State Variation in Railroad Wheat Rates

Abstract

Wheat shippers in the Central Plains states have no cost effective transportation alternative to railroads. Wheat produced in these areas moves long distances to domestic processing and consumption locations or to ports for export. Wheat shippers in the Great Plains don’t have direct access to barge loading locations and trucks provide no intermodal competition for these movements. Wheat shippers in Montana and North Dakota are highly dependent on rail transport because they are distant from barge loading locations and intra-railroad competition is limited. In North Dakota, the BNSF controls 78% of the Class I rail mileage, and in Montana, the BNSF controls 94%. Montana ships nearly 100% of its wheat by rail.Unlike Montana and North Dakota, the BNSF and UP have roughly equal track mileage in Kansas. The BNSF has 44% of the Class I rail mileage and the UP, 55%. Also, both railroads serve the major Kansas grain storage and market centers. A 2010 USDA study found that in 1988, Montana and North Dakota had the highest rail grain revenue per ton-mile of the 10 major grain producing states. By 2007 this was no longer the case. The overall objective of the paper is to investigate railroad pricing behavior for the shipment of North Dakota, Kansas, and Montana wheat. Specific objectives include (1) develop a model to measure the impacts of railroad costs and competition on rail wheat rates for North Dakota, Kansas, and Montana, (2) identify and measure the major cost determinants of rail wheat prices, and (3) measure intermodal competition by comparing rail wheat rates in captive markets (Montana and North Dakota) to one with more intermodal competition (Kansas). The results indicate that there is little difference in average Montana and Kansas rail wheat rates per ton-mile. However, North Dakota average railroad wheat prices per-ton mile are higher than average Kansas rates per ton-mile.

Congestion and Distribution of Rents in Wheat Export Sector: A Canada–U.S. Cross‐Border Comparison

“…Our results relating to the importance of competition are consistent with Babcock et al (), who find that rail prices in Montana and North Dakota, which have limited access to other transportation modes, were the highest of all the major grain producing states.…”

Hard Red Spring Wheat Marketing: Effects of Increased Shuttle Train Movements on Railroad Pricing in the Northern Plains

“…Considering other rail carriers' prices (R 2 ,R 3 ) as intramodal competition (R com ) and prices of other modes (T 1 ,T 2 ) as intermodal competition (INT com ) equation 4 can be rewritten as: Koo et al (1993), and other related research studies including Bitzan et al 2003 andMacdonald (1989), used market concentration in the form of the Herfindahl-Hirschman index to measure intramodal competition (rail-to-rail). However, in the context of North Dakota, Babcock et al (2014) noted that intramodal competition is very limited in the state. Regional and local railroads often act as subsidiaries for both Class I railroads, hence do not compete directly with them (Babcock el al.…”

“…2014). For example, Dakota Missouri Valley and Western (DMVW), a local subsidiary of Canadian Pacific (CP), serves areas in the state that BNSF does as well, but not CP (Babcock et al 2014). As such DMVW competes with BNSF for this traffic.…”

“…As such DMVW competes with BNSF for this traffic. Additionally, the Red River Valley and Western (RRVW), a subsidiary for BNSF in North Dakota, operates in areas of the state where CP has a strong presence (Babcock et al 2014). In that case, RRVW competes with CP for traffic.…”

Intrarailroad and Intermodal Competition Impacts on Railroad Wheat Rates

“…The study didn't supply rates for wheat separately. Babcock et al (2014) estimated an empirical model of intrarailroad competition involving Montana, North Dakota, and Kansas using OLS (robust standard errors) and double log specifications.…”