U.S. corn, wheat, and soybean markets
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2003-06-01
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Abstract:It is important to understand the distribution and incidence of influences associated with deregulation of rail rates. The objective of this research was to provide insight into inter- and intra-commodity rail rate differentials observed since rates were deregulated in 1981. A cross-sectional/time-series analysis of U.S.
corn, wheat, and soybean shipments was considered in the assessment of rail grain rate differentials. County level rail shipment characteristics for two decades were considered in the analysis. The time period selected, 1981 through 2000, covers two decades of pricing by railroads in the deregulated environment. As expected, results suggest that market-based pricing has become more prevalent in later years. The tendency for railroads to implement more market-based pricing in recent years implies that rail demand elasticity is becoming an increasingly important factor in the relative competitiveness of U.S. grain producers. The overall benefit of rail deregulation, measured in terms of rail productivity and decreasing in rail rates for shippers, is well established in previous research and consistent with the findings in this research. Important findings in research go beyond the broad discussion to show that these benefits are not distributed uniformly across or within commodities. Furthermore, as market-based pricing has become more prevalent the variance in distribution of benefits is shown to increasingly favor those grain producers located in regions with higher levels of intermodal competition. In a competitive market environment, trends in relative, as well as overall, rates should be considered in assessing the impacts of policy and investment initiatives. This research will help us to better understand the ultimate consequences of future policy and investment decisions, in terms of overall and relative competitiveness of grain commodities and U.S. grain producers.
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