By DOUG SCHMITZ
WASHINGTON, D.C. – Congestion and wait times in moving U.S. agricultural products reduce efficiency and result in increased export costs and decreased prices paid to farmers, according to a study by the Texas A&M Transportation Institute (TTI).
According to researchers some of this delay cost could be avoided with a better infrastructure. David Ellis, National Grain and Feed Assoc. (NGFA) senior research scientist, said during a July 9 webinar, “We can take some of that delay away, which makes these products more competitive in an international market. We never talk about what the cost is of doing nothing.”
Funded by the USDA, the study, titled ‘Impacts of the Transportation System on Agricultural Products,’ found delay costs range from 12-58 percent of the total transportation cost for agricultural commodities and related products.
“The heart of the project is to look at transportation issues – particularly as they relate to soybeans, but other products as well, and to look at transportation costs, and the impact of those transportation costs on what folks ultimately pay for products,” Ellis said.
“Being on the producer end of things, they can reduce your revenue, they increase prices, which makes us less competitive in international markets, and ultimately cost the end consumer more,” he added.
Conducted by TTI, the study’s research was developed to aid consumers in better understanding the importance of the transportation system, and its effects on soybean and corn product prices.
Ellis said hourly transportation costs were calculated for truck, rail, and barge traffic in the Gulf Region. Then, costs were applied to origin, destination, and travel information for the soybean distribution chain to the Gulf.
“Wait times include delay accrued in fields, at elevators, and during transloading between trucks, railcars, and barges,” the study said. “Congestion may occur with rail and barge transit due to weather, accidents, scheduled and unscheduled maintenance, shared use of track, or reduced capacity at locks; traffic congestion on roadways produces greater costs and is less reliably dealt with than on other modes.
“Efficient timing and scheduling can reduce delays with rail and barge, but highway traffic conditions are more volatile,” the study added.
The study said the transportation of soybeans and corn relies on multiple modes: truck, rail, and barge, with each incurring different costs and issues within the supply chain.
“The more it costs to transport soybeans or corn, the less a producer will receive, which, in turn, can reduce the benefit to the local and national economy,” the study said.
In order to estimate transportation costs, researchers calculated hourly transportation costs for truck, rail, and barge traffic, the study said.
“These were then applied to origin, destination, and travel information available for the soybean distribution chain,” the study said. “This calculation included a base transportation cost, an additional transportation cost due to traffic congestion, and costs associated with scheduling and loading delays at each step of the process.
“These numbers were then aggregated to provide a high and low estimate of the total transportation cost per ton for soybeans and soybean products, for domestic and export markets,” the study added.
When it came to soybeans, there was a significant amount of variation in the high and low averages per ton (except for domestic soybeans), Ellis said.
For example, total transportation costs per ton of soymeal feed range from $8 to $70.23, while costs for biodiesel range from $7.30 to $101.17, he said.
The study said this is because transportation costs increase as products move through more stages of the supply chain. The distance traveled, and the mode (i.e., truck, rail or barge) used, also impacts transportation costs.
Moreover, the same significant variations were seen with delay cost per ton. For soymeal feed, delay costs range from $3.50 to $10.30, while costs for biodiesel range from $3.40 to $11.80.
Researchers found delay costs were typically a higher percentage of lower cost routes than the high-cost routes because high-cost routes are longer, which drives up the transportation cost.
“Being longer distance, the wait costs incurred at loading and unloading make up a smaller portion of the total costs, than on shorter trips,” the study said.
The study said congestion can also affect freight rates of other modes of transportation, the export price of the product, and the price paid to the producer. For example, lock congestion on the Upper Mississippi River has been found to directly affect barge rates in surrounding states.
“The time lost in barge travel represents less freight transported for that time period and can result in lost profits,” the study said. “While barges are delayed at locks and dams, the towboats sit idling which results in increased fuel consumption.”
On the Upper Mississippi, an hour of idling can burn through about 80 gallons of diesel fuel, the study said.
The delays in barge travel times can also increase barge rates which subsequently decrease barge demand, the study said.
“A specific example of this relationship is in the wake of Hurricane Katrina,” the study said. “At the time of the hurricane, the Lower Mississippi was closed to barge traffic, prompting corn prices in prime growing areas, like Southern Illinois and Southern Missouri, to fall 20 percent as a response to empty waterways.
“Barge rates increased shortly after from the usual range of $10-$20 per ton to a high of $39 per ton that season to recover some of the losses,” the study added. “In September of that year, grain exports from Louisiana were 52 percent lower than the previous year.”
Ellis said a new tool developed by TTI and the USDA can help strengthen the argument for transportation improvements.
The tool, called M.A.R.K.E.T. (Measuring Agricultural Relevance of Key Expenditures in Transportation) is designed to provide high-level estimates of the relative benefit to the grain sector of roadway infrastructure projects, inland waterways projects, and improvements to multimodal facilities.
“The congestion and wait time are due to a lack of investment in transportation infrastructure that causes economic inefficiencies in the movement of goods,” Ellis said. “One of things we need to remember is how we communicate these things. We have to put it in terms consumers can relate to.
“We need to use models like the one we developed to help analyze which transportation investment gives us the biggest bang for our buck in terms of returns to the agriculture sector,” he added.
Countries like Brazil and Argentina are investing in their truck, rail, and barge transportation systems to make their soybeans and corn more competitive on the world market.
“For the United States to remain competitive, transportation delays must be mitigated where possible,” the study said.
To read the full TTI report, visit: https://www2.dtn.com/ag/assets/TTI-2019-11.pdf