Local Grain Industry

For purposes of this analysis the local grain industry will be defined as the system of decisions and infrastructure underlying farm-to-market product flows. Seven indiscrete components of this system are described in that they provide the base for analysis of grain flows over local infrastructure. The seven components are:

1. grain and oilseed production
2. producer trucking
3. local elevator industry
4. road system
5. rail network
6. local processors
7. market demand

Grain and Oilseed Production

The farm-to-market product flow is initialized when a farmer determines his production plan for the year. Although weather will impact volumes, quality, and crop maturity, many assumptions about the flow from farm-to-market are commodity-based. Each commodity has a unique set of market supply and demand conditions, in turn, making unique demands on the local grain industry.

North Dakota produces a broad array of grains and oilseeds. To better manage research efforts, four crops are considered in this analysis: hard red spring wheat (HRS), barley, durum, and corn. These crops were selected based on crop production statistics for 1995 to 1999. They accounted for approximately 75 percent of the average annual grain and oilseed production over the five-year period (ND Agricultural Statistics).

Table 2. North Dakota Grain and Oilseed Production, 1995-1999

Wheat constituted approximately 46 percent of North Dakota's grain and oilseed production between 1995 and 1999. HRS wheat, the largest single commodity in planted acres, was seeded on about 35 percent of the state's estimated annual planted acreage over the five-year period. HRS wheat is typified by high protein and strong gluten. It is milled into flour and used primarily as a blending wheat in the production of bread products. Durum wheat, which accounted for 13 percent of annual grain and oilseed production, is the hardest wheat type. Because of this strength its milled product, semolina, is an essential ingredient in premium pasta products. Barley and corn, used in the processing and feed industries, represented about 16 and 11 percent of the average annual production, respectively. Analysis for this report will consider aggregate annual county production volumes. Seasonal delivery patterns for marketing of individual commodities may be useful in discussing local infrastructure issues, such as load restrictions and bridge issues, but will not be considered in the content of the report.

Local Grain Truck Costs

As aforementioned, this analysis is based on a market clearing assumption that annual grain shipments are equal to a five-year county average level of grain production. A primary model input required for the producer side of the farm-to-market decision is the truck delivery cost. The three factors considered in this truck delivery cost are truck cost estimates, distance to market, and composition of the farm truck fleet.

Truck Cost Estimates

Two types of truck costs considered in this analysis are producer and commercial. Producer truck costs are representative of this delivery cost for farmer-delivered grain traffic. The commercial trucking industry represents the custom haul traffic and is an indicator for future potential costs in this industry. The commercial trucking industry is a highly competitive industry with its large number of firms, few economies of size, virtually perfect information, and ease of entry into and exit from the industry. When profits are available competitors will enter the industry until rates are forced down, and vice versa. Truck costs are considered a proxy for truck rates in this analysis. Truck cost estimates reflect 1999 dollar values.

Producer truck costs are based on a 1995 survey of North Dakota wheat producers (Vachal, et. al, 1996). Cost estimates were developed for a single-axle truck, tandem-axle truck, and a semi-tractor and trailer. Fixed costs considered in the model were depreciation, return on investment, insurance, license fees, and housing. The variable costs included tires, fuel, maintenance and repair, and driver's labor. The single-axle truck estimate included $1,277 of annual fixed costs and a variable cost of $0.648 per mile. The tandem-axle truck costs included $2,890 of fixed costs and variable costs of $0.668 per mile. Semi-truck and trailer costs were $5,113 of annual fixed costs and variable costs of $0.825 per mile of variable costs.

Characteristics of the producer truck industry span the array of farm operations in the state. In addition to truck type, costs are influenced by factors such as length of haul, average load, and total bushels hauled. Therefore, three average producer truck cost scenarios are considered. These annual miles are 1,500; 5,000; and 18,000. The 1,500 and 5,000 annual truck mile estimates, which reflect truck costs for farming operations including 800 and 3,000 acres. Average farm size of North Dakota farms, 1,274 acres, is in the mid-range of these estimates (ND Agricultural Statistics, 1999). In addition, annual miles of 18,000 is considered as a proxy for truck costs of large farms and custom trucking activities.

Table 3. Annual Mile Estimates for Producer Truck Costs

Three truck types, single-axle, tandem-axle, and semi-truck and trailer, are considered in the producer truck cost estimates. Average bushels per load were 316; 570; and 890; respectively, for the single-axle and semi-truck and trailer. The single-axle costs were estimated to be $.0095, $.0057, and $.0046 per bushel mile for 1,500, 5,000, and 18,000 annual miles. Tandem-axle cost estimates were $.0091, $.0044, and $.0029 per bushel mile for annual mileage totals of 1,500, 5,000, and 18,000. Semi-truck and trailer costs were estimated to be $.0095, $.0042, and $.0025 per bushel mile for 1,500, 5,000, and 18,000 annual miles.

Table 4. Producer Truck Costs, 1999 Dollars

Commercial truck costs are estimated based on a 1997 study of owner-operator truckload operations by Berwick and Dooley. Parameters included in the cost estimate of the hopper truck include (1) 80,000 gross vehicle weight, (2) 53,200 net payload weight, (3) 100,000 miles per year, (4) 50 percent loaded miles, (5) $0.29 per mile cost for driver wages, (6) $10 hour cost for waiting time, (7) $1.25 per gallon for fuel price, (8) average speed of 45 miles per hour, and (9) an average round trip of 100 miles (Berwick and Dooley, 1997). Cost was estimated to be $1.15 per mile, with variable costs equal to $0.72, or 63 percent of the total costs. The $1.15 per mile equates to $.0023 per bushel mile for a payload of 890 bushels (60-pound commodity), with no backhaul. Backhaul opportunities would influence this cost. For example, if a backhaul is secured to cover half of the return trip cost, the per bushel mile cost would fall to $.0017.

Producer grain marketing decisions influence local grain delivery patterns. These marketing decisions are based on distance to market, market price, and trucking costs. The producer and commercial truck costs developed in this section will be applied to the local grain procurement model to assess the sensitivity of this industry to local grain delivery costs. The spans of truck costs discussed in this section provide a multitude of local grain delivery scenarios to reflect the diverse truck equipment inventory of North Dakota farms. In addition, alternative trucking scenarios that consider future investment in truck equipment and employment of custom and commercial grain truck operators are considered. Truck costs range from a high of $.0095 per bushel mile for the single-axle producer truck to a low of $.0017 per bushel mile for a commercial truck operator, based on parameters specified in this section of the report. This range of truck costs will be considered in the local grain distribution model and sensitivity analysis.

Local Grain Delivery Truck Fleet

As indicated by the wide range of truck costs, the composition of the truck fleet employed in making local grain deliveries in North Dakota is an important factor in estimating producer truck costs and grain flows. In 1980, the North Dakota truck fleet was dominated by the single-axle truck configuration, as 82 percent of the farm truck fleet was reported to be attributed to this category. By 1995, the single-axle truck category had declined 30 percent of it's representation in the North Dakota farm truck fleet. Frequency tandem axle trucks doubled between 1980 and 1995, to account for about one-third of the 1995 farm truck fleet. Representation of semi-truck and trailers in the North Dakota farm truck fleet remains relatively small, but did increase substantially over the 15-year period, representing 1 percent of the fleet in 1980 and 4 percent of the fleet in 1995. Preliminary results of a 2000 UGPTI study of the farm truck fleet in North

Dakota supports the trend toward investment in larger capacity trucks (UGPTI, to be published). Just slightly more than half of the North Dakota farm truck fleet is single axle in 2000. The fleet is comprised of 53 percent single axle, 30 percent tandem, and 12 percent semi-truck and trailer. Approximately 6 percent of the fleet is other truck types such as tridem axle. The share of the fleet represented by semi-truck trailers increased by 200 percent, compared to 1995. This trend toward larger, more efficient producer farm trucks is an important factor in understanding local market trends and in assessing the future role and value of local elevators in the local grain marketing industry.

North Dakota Elevator Industry

When grain is harvested, the producer may choose from four markets for grain -- on-farm use, local elevator, terminal elevator, or processor/feeder. Selection of the delivery point is a function of net price including storage considerations, delivery costs, and opportunity cost. The local North Dakota elevator industry handled an average 506 million bushels annually between 1995 and 1999. The North Dakota Public Service Commission reported that 443 elevators were licensed to handle grain in 1999. Based on North Dakota Grain Movement Statistics, the 361 elevators actively shipping grain were operated by 252 companies. These 252 grain companies make grain sales to major grain companies, local livestock feeding operations, and local processors.

Producers marketed about three-fourths of the grain and oilseeds they produced between 1995 and 1999 through the local elevator network, based on a ratio of local elevator shipments to production. The prevalence of the elevator's role marketing varies by commodity. HRS wheat and barley ratios indicate more producers use local elevators in their marketing plan than with durum or corn. Ratios indicate that approximately 87 percent of the HRS wheat production and 88 percent of barley production was delivered to local elevators during the five-year period. Local elevators also were a primary recipient in the durum market, as the shipment to production ratio was 75 percent. Corn, as expected with a relatively large local processor interest, has the lowest shipment/production ratio, 42 percent. This ratio suggests that 58 percent of the corn grown by North Dakota producers between 1995 and 1999 was used on-farm or delivered to local processors or remote markets, bypassing the local elevator network.

Table 5. Shipment/Production Ratio for North Dakota Grain and Oilseeds, 1995-1999

Elevators compete for their share of the North Dakota grain and oilseed market through service and pricing mechanisms. It is the pricing that is considered in this analysis. Elevator board price is equal to the market price, less handling and transportation costs. Transportation cost is a primary determinant in the relative board prices of elevators competing for grain in the local market. The primary elevator factor considered in this analysis is the applicable freight rate. The applicable freight rate varies with shipment volume, origin, destination, and commodity. For purposes of this analysis, the handling cost, or margin requirement, are assumed to be equal for all North Dakota elevators. This assumption is premised on the belief that the local elevator industry is competitive, so that excess profits such as high handling fees cannot be extracted due to competitive pressures.

Five freight rate categories defined for this study are defined by the structure of rail tariffs for bulk agricultural commodities. These categories⁽⁷⁾ are (1) No-Rail - elevators with no on-site access to a rail siding, (2) Single-Car - elevators with track space for loading 1 to 24 cars, (2) Multicar - elevators with track space to accommodate 25 to 49 cars, (3) Unit Train - elevators with track space to load out 50 to 99 cars, (4) 100-car - elevators with track space to accommodate a railroad spot of 100 cars, but not qualifying for the railroad efficiency programs discussed previously in this report, and (5) Shuttle Train - as defined earlier, elevators equipped to market trains of more than 100 cars in the railroad efficiency program guidelines.

Approximately 28 percent of the North Dakota elevator population was equipped at trains of at least 50 cars in 1999 (UGPTI). This group included 101 unit train elevators, seven 100-car elevators, and nine shuttle train elevators. These elevators originated 61 percent of the annual North Dakota elevator industry's grain and oilseed shipments in 1999. The remainder of the elevator population is comprised of 58 no-rail elevators, 159 single-car elevators, and 86 multicar facilities.

Patterns in activity among elevators can be discussed in reviewing historical volume and modal shipping activities. Volume tends to be concentrated in that group of elevators able to load unit trains or larger. The average annual handle for these elevators is 2.6 million bushels. This handle is more than double the average annual handle for the next largest average annual handle, for multicar elevators, of about 1.2 million bushels. Single-car and elevators with no-rail service handle, about 512,000 and 246,000 bushels annually, respectively.

Rail market share for grain shipments originated from North Dakota elevators has ranged from 59 percent in 1978-79 to 79 percent in the 1986-87 crop year. Between 1976-77 and 1999-00, North Dakota elevators shipped an average 71 percent of their annual grain shipments via rail. In the recent past, from 1995 to 1999, North Dakota elevators marketed 76 percent of their grain and oilseed shipments via rail. This modal distribution illustrates the importance of a competitive rail alternative in marketing North Dakota grain and oilseed production.

Table 6. Shipments from North Dakota Elevators from 1995 to 1999, by Track Capacity

The relative importance of rail varies among individual elevator marketing plans. A general illustration of modal shipments for each elevator group is illustrated in the following graphic. Based on average annual shipment data for 1995 to 1999, elevators that made the largest investment in their rail capacity - the group including unit train, 100-car and shuttle facilities - tend to market relatively more bushels via rail than truck.

This group of elevators marketed 83 percent of the grain and oilseed bushels shipped by multicar elevators via rail during the five-year period. Although multicar facilities marketed relatively less of their average annual handle via rail, a majority was still loaded to rail for shipment. For the five-year span, 62 percent of the grain and oilseeds they shipped were attributed to rail. Single-car elevators were the only group with rail access that did not market a majority of their average annual handle via rail, as 59 percent of the grain and oilseed bushels they marketed annually moved via truck. This trend in use of rail for marketing is logical, given the lesser and severely-limited ability of multicar and single-car elevators, respectively, to access economies of scale in shipping grain. These volume and modal shipping patterns are important in discussing how the elevator industry will be impacted by the introduction of a shuttle influence in the local grain market.

Road System

The North Dakota road system includes 106,514 miles. Seven percent -- 7,378 miles are state highway miles. The composition of the remaining mileage is: 18 percent county roads, 53 percent township roads, 3 percent local city roads, and 18 percent trails. The average age of the State Highway System is 17 years. Approximately 57 percent of the interstate highway miles and 55 percent of the state highway miles are in good to excellent condition.

Rail Network

North Dakota elevators with access to rail may be served by one or two of the state's five railroads. For industry purposes, railroads are classified by their annual operating revenue. Class I railroads have an annual operating revenue of $259.4 million or more. Regional and short line railroads have annual revenues of less than $259.4 million. Two of the seven Class I carriers in the United States - the BNSF and the CPR - operate track in North Dakota. Three short line carriers - the Dakota, Missouri, Valley and Western (DMVW), Northern Plains Railroad (NPR), and Red River Valley and Western (RRVW) - operate the non-Class I track in the state.

Table 7. North Dakota Rail System Statistics

The short line railroads were formed during the past 15 years when track spun-off by the Class I carriers was leased/purchased by the respective companies. Short lines use labor savings and service initiatives to continue operating lines that the former Class I owner's deemed unprofitable in their operations (Tolliver, 1989). The relationship with the former Class I owner remains exclusive for the short lines in North Dakota. The RRVW is affiliated with the BNSF, and the DMVW and NPR are affiliates of the CPR. In these relationships, the Class I partner maintains pricing authority for movements originated on the short line, supplies cars for short line customers, and is the sole recipient of traffic originated by short line customers for off-line delivery.

The North Dakota rail network includes 3,858 miles of track (ND PSC). The largest share of track miles are served by the BNSF, as it operates 55 percent of the total track miles. The other Class I carrier, CPR, accounts for 12 percent of track miles. The remainder of the mileage is shared among the three short line carriers, with the RRVW, DMVW, and NPR operating 15, 10 and 9 percent of North Dakota track miles, respectively. Considering the track distribution among Class I's, with the short line miles attributed to their respective Class I partner, the BNSF operates 70 percent of the rail in North Dakota with the CPR owning the remaining 30 percent.

The state has 1,460 miles of track classified as main line. The BNSF owns 76 percent of this main line track, with the remaining 353 miles attributed to the CPR. A majority of track in North Dakota -- 62 percent, is classified as branch line. The BNSF operates the majority of this branch line track as well, accounting for 42 percent of this category mileage. The RRVW comprises the largest share of the balance of the branch line miles, with 579 system miles. The DMVW and NPR operate 14 percent and 16 percent of the North Dakota branch line miles, with the remaining 5 percent controlled by the CPR (ND PSC, 2000).

Indicators of grain activity among the railroads are volume, market share, and traffic densities. The BNSF handled more than two-thirds of the rail shipments reported by North Dakota elevators between 1997 and 1999. With 55 percent of the market and the 14 percent originated by its RRVW short line partner, the BNSF originated 69 percent of the rail grain shipments made by North Dakota elevators. The CPR accounted for the remaining 31 percent, with about half of those bushels originated by the CPR and the other half originated by its two short line partners (UGPTI, unpublished).

Traffic densities also are important in understanding the composition of the North Dakota rail system. Densities are an indicator of resource employment and rail viability. For purposes of this study, only grain traffic is considered in the calculation of traffic density so overall traffic densities are understated. Individual railroad traffic density is defined as grain and oilseed bushels originated per mile of track. The CPR rail network is supported by the most dense grain volumes, with its traffic density equal to 141,000 bushels per mile. Traffic density for the BNSF Class I carrier, is estimated at 99,000 bushels per mile.

The short lines originated about 38 percent of the grain North Dakota elevators shipped via rail over the past five years (UGPTI). The RRVW serves the more traffic-dense branch lines with an average 92,000 bushels originated per mile operated. The NPR is second among short line traffic densities averaging 62,000 bushels originated per system mile between 1997 and 1999. The DMVW operates with the lightest density of all North Dakota railroads, at 78,000 bushels per mile. For a more in-depth analysis of traffic densities, refer to the 286,000-car analysis in this research compendium.

Market Demand

A fundamental part of understanding market demand is comprehending the magnitude of the U.S. grain market and the role of North Dakota grain production. In the coarse grain market, the United States is the world's leading supplier of corn and a minor supplier of barley. The United States accounted for approximately 71 and 6 percent of world corn and barley exports, respectively between 1995 and 1999. In the world wheat market, the United States attributed about 30 percent of world wheat exports during the same five-year time period.

In the context of national grain supplies, North Dakota is a leading producer of wheat. North Dakota durum and HRS wheat production accounted for 78 percent and 47 percent of the United States annual production of these commodities between 1995 and 1999. Growers in the state also are notable suppliers of barley, attributing about one-third of the average annual United States production. North Dakota is a minor supplier of United States corn, attributing about one percent of the average annual United States production during the five-year period.

In addition to the relative importance of North Dakota growers as suppliers of the alternative grains, understanding the prevalence of domestic and export demand sales is important because consistency and substitutability for United States grains varies among these markets. The ratio of United States domestic use to United States exports illustrates the relative importance of the export market among the four grains considered in this analysis. The domestic/export ratio for barley is 7.5, this compares to 1.1 for HRS wheat, 2.1 for durum, and 3.8 for corn. The relative importance of the export market for HRS wheat is evident.

Table 8. North Dakota Grains in Context of United States Grain Industry, Average 1995-1999

Two sources of demand are considered in understanding the role that a shuttle rate might play in influencing the landscape and product flow of North Dakota's grain industry. These sources are local processor and remote markets. Local processors encompass the multitude of businesses within state borders that create market value by transforming raw grain and oilseed products through practices such as milling, manufacturing, or feeding. Remote markets are markets beyond state borders.

Local Processors

Introduction of shuttle rates into the market will have an impact on local processors as they compete to purchase grain from producers and local elevators. Local supplies of grain are assumed to be a principal source in processor procurement of raw product. Lower freight costs from shuttle-equipped origin/destination pairs will influence market flows as they are reflected in the board price of shuttle facilities. To maintain consistency in the analysis provided in this report, HRS wheat, durum, barley and corn are considered. A brief description of major local processors is presented in this section. Results of sample cases illustrate the impact of shuttle train freight rates on local processor procurement. In addition to the procurement considerations, each plant has by-product business interests, such as feed, that also may be influenced by changes in the relative delivered prices of substitutable products. These product issues are noted, but not addressed in the scope of this analysis.

Local processors consume volumes equal to approximately 16 percent of the annual production of the four commodities considered in this analysis. Major local processors of HRS wheat are the North Dakota Mill in Grand Forks and the Cenex Harvest States (CHS) Mill at Fairmont. The North Dakota Mill purchases 11 million bushels of HRS wheat annually. ⁽⁸⁾ It began operating in 1922, and continues to be the sole state-owned milling facility in the United States. The CHS Mill is equipped to process about 4.5 million bushels of HRS wheat each year. ⁽⁹⁾ The mill was opened in 1998 with local private ownership. It was purchased by CHS in 2000. The 15.5 million bushels processed by these plants is equal to about 7 percent of the state's average annual production of HRS wheat.

Four North Dakota companies are considered major local processors of durum. The largest of these processors is Dakota Growers Pasta in Carrington, N.D. Dakota Growers Pasta distributes the primary milled durum product, semolina, to its own mills and through sales to other pasta manufacturers. It currently is the second largest supplier of pasta in the United States. This grower-owned processor has been in business since 1993. Its annual purchases of durum average 11 million bushels.⁽¹⁰⁾ Noodles by Leonardo, Minot Milling, and the North Dakota State Mill also mill semolina. Noodles by Leonardo, housed in Cando, N.D., uses about 900,000 bushels of durum producing semolina for its vertically-integrated pasta plant. It has been in business as a privately-owned processing plant since 1980. Minot Milling and the North Dakota State Mill are semolina suppliers for the pasta industry. Minot Milling, sited in Minot, N.D., purchases approximately 7.5 million bushels of durum each year.⁽¹¹⁾ The mill, a subsidiary of the Philadelphia Macaroni Company, began producing semolina in 1998. The North Dakota State Mill purchases about three million bushels of durum annually for its semolina production line. The 22.4 million bushels milled annually by these local processors is equal to 26 percent of North Dakota's average annual production of durum between 1995 and 1999.

Table 9. Summary of North Dakota Processor Demand

Cargill's Ladish Malting in Spiritwood, N.D., is the largest malting house in the United States. Cargill acquired this plant with the 1991 purchase of the Wisconsin-based Ladish Malting Company. The Spiritwood plant has capacity to malt approximately 10 million bushels, or 9 percent of the average North Dakota barley production, annually. ⁽¹²⁾

Three corn processing plants are major local buyers of corn production for the ethanol and sweetener industries. Cargill Corn Milling at Wahpeton began producing high-fructose corn sweetener in 1996. This business, incorporated as the grower-industry partnership "ProGold," was leased to Cargill in 1997. The plant processes approximately 29 million bushels of corn annually. ⁽¹³⁾ Alchem at Grafton, N.D., and Archer Daniels Midland Co. (ADM) in Walhalla, N.D., both opened in 1985 and produce ethanol. Alchem procures about 3.7 million bushels of corn annually for its production line.⁽¹⁴⁾ The ADM plant was built by Dawn Enterprises of Walhalla. It was operated by the local owners for about a year before closing. ADM purchased the plant in 1992 and reopened it. ADM elected to cease production at the facility in 1999 based on market economics. Its 10 million bushel annual capacity continues to sit idle.⁽¹⁵⁾ Absent the ADM capacity, local processors are equipped to process 43 percent of North Dakota's average annual corn production.

Remote Markets

As aforementioned, North Dakota sells a majority of the grains and oilseeds it produces to markets beyond state borders, which are called the remote market in this analysis. This market includes a dynamic mix of customers in domestic and foreign markets. Determining the specific end-market for each bushel of grain originated from North Dakota is a cumbersome and likely impossible task. Industry experts and secondary data will be used to describe typical grain flow patterns and characterize markets.

The commodity grain industry in the United States works as a funnel. A multitude of producers deliver grain to a network of local elevators. These elevators, in turn, make sales either through brokers or direct to large grain companies. The large grain companies take positions in the market (buy/sell) based on expected domestic use/sales and export sales. The domestic use and sales may include supply for internal processing plants, as well as sales to other processors. UGPTI Grain Movement Statistics, Public Use Waybill, and USDA information provide some statistics about grain marketing patterns. This information is discussed in its relationship to the potential for accessing shuttle train rates for the four grains discussed in this report.

North Dakota Grain Movement Statistics (UGPTI) are based on mandatory reports from elevators in North Dakota, regarding the quantity, market, and mode used for grain shipments. This data may be used to discuss marketing trends for North Dakota elevators. Traffic sources for shuttle shipments are producer and elevator truck shipments and existing rail shipments. Railroad introduction of shuttle rates into the market provide a more competitive rail option for elevators.

In the short-term, the transfer of rail shipments moved under the existing rate structure likely may be for current unit-train traffic to shuttle, as this traffic typically is bound for export facilities and large domestic processors - the remote markets most likely equipped to handle shuttle train shipments. Single-car and multicar shipments typically are bound for domestic markets. It seems unlikely that this traffic would be delivered via shuttle in the near-term, unless railroads offer shuttle-type alternatives for smaller train sizes.

In the long-run, more of the single and multicar traffic may be shifted to shuttles as investments are made in rail/truck transfer facilities or in domestic processor's rail handling capabilities. In regard to potential for transferring truck traffic to rail using the more competitive shuttle rate structure, elevators reported that an average 31 percent of annual shipments were marketed via truck between 1995 and 1999. This truck market share is up 20 percent, compared to its market share for the previous five-year period, 1990 to 1994. A more competitive rail rate may shift a portion of this traffic back to rail.

Trends in the modal distribution of individual commodities also provide insight into the potential for shuttle shipments. Unit train shipments of HRS wheat have been relatively stable over the last decade, accounting for 38 percent of the average annual shipments originated by North Dakota elevators. Trucks have gained market share over recent years, increasing market share by 31 percent between the first and last half of the 1990s. Multicar shipments also have increased by 23 percent, suggesting an increased prominence of domestic markets. In addition, rail investments in the domestic milling industry may be reflected in the average annual use of the single-car rail shipment option. Use declined 35 percent between 1995 to 1999, compared to 1990 to 1994.

Table 10. Modal Distribution of North Dakota Grain and Oilseed Shipments, 1990-94 and 1995-99

Durum and barley shipments also have exhibited a declining interest in single-car shipments during the last decade. Elevator use of single-car shipments declined by 24 and 36 percent respectively, during the last decade. Truck share of the market remained stable over the decade for durum. Truck market share increased by 18 percent for barley from the first half of the decade, compared to the last half. Elevators increased use of multicar and unit train alternatives for durum and barley from 1995 to 1999, compared to the previous five years. Barley use of unit trains is relatively stable, while use for marketing durum has exhibited an upward trend in recent years.

Elevator marketing of corn has shifted from truck to rail over the past decade, with rail market share increasing by 25 percent. Single and multicar shipments increased by 7 and 47 percent, accounting for half of the average annual elevator shipments between 1995-99, compared to 1990-94. Unit train shipments declined by 10 percent for the same time period. Some of this shift from truck to rail may be volume related, as average shipments increased by 36 percent for 1995 to 1999, compared to the previous five years.

Information detailing the destination for grain shipments originating in North Dakota also may provide insight for application of shuttle rates since the initial discussions of North Dakota shuttles have centered on the Pacific Northwest (PNW) export market facilities. Prevalence of the PNW as a market for HRS wheat is illustrated in Appendix A. Two data summaries are considered in assessing the relative importance of this market for North Dakota elevators, the UGPTI grain movement statistics and the U.S. Public Use Waybill. Public Use Waybill origins are defined by regions known as Bureau of Economic Analyses (BEAs). ⁽¹⁶⁾ Waybill statistics show that, on average, 21 percent of all wheat originated from the four BEAs covering North Dakota origins was destined for the PNW between 1994 and 1998. ⁽¹⁷⁾ The U.S. Public Use Waybill does not distinguish between wheat types.

North Dakota Grain and Oilseed Statistics, UGPTI, do distinguish HRS wheat and durum movements. Based on the North Dakota Grain and Oilseed Statistics, approximately 17 percent of the HRS wheat shipped by North Dakota elevators between 1995 and 1999 was destined for the PNW. This is a decline of 10 percent compared to shipments between 1990 and 1994, when 19 percent of the HRS shipped by North Dakota elevators was bound for the PNW. The year-to-year trend in HRS wheat shipments to the PNW is illustrated in Figure 11. The PNW has been a rather insignificant market for durum, accounting for less than 2 percent of the shipments originated by North Dakota elevators.

Table 11. North Dakota Elevator Shipments to PNW

The Public Use Waybill and North Dakota Grain Movement Statistics are closely correlated for barley shipments. Both data sources attribute about 7 percent of the market for barley shipments from North Dakota elevators to the PNW between 1995 and 1999. The PNW peaked as a market in 1991 was a recipient of 11 percent of all the barley shipped from North Dakota elevators. The market share reached 10 percent in 1998, but declined to 3 percent in the most recent year (UGPTI).

The PNW consistently is an important market to North Dakota elevators shipping corn. Public Use Waybill statistics suggest that the PNW was the market chosen for 68 percent of the corn originated from ND elevators between 1994 and 1998. The UGPTI statistics show a lower, but still large, share for this market of 47 percent. The North Dakota Grain and Oilseed Statistics suggest that the PNW has become less dominant as a market for North Dakota corn, accounting for 55 percent of the corn shipped between 1990 and 1994 - a 14 percent decline compared to the most recent five-year period.

The information discussed in this section of the report provides resources for understanding the market in which shuttle train facilities will compete for grain produced in North Dakota. Analysis of the potential impact that shuttle facilities may have on the local infrastructure is provided in the next section of this report. The goal of the analyses is to develop a framework for considering shuttle facility impacts on marketing patterns and traffic flows in local investment and policy decisions.

Table 12. Summary of North Dakota Rail Shipments, Public Waybill Data Average 1994 to 1998

^7. The range for the category definitions may vary slightly by railroad and commodity.

^8. Source: Dan Korynta, Grain Dept. Manager, ND State Mill, Grand Forks, ND.

^9. Source: Cenex Harvest States, St. Paul, MN.

^10. Source: Bonnie Mullenberg, Executive Director, Northern Grains Institute, Carrington, ND.

^11. Source: Based on 340 active milling days per year - http://www.made-minot.com/projects.htm.

^12. Source: Cargill, Inc., http://www.cargill.com/malt/hist.htm.

^13. Based on 340 active grind days per year - http://www.cargill.com/today/releases/100211997.htm.

^14. Source: Brent Kohls, Alchem, Mayville, N.D.

^15. Source: http://www.ethanol.org/in_the_news/petroleum_pain.html.

^16. BEAs do not follow state borders.

^17. 1998 was the most recent U.S. Public Waybill sample available at the time of this analysis.