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GRAIN LOGISTICS

GRAIN LOGISTICS

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GRAIN LOGISTICS

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  1. GRAIN LOGISTICS September 17,2002

  2. INTRODUCTION • Grain transportation is changing for many reasons • consolidation of railroad industry and branch line abandonment--from comprehensive web to connecting major shipping nodes • more farmers have tractor-trailer (semi) truck with which to haul their grain and can and will transport longer distances when profitable • more grain used off-farm, but also more grain consumed within the larger region • Decline in grain exports

  3. Railroad Efficiency Drive • Changes from 1980 to 1996 • employment from 532,000 to 256,000  48%) • trackage: from 179,000 to 147,000 miles 82% • freight cars: from 1.7 million to 1.2 million 70% • locomotives: from 28,000 to 19,000  68% • output: from 22.2 to 24.2 million cars  109% • intermodal units: from 3.1 to 8.2 million cars  264% • revenue ton miles: from 919 to 1,356 billion ton miles  148%

  4. How did Railroads  ton-miles? • Handle shipments over longer distances • at greater velocity • fewer node to service • result of economics • motor carriers more economical for small traffic areas

  5. Efficiency gains • Revenue-per-ton-mile  • Loss and damage claims  • result of better track and equipment--maintenance on this smaller system.

  6. Downside • System pretty much at capacity--no excess capacity • Capacity highly sensitive to slight downturn in velocity—e.g. situation after UP SP merger • Today’s rail system is less compatible with traditional grain movement methods • seasonality of grain movement • year-to-year variability in grain volume to be moved depending on crop size and export demand

  7. Railroads profit driven (as any business) •  Rate of return on assets •  Asset utilization • RRs promoting arrangements that contribute to higher profitability, e.g., • shuttle trains • discourage co-loading • COTS/PERX to ration cars • High value shipments receive higher priority

  8. From Transportation to Logistics • Substitute cheaper information for more costly physical assets • Adoption information technology--EDI • More emphasis on continuous flow, less on seasonal • less transactional and more relationship oriented • trust relationships • Dakota desk • Advance notice of arrival of train

  9. Implications for Grain Marketing • Less rail transportation on demand • Long-term arrangements for large shipments, long distances (pool) • between shipper and carrier • more advanced planning of grain movement • New farm marketing plans may emerge

  10. Shipper concerns • Demanding higher railroad responsibility • BNSF’s Dakota desk is an outcome • Negotiation on co-loading

  11. NGFA-Rail Industry Agreement1998- OCT 2002

  12. NGFA-Rail Industry Agreement(1998- OCT 2002) Arbitration areas General car distribution rules that govern “regular tariff” service Special car-ordering and or equipment rules Rental rates and liability terms of railroad land leased to an agricultural facility http://www.ngfa.org/

  13. Subjects to arbitrationcontinued • Demurrage rules or terms • Misrouting of loaded cars or locomotives • Loss and damage and bill of lading claims • Transportation contracts • Mishandling of private cars or locomotives

  14. “Optimal” Feedgrain Movementon the High Plains, 1998 Based on Least Cost Transportation Network Modeling

  15. Grain transportation on the High Plains • Railroad companies operating on the High Plains • Union Pacific • Burlington Northern Santa Fe • Trucking

  16. Feedgrain Movement Oct-Dec

  17. Feedgrain Movement Jan-Mar

  18. Feedgrain Movement Apr-Jun

  19. Feedgrain Movement Jul-Sep

  20. Applicability of Model • While this is based on least Transportation cost it is consistent with arbitrage opportunities, i.e., basis differentials among locations.

  21. Summary and Implications • Kansas feed grains heavily trucked • look for new grain marketing plans and opportunities (these plans may be more complex and more difficult to evaluate)