Shipping Bottleneck Chokes U.S. Grain Trade

BOTTOM LINE WEATHER POINTS
– Aging U.S. infrastructure creates shipping bottlenecks, costing consumers millions.
– Millions of bushels left out in the rain for months because of inadequate shipping.
– If U.S. loses just 1 to 2% of grain market, it could drain the economy by $1.8 billion.

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Regardless of the harvest size this year, millions of dollars in healthy crops will be lost on account of the nation’s failing infrastructure. By land and by sea, inadequate shipping and storage conditions are costing Americans millions of bushels a year.

The recent surge in corn, soy and wheat exportation is revealing major deficiencies in America’s aging railways, highways and barge paths, according to Newsday.
Due to inefficient methods of transportation, some grain can sit for months on the ground, exposed to the ravages of rain, wind and vermin.

The trouble with bountiful harvests is that millions of bushels must be stored outside overfilled grain silos, precariously waiting for shipment.

Despite grain elevator operators’ best efforts to salvage excess yield, storing grain outside means the cargo must be "double handled" – dumped once outside, then recollected for reloading into a silo and then a rail car. When things work smoothly, however, grain is loaded from elevators to waiting rail cars. Double handling adds between 10 and 15 cents a bushel, said USDA economist Marvin Prater.

In 2006, an estimated 1 billion bushels of grain was stored outside or in improvised shelters in Iowa, Illinois and Indiana because of rail delays, adding an estimated $107 million to $160 million that year to the cost of transporting it, according to USDA figures. That's about 1 percent of the combined $13.8 billion value of corn and soybean exports in 2006.

River and ocean transport have been shown to be similarly wasteful. Crops loaded on barges faced long waits at outdated locks and dams on the Mississippi River, raising costs by the boatload. Barge delays alone added an average $72.6 million annually to cost of shipping goods down the Mississippi and Illinois rivers.

Economists say higher transportation costs can hurt both farmers and consumers. That's because grain elevators or barge companies can cover higher costs by paying farmers slightly less for their grain, or by charging consumers slightly more for it. Currently, the USDA does not track how much cost transportation bottlenecks add annually to the price of food.

These costly expenditures have some agribusiness groups worried the bottlenecks could hurt the United States' standing as a global food provider. Nations such as Brazil and Argentina are currently competing for a lucrative share of the market.

Fixing the bottlenecks will take billions of dollars in investment over several years. In the meantime, exports are predicted to increase, with corn shipments expected to grow every year over the next decade from 54 million metric tons to 77 million metric tons, according to the Food and Agricultural Policy Research Institute.

Agricultural exports last year were worth just less than $90 billion. If the U.S. loses just 1 or 2 percent of that market to fast-growing exporters like Argentina, it could drain between $900 million and $1.8 billion from the economy.