NO TRAIN NO GRAIN: THE IMPACT OF INCREASED DEMAND FOR RAIL SERVICES BY THE ENERGY SECTOR ON WHEAT PRICES—A PRELIMINARY ANALYSIS

• Main Author: Laura Villegas Ortiz
• Format: Article
• Language: English
• Published: International Journal of Food and Agricultural Economics 2016-07-01
• Series: International Journal of Food and Agricultural Economics
• Subjects: Transportation Costs; Wheat Prices; Rail Services; Oil Boom; Pipeline
• Online Access: http://www.foodandagriculturejournal.com/vol4.no3.pp103.pdf

Rail service is often the most cost-effective available alternative for shipping agricultural commodities in the Upper Midwest Region of the United States. The recent energy boom has created new competition for the use of shipping services. As oil has taken up freight space on railways, it has become more costly for farmers in states like Minnesota, Montana, North Dakota and South Dakota to reach grain markets, resulting in millionaire losses. Using oil nearby prices as the proxy, I study three particular effects of increased competition for rail services. First, I use national measures to study the impact of track congestion on wheat basis. Then, I examine how the expansion of the energy sector may have had different effects on prices received by wheat producers in the Midwest and in the Gulf Coast. Finally, I investigate whether the construction of new regional liquid pipeline networks is linked to regional wheat prices