ..................................... 1?" vi i LIST OP TABLES TABLE Page 1. Production of Soybeans and Wheat in the State of Rio Grande do Sul, Brasil, 1975-76. 14 2. Number of Wheat Milling Plants, Total Capacity and Amount of Wheat Processed by Region, Rio Grande do Sul, Brasil, 1976 . 19 3. Number of Soybean Processing Plants, Total Processing Capacity and Amount of Soybeans Processed by Region, Rio Grande do Sul, Brazil, 1976 23 4. Nominal and Net Storage Capacity by Class of Storage Facility in the State of Rio Grade do Sul, Brasil, 1976 ................... 26 5. Nominal and Net Storage Capacity for Grains by Region in the State of Rio Grande do Sul, 1976............. 28 6. Time Periods for the Soybean/Soymeal Network Model, Rio Grande do Sul, Brazil, 1976 .... 59 7. Time Periods of the Wheat Network Model, Rio Grande do Sul, Brazil, 1976............... 59 8. Wheat Flows, Exports and Industry Demands for Each Period, Rio Grande do Sul, Brazil, September 1975 to August 1976 ................. 33 9. Optimal Solution for 1976 Basic Wheat Network Model and Simulations of the Basic Model . 85 10. Flows of Wheat through Alternative Modes of Transportation to Estreia, P. Alegre and Rio Grande in the Basic Model and Simulated M o d e l s ......................................... 36 11. Soybean Flows,