What caused major change in rail shipments for grain?

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What happens to your corn or soybeans when it leaves your possession? If you are delivering to a feed lot or a processor, it is quite evident what will happen to it. 

But if it flows through an elevator and into a covered hopper car, the destination could be a long ways away and there may be a lot of other grain hauled with it. 

Increases in corn and soybean production, the development of ethanol plants, and China’s hunger for soybeans have all become significant dynamics in the changes the rail industry has made to transport U.S. grain.

In the railroad ledger books:

  • Grain comprises 7.9 percent by tons of all commodities hauled by rail.
  • Grain represents 94 percent by tons of all farm commodities.
  • Grain transportation earned 8.4 percent of total rail revenue in 2009.
  • Railroads hauled 33 percent of all grain transported in the United States in 2007.

But those statics are changing over time according to USDA economists who say since 1994 railroads have moved from hauling single carloads to grain to shuttle-sized shipments which are 75 or more railcars. That is the primary option for movement of corn, soybeans, and sorghum.

However, the use of shuttle trains has not been the primary mode of transportation for wheat. 

Additionally, the distance traveled by rail cars full of grain has increased for corn and soybeans, the US Surface Transportation Board reported, “In 1994, lengths of haul for corn and soybeans were principally between 20 and 500 miles. In 2009, however, the predominant length of haul for these two crops had become greater than 1,500 miles.” 

In terms of a percentage increase from 1994 to 2009, the length of haul for corn increased 71%, for soybeans the length of haul increased 123%, but only 33% for wheat.

However, in the case of wheat the Surface Transportation Board reports, “In 1994, the average length of haul for wheat and sorghum was between 501 and 1,000 miles, representing 40 percent and 34 percent of total movements, respectively.

By 2009, hauls of this length had increased to 51 percent and 54 percent of total movements.” 

The length of haul for grain and the size of shipments are functions of the changing production of corn, primarily, along with the relatively new development of ethanol plants, and the global demand for various types of grain produced in the US. 

The USDA economists report, “As prices have changed to reflect  new supply and demand equilibriums, the size and distance of grain shipments has been affected as well.” 

They report that in 1994, 58% of corn was used for feed and residual, but that dropped to 39% in 2009.  And in 1994, only 6% of corn was used for ethanol, a number that grew to 35% in 2009.  Additionally, the development of distillers dried grains has displaced some use of corn in feed and in exports. 

However, export volume has fallen as corn production has increased, making it unnecessary to increase trainloads from the Cornbelt to Gulf and Pacific Northwest ports.

Corn

The USDA reports, “The  quantity of corn exports decreased only 9 percent, from 61.0 million tons in 1994 to 55.4 million tons in 2009. The use of corn to produce ethanol does not necessarily reduce the amount of corn available for exports because exports depend on price and production in other countries. The percentage of corn moved by shuttle-size shipments increased from 19 percent of rail corn tonnage in 1994 to 55 percent in 2009. Corn shipments of 1 to 5 railcars decreased from 15 percent of the rail tonnage in 1994 to 7 percent of the total in 2009.

Corn shipments of 6 to 49 railcars decreased from 41 percent of the rail tonnage to 19 percent and corn shipments of 50 to 74 railcars decreased from 26 percent to 19 percent of the rail tonnage.  

The distance corn was shipped has increased 71 percent since 1994 (table 1). Corn shipments between 20 and 500 miles, which are most susceptible to truck competition, decreased from 49 percent of the rail shipments (27.3 million tons) in 1994 to 22 percent (16.0  million tons) in 2009, a tonnage decrease of 41 percent.                   

Soybeans

“From marketing year 1994 to MY 2009, U.S. soybean production increased 34 percent in response to high world demand for meat, milk, and eggs, which use soybean meal as a high-protein livestock feed. Soybean tonnages exported have increased 79 percent, from 25.2 million tons in marketing year 1994 to 45.0 million tons in marketing year 2009.  The percentage of soybeans moved by shuttle-size shipments has increased from 10 percent of total rail tonnage in 1994 to 63 percent in 2009. Soybean shipments of 1 to 5  railcars decreased  from 16 percent of total rail tonnage in 1994 to only 3 percent of the total in 2009. Soybean shipments of 6 to 49 railcars decreased from 44 percent of the total tonnage in 1994 to 19 percent in 2009. Soybean shipments of 50 to 74 railcars decreased from 30 percent of total rail tonnage in 1994 to 15 percent in 2009.  The distance soybeans are shipped has increased 123 percent (table 1), partially in response to a 79-percent increase in export tonnages since 1994. Soybean rail tonnages hauled more than 1,500 miles increased from 7 percent of total rail soybean tonnage (1 million tons) in 1994 to 45 percent (13 million tons) in 2009, a tonnage increase of 1,190 percent.

Wheat

“Wheat usage has not changed markedly since 1994. Exports and food are still the primary uses of wheat, comprising 45 percent and 41 percent, respectively, of 2009 wheat use.  Exports have averaged 48 percent of U.S. wheat production from 1994 to 2009, but are variable, ranging from 40 percent to 62 percent of production because of changes in world markets and world production.  Smaller size shipments of wheat are still an important part of wheat markets. Although the percentage of wheat moved by shuttle-size shipments increased from 9 percent of the rail wheat tonnage in 1994 to 36 percent in 2009, shipment sizes of 6 to 49 railcars hauled 47 percent of the tonnage in 2009.  Wheat shipments of 1 to 5 railcars decreased from 20 percent of the total tonnage in 1994 to 12 percent of the total in 2009. Wheat shipments of 50 to 74 railcars decreased from 19 percent of the total rail tonnage in 1994 to only 5 percent in 2009.  The distance wheat was shipped has increased 33 percent since 1994. Wheat shipments between 20 and 500 miles decreased from 32 percent of the total in 1994 (15.1 million tons) to only 19 percent of the total in 2009 (8.3 million tons), a tonnage decrease of 45 percent.  Most wheat is transported 501 to 1,000 miles, which increased from 40 percent of the total in 1994 (18.5 million tons) to 51 percent of the total in 2009 (22.7 million tons), a tonnage increase of 23 percent.”

Summary:

Despite the overall push towards  larger and longer hauls by the railroads to maximize efficiency, the shuttle market has not developed identically for each grain because of differences in exports, production, and usage.   Wheat has been the most consistent of the five grains over the period of study, showing very little change in exports, production, or usage. Increased production of corn and soybeans due to increases in corn-based ethanol and soybean exports have led to shuttle-sized shipments.

Source: FarmGate blog


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