Estimated grain transportation supply and demand elasticities at selected Gulf ports
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Grain transportation is an important factor affecting the marketing of grain produced in the Mississippi River Valley. The production of corn, grain sorghum, wheat, and soybeans in the valley represented 77 percent of total U.S. production of those commodities in 1976. Export markets represent a major market outlet for producers of grains and oilseeds. Approximately 60 to 65 percent of total U.S. exports of grain and oilseeds are exported through the Gulf ports. Major ports are located on the Mississippi River and North Texas Gulf. Approximately 70 to 75 percent of grain exports from the Mississippi River Gulf ports are received by barge. Approximately 80 percent of grain exports from the North Texas Gulf ports are received by rail. These two port areas were selected for study. Data for the study represent thirty-two quarterly observations on specified variables for the years 1970 through 1977, inclusively. Data were obtained from several sources, including the Association of American Railroads, the U.S. Department of Agriculture, the U.S. Army Corps of Engineers, and rail and barge firms. An explanatory analytical model was developed and consisted of eleven equations designed to estimate relationships among the identified variables. Ordinary and two stage least squares regression analysis was employed as the method of study. Tests of hypotheses were employed as a means of testing the findings for statistical significance. The conclusions of the study were: (1) rate elasticity of demand for grain transport by barges and rail cars was inelastic at the Mississippi River and North Texas Gulf ports; (2) rate cross elasticity of demand for grain transport by barges and rail cars was inelastic at both ports; (3) rate elasticity of rail car demand was relatively more elastic at the Mississippi River Gulf than at the North Texas Gulf; (4) rate elasticity of supply was inelastic for both rail and barge modes; (5) demand for barge and rail movements of grain at both ports was subject to seasonal effects; and (6) the utilization rate of rail cars in grain movements was positive and inelastic with respect to rail rates and also subject to seasonal effects. Based on the findings of this study, certain implications can be drawn for shippers and carriers of grain* The rate inelasticity of demand for grain transportation services implies that industry marginal revenue is negative. Therefore, carriers are reluctant to allocate additional resources to grain transportation. The results of this study imply that rail rates for grain transportation services should increase. Increased transportation rates contribute to high costs for grain shippers. However, these findings indicate that rail car utilization in grain transport increases with rail rates for grain. Increased rail car utilization and decreased delay cost result in reduced cost to grain shippers. Hence, increases in the relative rail rate for grain may not contribute to higher total shipper cost. Additional research to determine cost of delays to shippers was recommended. Limitations to and conclusions of the study were cited. Data employed in this study were aggregated and restrict the results to market situations. The type of analytical model and method of study also limit the application of the results. Weaknesses of the model were due to the failure of the parameter estimates to exhibit relationships as hypothesized in some instances. Regression results were based upon historical data, consequently, the results are applicable only to the extent that future behavior of carriers and shippers of grain is consistent with prior behavior. In addition, demand estimates are applicable only to the selected ports.
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