Grain pricing and transportation: dynamics and changes in markets

Abstract

Changing underlying market fundamentals has resulted in a more robust outlook for grain shipping from the United States. This has resulted in changes in the spatial distribution of production among crops and greater volatility in shipping demands, both intra- and interseasonally. Basis relationships have become more volatile and less predictable. Greater volatility results in more risk for producers and shippers, and exacerbates planning and investment for handling and shipping infrastructure. The purpose of this study is to analyze relationships and impacts among shipping costs and basis values at origins and destinations. The results indicate that (1) basis values have become more risky; (2) all marketing costs have increased; (3) increases in rail tariffs were less than those for barges; (4) daily car values, on average, declined; (5) fuel service charges had moderate changes in absolute terms; and (6) handling margins have had fairly substantial increases, particularly at port. The econometric results indicate that the following variables were significant in explaining variability in origin basis values: shipping costs, Gulf-PNW ocean rate spreads, outstanding export sales, shipping industry concentration, measures of rail cars late, the ratio of stocks to storage capacity, futures prices, and varying measures of futures and destination spreads. Finally, implications for rail pricing, capacity and understanding basis pricing are discussed. [Econ Lit citations: Q130, L900]. © 2011 Wiley Periodicals, Inc.