WASHINGTON, DC, US — Wait times and congestion can add significantly to the cost of US agriculture commodities, resulting in increased export prices and decreased prices paid to farmers, according to a study by the Texas A&M Transportation Institute.
Delay costs make up anywhere from 12%-58% of the total transportation cost for commodities and related products. Delay cost is the sum of congestion (cost occurred from additional traffic along the route) and wait costs (cost incurred while waiting for loading at different stages of the supply chain).
“This delay cost is some of which can be avoided if we have a better infrastructure system. We can take some of that delay away, which makes these products more competitive in an international market,” said David Ellis, senior research scientist at the institute during a webinar on July 9 by the National Grain and Feed Association. “We never talk about what the cost is of doing nothing.”
The study determined the base transportation cost using soybean data along with any additional cost due to traffic congestion and loading delays at each step of the process. Congestion happens between farms, feedlots, local elevators, rail and barge-served elevators, ports and production or processing while wait times accrue during loading and unloading at the locations, including transloading from one mode to another.
From there, researchers were able to develop a high and low estimate for domestic and export markets based on the final product and the route that it takes. Although the study used soybean data because it was more readily available, the same numbers can be applied to corn, Ellis said.
With the exception of domestic soybeans, there was a significant amount of variation in the high and low averages per ton. For example, total transportation costs per ton of soymeal feed range from $8 to $70.23 while costs for biodiesel range from $7.30 to $101.17. In general, transportation costs increase as products move through more stages of the supply chain. The distance traveled, and the mode (truck, rail or barge) used, also impacts transportation costs, the study said.
The same significant variations were seen in terms of delay cost per ton. For soymeal feed, delay costs range from $3.50 t0 $10.30 while costs for biodiesel range from $3.40 to $11.80.
Delay costs were typically a higher percentage of lower cost routes than the high-cost routes. Researchers said this is because high-cost routes are longer, which drives up the transportation cost.
“Being longer distance, the wait costs incurred at loading and unloading make up a smaller portion of the total costs, than on shorter trips,” the study said.
Ellis said it has been his experience when the agriculture industry makes the case for needing infrastructure improvements, it makes some real headway. He hopes a new tool – M.A.R.K.E.T. (Measuring Agricultural Relevance of Key Expenditures in Transportation) – developed by the institute and USDA can help strengthen the industry’s argument for transportation improvements.
Producers can also use the model to determine which projects would benefit the industry the most and therefore should receive their support.
The model, available here for free, analyses certain parameters to determine the transportation project benefits and costs including vehicle operating savings, business time and reliability savings, personal time and reliability savings, safety benefits, freight time savings, environmental benefits, business output and positive economic effect of wage income.
“The congestion and wait time are due to a lack of investment in transportation infrastructure that causes economic inefficiencies in the movement of goods,” Ellis said. “One of things we need to remember is how we communicate these things. We have to put it in terms consumers can relate to. We need to use models like the one we developed to help analyze which transportation investment gives us the biggest bang for our buck in terms of returns to the agriculture sector.”
The US competes on the international market through innovation and efficiency, including its more stable transportation costs compared to the rest of the world. However, countries like Brazil and Argentina are investing in their transportation systems.
“For the United States to remain competitive in the international soybean and corn markets, transportation delays must be mitigated where possible,” the study said.