market for u.s. grain barge services russell byington chief economist maritime administration may...
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Market for U.S. Grain Barge Services
Russell Byington
Chief Economist
Maritime Administration
May 2009
U.S. Grain Exports
U.S. is the world’s largest grain exporter.Grains move from the U.S. Midwest to five major port areas:
Seattle/Columbia River PortsLA/LBHoustonNew OrleansNorfolk
Houston New Orleans
Norfolk
Seattle,Col. R. Ports
L.A./L.B
Rail Barge
Barge and Rail Shipments of Grain to U.S. Ports, 2000-2008
0
20
40
60
80
100
120
2000 2001 2002 2003 2004 2005 2006 2007 2008
Mil. Tons
Barge Rail
Source: Agricultural Marketing Service for rail; USACE for barge.
Rail Shipments by Coast, 2000-2008
0
150
300
450
600
2000 2001 2002 2003 2004 2005 2006 2007 2008
Thous. Carloads
Miss. Gulf Texas PNW Atl.
Source: Agricultural Marketing Service.
Why rail increased and barge declined?
Seattle/Japan4,498 Mi.
New Orleans/Japan9,405 Mi.
Higher fuel prices
A PNW short-cut to the Far East
Higher prices for barge services
Higher ocean freights
Reliability issues
Producer Prices, Rail and Barge Services, Fuel 2000-2008
070
140210280350
2000 2001 2002 2003 2004 2005 2006 2007 2008
Index
Inland Barge Rail Fuel
Source: Bureau of Labor Statistics.
Fuel Efficiency, Water and Overland Modes
Fuel Efficiency Measures:
Ton-miles/gallon.
Mule is the best, but slower and not as
reliable as other modes. Runs on oats,
a bio-fuel. Customers pay for speed and
reliability as well as volume and distance.
Fuels Costs/$ of Gross Output. Better for modal comparisons. Rail is best (6.5%) followed by Water (7.5%), truck (12.6%) and pipeline (16.7%).
Ocean Grain Rates, Panamax, U.S. Gulf/Japan and PNW/Japan, 2000-2008
0
30
60
90
120
150
2000 2001 2002 2003 2004 2005 2006 2007 2008
$/Ton
USG/Japan PNW/Japan
Source: Clarkson’s Research.
Waterway Disruptions Reduce Reliability of Barge Services
Unscheduled Lock and Dam Repairs, 2000-2008
0
20,000
40,000
60,000
80,000
2000 2001 2002 2003 2004 2005 2006 2007 2008
Hours
Source: USACE.
Market Model for Inland Grain Barge Shipments
BM
S2
D
BM Inland Barge Movements, Grains and Oilseeds, TonsPbarge Producer Price Index, Inland Barge Freight ServicesPrail Producer Price Index, Rail Freight ServicesPfuel Producer Price Index, Diesel FuelExports Grain Exports, Tons down Unscheduled Lock Repairs, Hrs.
BMS = 5.872 + 1.115 Pbarge/Prail – 0.274 Pfuel – 0.046 down
(25.529) (2.809) (-6.438) (-2.597)r2 = 0.965 dw = 2.467 int: 1999-2008
BMD = – 0.879 – 2.204 Pbarge/Prail + 1.162 Exports (-0.453) (-5.348) (2.801) r2 = 0.772 dw = 2.138 int: 1999-2008
Pbarge/Prail
S1
What Ifs
2008 Values:BM 60.4 million tonsExports 130 million tonsLock Repairs 70,000 hoursFuel Price Index: 325
Barge Movements of Grains at 2008 Export Levels
Fuel Price, Index
Lock & Dam Repairs, Hrs. 100 160 325
5,000 83.0 76.4 67.4
35,000 77.0 71.1 62.5
70,000 74.9 69.0 60.4
Conclusions• Demand for barge services is price elastic (rail alternative).
• About one-third of fuel price changes are passed on in higher prices for barge services, compared to 24 percent for rail services.
• Unscheduled lock repairs (hours) have increased by nearly 400 percent over the last five years contributing to the decline in barge movements.
• Despite a bad economy, lower fuel prices should bring a 2009 recovery in barge shipments.
• Never use the “F” (forecast) word.
“Persons pretending to forecast the future shall be considered disorderly under subdivision 3, section 901 of the criminal code and liable to a fine of $250 and/or six months in prison” Section 889, New York State Code of Criminal Procedure Cited by Pindyck, R. and Rubinfeld, D, Econometric Models and Economic Forecasts, 1998, p. xiii.
Questions
Russell (Buff) Byington
www.marad.dot/data_statistics