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Cash Market Moves             07/13 11:25

   Do You Know the Actual Cost to Transport Grain to its Final Destination? 

   Transportation costs are a core component within the soybean, corn and 
related agricultural product supply chains. Congestion and wait times lead to 
delays that increase those costs and reduce efficiency.

Mary Kennedy
DTN Basis Analyst

   The National Grain and Feed Association (NGFA), together with the USDA 
Agricultural Marketing Service (AMS) and Texas A&M Transportation Institute 
(TTI) hosted a webinar on Thursday, July 9, highlighting an in-depth look at 
the research and outcome of a study done by TTI on how congestion and wait 
times during the transportation of U.S. agriculture commodities can be costly, 
thus decreasing the producer's revenue, increasing export prices and making 
U.S. products less competitive on the world market.

   In 2019, TTI conducted a study for AMS with the goal of identifying 
transportation costs associated with these goods. This research was developed 
to aid consumers in better understanding the importance of the transportation 
system and its effects on soybean and corn product prices.

   It's not enough to know just the cost of a truck or rail rates or barge 
freight when moving corn or soybeans to market. Transportation costs include 
the base cost of transporting these products, as well as costs associated with 
delay. Delay consists of wait times and congestion. The study done by TTI 
encompassed the base transportation cost, additional transportation costs due 
to traffic congestion and costs with scheduling and loading delays each step of 
the process. And it can determine a farmer's bottom line.

   Wait times include delay accrued in fields, at elevators, and during 
transloading between trucks, railcars and barges. Congestion may occur with 
rail and barge transit due to weather, accidents, scheduled and unscheduled 
maintenance, shared use of track or reduced capacity at locks; traffic 
congestion on roadways produces greater costs and is less reliably dealt with 
than on other modes, noted the study. Efficient timing and scheduling can 
reduce delays with rail and barge, but highway traffic conditions are more 
volatile.

   David Ellis, senior research scientist at TTI, explained during the webinar 
that, in order to estimate transportation costs, researchers calculated hourly 
transportation costs for truck, rail and barge traffic. These were then applied 
to origin, destination and travel information available for the soybean 
distribution chain. This calculation included a base transportation cost, an 
additional transportation cost due to traffic congestion, and costs associated 
with scheduling and loading delays at each step of the process. These numbers 
were then aggregated to provide a high and low estimate of the total 
transportation cost per ton for soybeans and soybean products for domestic and 
export markets.

   In his example for soybean products, Ellis showed that, while domestic 
soybeans did not show any variation from the low average to the high average, 
other soybean products showed a wide range of total costs of transportation. 
Export soybeans at the Gulf showed a range of $9.40 per ton to a high of $64.60 
per ton. Soybean meal for feed showed a low of $8 per ton to a high of $70.23, 
while soymeal for export showed a low of $11.90 per ton to a high of $65.30. 
Biodiesel costs showed the widest range with the low at $7.30 and the high at 
$101.17.

   Ellis said it is his hope that a new tool developed by TTI and USDA can help 
strengthen the industry's argument for transportation improvements. It is 
called M.A.R.K.E.T. (Measuring Agricultural Relevance of Key Expenditures in 
Transportation) and is free to use. It is designed to provide "high-level 
estimates" of the relative benefit to the grain sector of roadway 
infrastructure projects, inland waterways projects and improvements to 
multimodal facilities.

   Here is a link to the tool: https://market.tti.tamu.edu/grain/

   Ellis also noted that the agriculture industry needs to continue to push for 
infrastructure improvements on our roads, bridges and lock and dams. We all 
know what a failure of any of these can mean for transportation of farm goods 
at origin to final destination. Talk of infrastructure funding has become like 
a broken record; it is repeated over and over again without a plan actually put 
in place.

   Here is a link to my story from July 6 on the latest talk of providing much 
needed funding for infrastructure: 
https://www.dtnpf.com/agriculture/web/ag/blogs/market-matters-blog/blog-post/202
0/07/06/moving-america-forward-act-another-2

   Transportation costs heavily factor into U.S. exports of soybeans and corn. 
Each mode of transportation provides advantages and challenges while providing 
flexibility in reaching markets. However, wait times and delays can affect 
transit time and incur additional costs, noted the study. Increased costs are 
then accompanied by increased export prices and decreased prices paid to 
farmers. Countries like Brazil and Argentina are investing in their 
transportation systems. For the United States to remain competitive in the 
international soybean and corn markets, transportation delays must be mitigated 
where possible.

   "Everyone focuses on what infrastructure improvements will cost and not what 
it will cost not to make the investments," said Ellis. "There is a cost to do 
nothing."

   Here is a link to the entire TTI study: 
https://nam03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.dtn.com%2F
ag%2Fassets%2FTTI-2019-11.pdf&data=02%7C01%7CMary.Kennedy%40dtn.com%7C620bd14093
ab4e75bb6308d827319197%7Cd945da26f07f451496e79b8f78a743d0%7C0%7C0%7C637302441138
945827&sdata=Kez4ma09SSxCQb8dy8zlTCM%2FMrUiXwGEFoV7b0ZSE60%3D&reserved=0

   Mary Kennedy can be reached at mary.kennedy@dtn.com

   Follow her on Twitter @MaryCKenn




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