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USDA releases agricultural transportation study

The U.S. Department of Agriculture released a comprehensive report on agricultural transportation in the United States on Tuesday. The report, Study of Rural Transportation Issues, was mandated by the 2008 Farm Bill and covers the four major modes of transportation commonly used by agriculture in the United States-truck, rail, barge, and ocean vessel.

Agriculture is the largest user of freight transportation in the United States and the study looks at the four main modes used: trucking, railroads, barges, and ocean vessels. The report finds global demand for our agricultural products has changed rapidly with dramatic increases in production and consumption of corn and soybeans. During the last five years, half of the American wheat crop, 36 percent of the soybean crop and 19 percent of the corn crop were exported. It also projects continued growth in demand thus the need for agricultural transportation will likewise increase.

It is noted that while the four modes of transportation work together to deliver agricultural products, the four are regulated differently. Railroads and ocean shipping are exempt from many anti-trust laws and the report states the lack of competition has the potential to reduce service and raise rates. However, it was also found that since deregulation in 1981, railroad productivity has increased greatly, rates have fallen for many shippers yet the financial health of the railroads has improved benefiting farmers and rural areas.

Rail continues to be the main source of transportation for agriculture especially in the West. “Railroads transport nearly all the grains and oilseeds produced in Montana, more than 70 percent of the commodities produced in North Dakota, and more than half of those produced

in Arizona, Oklahoma, and South Dakota.”

The report also addresses the growing biofuels industry and the transportation needs that presents. With the implementation of the newest Renewable Fuels Standard (RFS2) the system will need to be able to transport 36 billion gallons of biofuels from the Corn Belt to the nation. EPA estimates 40 unit train destinations will be needed for that service; there are currently 13 unit train destinations. Even with the transition to cellulosic ethanol, the main area of production will be in the middle of the country due to the abundance of crop residue.

As for waterways; “Barges move more than a third of our corn exports and 17 percent of our soybean exports through the New Orleans region along the Mississippi River and Illinois Waterway.” The market share of barges has been slowly shrinking for a number of years, and traffic on these waterways has declined. Although aging, the locks and dams on the system are generally reliable. As locks age, however, repairs and maintenance become more extensive and expensive. Funding for new waterway projects is nearly depleted, and there is a growing funding gap to finance ongoing projects. The report calls for “A consensus on the best way to tackle these funding issues is needed.”

Trucking remains the biggest element in agricultural transportation. The industry carries 70 percent of the tonnage of agricultural, food, forest products, alcohols, and fertilizers. Furthermore, more than 80 percent of the nation’s cities and communities are served exclusively by trucks. The industry is highly competitive in that half of the trucking companies in the country consist of one truck and one owner. This competition keeps rates low to the point 95 percent of operating revenue goes into operating costs. Some have called for an increase of load limits to 97,000 pounds with a sixth axle on Interstate highways but the report finds the advantage would not justify the increase in wear on highways and bridges.

Ocean transportation handles more than half of U.S. agricultural exports and while the recession has prompted a decrease in the available fleet, demand is expected to rebound and grow so “Infrastructure and technological improvements are needed at U.S. ocean ports to expand

capacity to accommodate the forecast growth.”

In summary, the report notes that while the four modes which make up the U.S. ag transportation system work in unison, each mode is controlled and regulated by different agency. It concludes that, “Investment and planning could be better focused if it were more system-based. A systems-based approach could identify choke points in the network, and investments could be targeted to improve the interaction between modes.”

Read the full report here: