Disclaimer

The contents of this report reflect the views of the authors, who are responsible for the facts and accuracy of the information presented herein. This document is disseminated under the sponsorship of the Department of Transportation, University Transportation Centers Program, in the interest of information exchange. The U.S. government assumes no liability for the contents or use thereof.

Executive Summary

Investment in shuttle facilities and the ability of these facilities to utilize the more competitive rates in attracting grain has the potential to strongly influence future local grain flow patterns. As these local grain flow patterns adjust to new market signals, demands on the local grain gathering system must be addressed. The purpose of this component of the Strategic Freight Analysis was to provide a market-based synopsis of the potential impact of shuttle train shipments on North Dakota's local grain industry.

Facility infrastructure requirements, economic incentives, investment requirements, and financing packages are unique to each shuttle venture. Based on an earlier UGPTI study, a $6 million green field facility required approximately 10 million bushel handle for profitable returns. Discussions with grain companies and railroads suggest a target of 12 to 15 million bushels for a shuttle facility. This bushel requirement compares to the current average annual handle of 1.2 million bushels for the North Dakota elevator population, and average annual handle of 5.6 million bushels for the state's largest elevators. Therefore, redistribution of bushels in the local elevator industry seems imminent.

HRS wheat, durum, barley, and corn were considered in this economic analysis of shuttle rail rates on the local grain marketing. In the base case -- wheat, the boundary of grain draw areas estimated for the 10 shuttle facilities encompassed 45 percent of the total North Dakota land area. Regarding production, approximately 88.6 million bushels of HRS wheat and 32.9 million bushels of durum were contained in the estimated shuttle draw areas. The 10 draw areas encompassed about 38 percent of North Dakota HRS wheat production and slightly more, 39 percent, of the state's durum production. In the cases of barley and corn, the shuttle facilities have the potential to accumulate 26.5 million bushels (24 percent of average North Dakota production) and 14.2 million bushels (19 percent of average North Dakota production), respectively, based on the estimated boundaries of the draw areas.

Considering these four crops, the 10 shuttle facility draw areas have the potential to originate about 162 million bushels. In relative terms, 2 percent of the elevators may originate up to 32 percent of the average annual production of wheat, barley, and corn. This market share of North Dakota production translates to an average 16.5 million bushels per facility. This potential concentration of bushels has implications for local roads, short line railroads, bridge infrastructure, local processors, local communities, and the North Dakota elevator industry.