Long-term Rail Service Availability Key Agricultural Market Ingredient

The success of United States production agriculture is closely tied to a healthy and competitive rail system. It's important to understand recent changes in the railroad industry and in the services they offer agricultural shippers. Changes in both industries influence logistical choices and the distribution of risk, reward and cost along marketing channels.

Upper Great Plains Transportation Institute associate research fellows Kimberly Vachal and Dr. John Bitzan studied the long-term availability of railroad services for U.S. agriculture. Through review of existing data and a Delphi survey, they describe trends in rail service and their potential impacts on agricultural shippers, projecting through 2010.

Vachal and Bitzan contend understanding these emerging trends is critical to making discerning resource allocation and policy decisions that affect the future of the rail grain industry. Further, they note, rail service is a key component in the long-run competitiveness of the U.S. grain and oilseed industry in delivering products to domestic and international markets.

Rail service encompasses a broad scope of issues that surround price, efficiency and reliability. Rail rates and freight programs have evolved substantially these last 20 years as railroads have been given freedom to use differential pricing, service and rate structures to grow their businesses, and encourage shipper investment aimed at increasing efficiency for shipping via rail.

Vachal and Bitzan reviewed earlier research and conducted a Delphi survey to develop a consensus of industry experts regarding their expectations for the rail grain industry. A series of three questionnaires led to several future expectations:

• Further consolidation of the rail and elevator industries
• Increasing prominence of the HAL (286,000 pound) cars in grain service
• An increase in rail rates from 1 to 4 percent annually during the next decade
• Expanded use of shuttle/efficiency rail programs for major grains
• An increased use of market-based car ordering systems
• Growth of the short line rail network
• Small market-scale, but large volume, increases in the share of grain marketed via container

These expert opinions will be considered in future research and discussions regarding longer-term implications of government policy and market investment decisions in the rail grain sector.

To obtain the full report "The Long-Term Availability of Railroad Services for U.S. Agriculture," DP-136, contact the Upper Great Plains Transportation Institute at North Dakota State University, Fargo.