AgDM newsletter article, November 1999

Transportation issues & GMOs

Phil BaumelBy C. Phillip Baumel, Charles F. Curtiss Distinguished Professor for Agriculture and Professor of Economics, 515/294-6263, pbaumel@iastate.edu

Several transportation issues to be considered in both domestic and export markets.† Letís first look at domestic markets.†

Domestic markets

Assume that Iowa farmers will store all non-GMO corn and soybeans on-farm.† Those who own semis likely will haul the non-GMOs directly to corn processors and soybean crushers, especially in eastern Iowa, and increasingly so in central and western Iowa.

Farmers without semis will haul their corn and soybeans to the local elevator.† Elevators will be forced to handle at least four types of grainsóat least two types of corn (more likely three including high oil corn) and at least two types of soybeans.† This will reduce the capacity to quickly and efficiently receive grain at harvest time and will reduce their effective storage capacity.† Most eastern Iowa elevators ship by truck while most western Iowa elevators ship by cycle trains that are typically controlled by processors and large merchandising firms.† While doubling the number of types of grains will reduce the available storage for and supply of any one type of grain at each elevator, most elevators with rail service have enough grain storage to be able to load a 75-car cycle train (260,000 to 275,000 bushels) with one type of grain.

Export markets

Turning to export markets, again assume that all non-GMO grain is stored on farms.

Eastern Iowa

In eastern Iowa, most of the exported grain moves by truck to the Mississippi River and then by barge to New Orleans.† This will create no transportation problems for farmers and local elevators.† However, barge terminals will have difficulty handling at least four types of grain at the same time.† Some grain will be transferred directly from trucks into barges and then directly from barges into ocean vessels without moving through elevators.† This direct transfer system will minimize the mixing problem.† However, it is more costly because it requires barge terminals to tightly schedule inbound loaded trucks and trains and inbound empty barges.† Likewise, export elevators will be required to tightly schedule inbound loaded barges and empty ocean vessels.† In addition, the direct barge-to-ocean vessel transfer through a mid-streamer is more costly than through an export elevator.

Central and western Iowa

Most central and western Iowa export grain moves by railroad.† Central and western Iowa grain shipments to the Mississippi River are typically shipped in 75-car cycle trains to the Mississippi River.† Grain shipped directly from elevators to export ports typically is shipped in 100-car shuttle trains (350,000 to 400,000 bushel per train).† Shuttle trains require multiple consecutive trips.† Doubling the number of types of grain will make it more difficult for one elevator to accumulate enough available non-GMO grain to load the lowest-cost shuttle trains.

Export ports

The major problem in exporting non-GMO grain will occur at export ports.† If importers strictly prohibit the import of GMO grains and country elevators rely on the farmerís word that it is GMO or non-GMO, how will the exporter know if all the grain is non-GMO grain and/or approved GMO grains?† And what does the exporter do if the wrong kind of grain has been loaded in the hold of a ship while it is still at the port or even worse, in a ship that has already sailed to its import destination?

The scheduling problems at barge terminals and export elevators combined with the additional cost of direct barge-to-ocean vessels and increased risk will increase costs and widen margins at these transfer points.† This raises the question of who will pay for these additional costs.

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