The review and update of the Missouri River Master Manual is being conducted as
a National Environmental Policy Act (NEPA) process, including the preparation of an
Environmental Impact Statement (EIS). A Draft EIS was published in September 1994
and was followed by a public comment period that closed on 1 March 1995. A series
of 24 public hearings were held throughout the Missouri River Basin and at Quincy,
IL; Memphis, TN; and New Orleans, LA. Comments received regarding the Draft EIS
prompted the decision to prepare a Revised Draft EIS. A final version of this
technical report will be published as part of the Revised Draft EIS documentation,
which is currently scheduled for public release in May 1998.
This study was conducted for the Missouri River Region - Northwestern Division
of the U.S. Army Corps of Engineers (Omaha, Nebraska), by the Tennessee Valley
Authority - Water Resources Projects and Planning (Knoxville, Tennessee). This
technical report presents study methodology and results regarding National Economic
Development (NED) benefits attributable to Missouri River navigation.
Only the main body of this technical report is presented on this homepage. The
complete report also includes the following appendices:
Appendix 1 - Rate Analysis Summary Results
Appendix 2 - Sample Survey Work Sheet
Appendix 3 - 1995 Institute for Waterway Research Barge Costing Parameters
Appendix 4 - Additional Barge Costing Parameters
Appendix 5 - Percentage of Waterway Barge Tariff for Grain
Appendix 6 - Railroad Costing Parameters
Appendix 7 - Loading and Unloading Costs
Appendix 8 - Terminal Market Grain Prices
Appendix 9 - FOB Fertilizer Prices / Product Concentrations
Appendix 10 - Navigation Costs Under Alternative Flow Conditions
Copies of the complete report, including appendices, may be requested via E-mail to
the Master Manual POC. Please include your name, address, and phone number with
your request. Appropriate fees may be assessed in accordance with standard agency
practices.
I. Summary
Based on a 283 movement survey of barge shipping, users of the Missouri River
Navigation System are estimated to have saved, on average, more than $1.01 per ton
in transportation and handling charges when available barge costs are compared to
the next-best transportation alternative. These savings are calculated across eight
commodity groups including over 45 separate commodities and range between a high
$14.16 per ton for manufactured products and $0.47 per ton for sand, gravel, and
other non-metallic minerals. A summary of all rate calculations is provided in
Appendix 1.
II. Introduction
This study investigated a full range of transportation rates and supplemental
costs for a sampling of 283 waterborne commodity movements from 1991 - 1994 that,
in total or in part, were routed on the Missouri River. Freight rates for each
sample movement are calculated based on the actual water-inclusive routing, as well
as for a competing all-land alternative, a land and water alternative through the
Port of St. Louis, and to or from alternative origins or destinations. All
computations reflect those rates and fees that were in effect on June 30, 1995.
Results are documented on a movement-by-movement basis, including a separate
worksheet for each observation. These disaggregated data are also integrated into
a single spreadsheet. A full description of the study's scope and guidelines,
TVA's methods of rate research and construction, and supporting assumptions are
provided within this report.
A sample of 283 movements was identified for inclusion in this analysis.
Dock-to-dock tonnages over the included origin/destination pairs range between
800 tons and 971,000 tons annually, representing 45 individual commodities.
Reported rates for both the water movement and the all-land alternative are based
on the actual location of shipment origins and destinations.
1. Water Routings
Because many of the sample movements have off-river origins and or destinations,
a full accounting of all transportation costs for waterborne movements requires the
calculation of railroad and/or motor carrier rates for movement to or from the
nearest appropriate port facility. Additionally, all calculations reflect the
loading and unloading costs at origin and destination, all transfer costs to or from
barge, and any probable storage costs. Finally, though it was rarely a concern, all
waterborne routings were constrained to include, at least, partial use of the
Missouri River Navigation System.
2. Land Routes
With the exception of over-sized shipments and intraport sand dredging, rail or
truck rates are calculated for all movements (See Section VI for a discussion of
exceptions.). As in the case of the barge-inclusive routings, many all-land routes
require the use of more than one transport mode. Therefore, when appropriate,
calculations include all requisite transfer charges and/or storage charges.
3. Alternative Origins, Destinations, and Market Prices
In many spatial markets, commodity flows are, in fact, determined by a variety
of factors including the origins and destinations served by competing transport
modes, the rates offered by these modes, and the origin and/or terminal market
prices for the shipped commodities. Consequently, when one component in this
spatial equation (e.g., a transportation rate) changes, the resulting new
equilibrium may redirect some movements over different origin/destination pairs.
Thus, the least-cost alternative to the currently observed barge movement may
involve the land transport of the commodity from a different origin or to a
different destination. This is particularly true for farm products and
agricultural chemicals.
To reflect the possible impacts of competing terminal markets, for movements
of corn, sorghum, soybeans, and wheat, this study examines transportation rates to
three alternative export destinations (Houston/Mobile1, Portland, and Duluth), and
to an alternative domestic destination in addition to the all land routing to the
original destination and a land/water routing over the Port of St. Louis2.
Appendix 8 includes the set of terminal market prices observed at these alternative
locations during the study period3. After closely examining the
transportation rates to the potential alternative markets in conjunction with the
market prices available in those markets, we have concluded that the alternative
export destination do not play a significant role in determining grain commodity
flows from the Missouri River region. Conversely, as discussed below, local and
regional markets are of paramount importance to the eventual disposition of
locally produced grains.
The case of fertilizer is made more complex by the different chemical
concentrations and application properties associated with different, but
substitutable fertilizer products. In particular, the variability of concentrations
adds another dimension over which market prices much equalize. For shipments of
fertilizers and other agricultural chemicals, the shipment destination is assumed
to be fixed. However, where possible, the analysis includes all-land-route rates
from a competing origin. Appendix 9 provides a relevant set of origin market FOB
fertilizer prices as well as an indication of product concentration and application
properties. This information may useful in the interpretation of the rate
information summarized in Appendix 1.
Volume II contains the individual worksheets for each of the 283 movements.
Each worksheet consists of 1 - 5 pages and catalogues basic shipment information
including:
1. Corps assigned shipment reference number
2. Individual commodity description
3. Commodity group description
4. WCSC number
5. River origin and port code
6. River origin waterway mile
7. Off-river origin (if applicable)
8. Shipment tonnage
9. River destination
10. River destination waterway mile
11. Off-river destination (if applicable)
Section I of the worksheet contains the analysis of the barge-inclusive routing
from origin to destination via the Missouri River. Section II contains information
describing the best available all land alternative. Section III contains an
analysis of the land and water movement via the Port of St. Louis. Additional
Sections (IV - IX) reflect transportation costs for other potential movements
including alternative origins or destinations.
Authorities or sources for all calculations are reported in footnotes to the
appropriate worksheet items. All rates and supplemental costs are expressed on a
per net ton basis in second quarter 1995 U.S. dollars. When the river port town
name and the railroad station name are different, the railroad station name is
indicated as an off-river origin or destination with no cost to and/or from the
river.
Based on information collected from shippers, receivers, carriers, river
terminal operators, stevedores, federal agencies, and private trade associations,
TVA was able to identify probable origins and destinations for the majority of
those movements that originated or terminated at off-river locations. In the
absence of specific shipper/receiver information, it is assumed that the river
origin and destination are the originating and terminating points for both the
river and alternative modes of transportation. In every case, an attempt was
made to gather information from all shipping ports. However, in some instances,
1991- 1994 logistical data were not available from these ports. In other cases,
port representatives declined to provide the requested information.
Specific commodity groups are discussed in more detail later in this section.
However, for those movements that originate or terminate at a river port location,
it is assumed that rail service could also be utilized by the shipper or receiver
if that port is rail served. Exceptions to this assumption are noted on
individual worksheets. When the shipper or receiver is served by truck only, a
railroad team track or transfer facility at the station nearest the off-river
shipper or receiver is used for the land alternative4. Only those shippers who ship
more than 100,000 tons annually and who are already adjacent to rail trackage would
be assumed to undertake the significant capital expenditures necessary to acquire
direct rail service. No consideration is given to private car leasing cost and
mileage allowances made by carriers to shippers for the use of private equipment
are, similarly, ignored.
In nearly every case, it is assumed that the alternative modes of transporta-
tion would have the physical capacity to accommodate the additional tonnage
represented by each commodity movement5. Commodity specific judgments and
assumptions include:
Commodity - Grains
The computation of rates for grain is based upon the survey responses of the
shippers and receivers throughout the region. These responses reveal considerable
information regarding the transportation patterns for corn, sorghum, soybeans, and
wheat. Local/regional consumption and processing demands provide the dominant
markets for corn, sorghum, and soybeans. Local and regional elevators indicate
that export shipments occur only during those limited times when local production
significantly exceeds local demands. Otherwise, these field crops move by truck
or rail directly to domestic use destinations over a distance of as much as 200
miles. Transportation patterns for wheat are similar, except that the prevalence
of local processing is less pronounced.
For export shipments that do utilize Missouri River navigation, a number of
distinct and important transportation patterns were identified. First, in more
rural locations, river terminals often play the same role as country elevators
that are not barge served. These river terminals receive grain directly from
producers and have a relatively modest drawing distance of 20 to 30 miles. The
terminal operation at White Cloud, Kansas provides a typical example of a river
terminal functioning as a country elevator. The availability of inexpensive barge
transportation to Gulf port locations works to divert this very localized production
away from domestic consumption and toward export locations. The remainder of
Missouri River grain traffic is drawn from considerably longer distances (up to 150
miles) to much larger river port locations.
Grain that moves through these larger terminals does so for a variety of
reasons, depending on the specific commodity. Consequently, our investigation
revealed that it is necessary to treat corn and sorghum shipments differently than
wheat and soybean movements that move through these central terminal facilities.
When local corn and sorghum production exceeds local and regional demands, the
dominant practice is to rail this excess from gathering locations such as Topeka,
Salina, or Wichita to Texas and Central Gulf export locations. Some portion of
this excess, however, is routed through Kansas City. In most instances, the corn
or sorghum is immediately railed from Kansas City to the same Gulf locations that
are accessed by the other gathering locations. Some fraction, however, is stored
in Kansas City until barges become available in the Spring. These represent the
Kansas City corn and sorghum movements identified within the sample. Given this
pattern, the appropriate land route / barge route comparison is summarized in
Table 1.
Kansas City Sorghum and Corn Route Comparison
| Barge Routing |
Land Alternative |
| Truck move from farm to country elevator |
Truck move from farm to country elevator |
| Truck movement from country elevator to Kansas City |
Truck movement to rail unit train location such as Wichita, Topeka, or Salina |
| Barge movement to export location |
Unit train rail movement to Gulf export destination |
The Kansas City routing involves a considerably longer truck haul to the point
where the corn or sorghum is transloaded and is, consequently, more costly. This
squares with survey and interview responses that indicate Kansas City as the routing
of last resort to be used only when other alternatives are temporarily unavailable
or are rendered temporarily unattractive by depressed local market prices.
The peculiarities associated with these movements of corn and sorghum present
a rather perplexing set of circumstances. The procedures and guidelines governing
the calculation of NED benefits expressly direct that market anomalies be ignored
in the development of water and land route transportation costs, but it is precisely
these sorts of anomalies which generate the observed barge movements. When the
shipment is evaluated under normal, prevailing economic conditions, the decision to
use barge transportation appears irrational or uneconomical. To infer from this
analysis that barge shipments of corn or sorghum originating in Kansas City detract
from the national economic well being would be a significant error. It is more
appropriate to conclude that when such shipments occur no other reasonable
alternative exists. In the long-run such anomalies cannot be expected to persist.
This conundrum is discussed more fully in the results section of this volume.
Shipment patterns for wheat and soybeans differ notably from those observed for
corn and sorghum. It is still true that a significant portion of farm output is
consumed in local markets. However, there is also a processing-based demand for
both commodities in the Kansas City area. In particular, wheat from east-central
Kansas is routinely moved into the Kansas City area for blending with Missouri wheat
in order to achieve specific protein requirements. Likewise, local soybean
processing helps to create a Kansas City market for this commodity. These
processing patterns, combined with survey information, lead us to conclude that the
wheat and soybean movements that move through Kansas City and are subsequently
loaded for barge transportation would be initially bound for Kansas City under
any circumstance. In short, all land route alternatives must include a Kansas
City transit. Thus, the appropriate routing comparison is summarized by Table 2.
The impact of these differing scenarios on the calculation of NED benefits
attributable to available Missouri River navigation is significant. Corn and
sorghum movements which move over Kansas City for barge shipment to the Gulf must
include a lengthy and costly truck move to the Kansas City area. Whereas, a much
shorter truck move is required under the land alternative.
Kansas City Wheat and Soybean Route Comparison
| Barge Routing |
Land Alternative |
| Truck move from farm to country elevator |
Truck move from farm to country elevator |
| Truck movement from country elevator to Kansas City for processing |
Truck movement from country elevator to Kansas City for processing |
| Barge movement to export location |
Rail movement to export location |
Consequently, as noted above, the Kansas City routing sometimes appears economically
unreasonable. However, a significant amount of wheat and soybeans moves to Kansas
City for processing regardless of final destination and without attention to
available navigation. For these quantities which will transit Kansas City under
any circumstance, barge transportation represents an attractive option.
To reflect these various patterns, following set of judgments and assumptions
have been adopted:
- Farm shipments to country elevators, on average, require a 20 mile
truck movement.
- Within the land alternative, corn and sorghum export movements move
by truck to the nearest reported unit train location and are then moved
by unit train to the Gulf. The same is true for wheat and soybean
movements with a river origin other than Kansas City.
- Kansas City wheat and soybean export movements are forced over Kansas City,
then moved by unit train or by barge to the Gulf.
- For domestic shipments, the computation of rail rates is based on the track
capacity of the country elevator or domestic receiver. We assume that the
grain shipper would maximize the use of his facilities and utilize gathering
rates to reach the track capacity of the receiver.
Notable within the computational method is our use of both rail costing models and
tariff rates depending on which value is the lowest6. Since the rail tariff rates
generally use the short line miles, the actual tariff miles were computed for both
the cost model and grain tariff rates. No consideration is given to the Burlington
Northern's Certificate of Transportation (COT) program, OT-5 authority decisions by
rail carriers, or the C6-X covered hopper car rate structure on grain7.
To reflect the potential impact of rail car shortages, we include a one-cent
per bushel storage charge for those shipments moving from an on-river, farm-direct
location to their ultimate destination8. This charge allows for 30 days of storage.
This charge is not applied to movements from non-farm-direct shippers or in
instances in which the farm products were obviously stored for some length of time
between harvest and shipment.
The rail rating of feed ingredients follows assumptions similar to those used
for the rating of grain - namely rates constrained by track capacity and the use of
the lower of either tariff rates or rates estimated via the costing model. Combined
rail and barge transit programs for processed grain meals were not considered.
Commodity - Fertilizers
The distribution of fertilizer materials within the Missouri River Basin
reflects a fragile balance between a number of disparate market forces. This
general geographic equilibrium encompasses: (1) a variety of commodities that
are, to varying degree, substitutable; (2) strong seasonal patterns;
(3) geographically diverse production facilities; and (4) the uneven distribution
of pipeline availability within the region. A clear understanding of this delicate
multi-faceted equilibrium is essential to the appropriate evaluation of
transportation rates within the context of NED benefit calculations.
Primary fertilizer materials are divided into four groups. Nitrogen (N),
phosphates (P), potassium products - primarily potash, (K), and micro or secondary
nutrients. These materials are moved by truck, rail, barge, and pipeline to a
terminal facility for distribution to local dealers. Though some large users
purchase primary fertilizer materials for self-blending, most end users generally
purchase a prepared fertilizer blend from the local dealers either in a bagged or
bulk form.
Fertilizer distribution and applications are highly seasonal and this
significantly impacts modal choice. Three windows of opportunity are present for
the application of fertilizer by the farmer. The first of these is a two to three
week period in April. This is followed by a side dress season of one to two weeks
in late May and by a two week fall season for those farmer who plant winter crops.
Weather conditions and ground moisture dictate the timing of each season each year.
Thus, the appropriate fertilizer materials have to be in position to reach local
markets quickly, well in advance of actual season starts. This necessitates both
large storage and rapid re-supply. Typically, fertilizer manufacturers use rail
and barge to build initial warehouse inventories and rail and truck to stock local
dealers. Once an application season starts, truck re-supply is the dominant mode.
Seasonality and weather conditions also affect fertilizer transportation patterns
by requiring the post-season repositioning of liquid fertilizer products to warm
weather winter storage locations.
The unique geographic position of the Missouri River Basin helps to facilitate
an almost unparalleled degree of both product and source substitution. Within the
product dimension, users can substitute between liquid and dry fertilizer blends
and also between the various subtypes of N, P, and K materials. For example, users
may choose between nitrogen fertilizer solutions and anhydrous ammonia for liquid
nitrogen applications or between urea and ammonium nitrate for dry nitrogen uses.
In addition, nitrogen can be sourced from ammonium sulfate, mono-ammonium phosphate
(MAP), and di-ammonium phosphate (DAP). Crop selection and weather greatly
influence the type and form of fertilizer used in farm production, but usage
patterns are also impacted by product prices and the relative prices of available
transportation alternatives.
The range of transportation alternatives also varies considerably within the
region. While rail and motor carriage are ubiquitously available, barge and
pipeline transportation are not available to many local markets. Thus, patterns
of product substitution are somewhat skewed by modal availability. For example,
because an anhydrous ammonia pipeline traverses eastern Kansas, eastern Nebraska,
and northwestern Iowa, the use of liquid fertilizers is relatively more attractive.
In turn, the relatively high use of liquids causes a greater demand for phosphoric
acid as a phosphate source and dampens the demand for DAP. The same pattern also
increases the demand for powdered MAP for local dealer blending. Finally, the
Missouri River Basin is roughly equidistant from a variety of geographically
diverse product sources. Phosphates are found in Florida and Idaho. Nitrogen
products are generally obtainable from any natural gas deposit or pipeline location.
Potash enters the region from both Carlsbad, Utah and the Canadian province of
Saskatchewan.
This convergence of market forces yields market equilibria that are remarkably
fragile. Even the most modest variation in product or transportation pricing can
significantly disrupt currently observable distribution patterns. Movements that
may yield considerable profits to shippers in on time period may be wholly
uneconomical in the next. The development of a set of judgments and assumptions
that fully encompasses these complex and often fluid market interactions is beyond
the scope of this analysis. Still, every effort was made to adopt a forward
looking, robust methodology that does adequately reflect the most important of
those myriad factors affecting fertilizer movements to, from, and within the
Missouri River Basin. These include:
- The origination of all Louisiana phosphate movement from their actual
central Florida origin and the use of Idaho as an alternative source for
di-ammonium phosphate.
- The required positioning of phosphates at Kansas City for dealer
re-supply9.
- The inclusion of various alternative land route supply origins for nitrogen
products.
- The inclusion of origin market f.o.b. fertilizer prices as an appendix to
this document.
Commodity - Aggregates
All movements, save one, within this commodity grouping are either dredged
sand or waterway improvement materials. With respect to sand, the waterway serves
both as a production facility and a means of local transportation. Every effort
was made to distinguish between these two functions. In the absence of navigation,
it was assumed that production would continue under essentially the same mining /
transportation techniques employed during the study period10. Thus, in this case, a
"no navigation" alternative replaces the "land" alternative associated with other
movements. Dredging operations are assumed to be unaffected by a discontinuation
of navigation. Thus, stand-by, loading, crew, insurance, and other costs of the
mining operation remain unchanged. The lack of a navigable channel does, however,
reduce the efficiency with which the dredged sand can be moved to shore.
Specifically, we assume that those operators currently producing up to 100,000 tons
of sand each year would be required to reduce tow size from two to one barge and
that those operators producing 100,000 tons or more annually would find it
necessary to reduce tow size from four to two barges. Based on survey information
and other available data, all operators are assumed to operate using sand flats
and 600 horsepower tow boats.
Waterway improvement materials were quarried, then moved by barge for
placement. Consequently, the land alternative reflects a truck movement from
quarry site to the location at which the material was placed. In some instances,
this results in land-haul distances that are significantly longer than the all
water routing. These cases generally reflect the lack of a highway bridge,
requiring a circuitous route.
As a result of the flexibility created by surface transportation deregulation,
it is sometimes difficult to determine the exact rate charged by a carrier on
shipments moving under contract. Barge rates are a matter of negotiation between
shipper and barge line operator, and these rates are not published in tariff form.
Each carrier's rates are based on individual costs and specific market conditions,
so that these rates will vary considerably between regions, across time, and from
one barge line to another.
Contract rates are also common in pipeline, rail, and motor carrier
transportation and, like barge rates, may be maintained in complete confidentiality.
In other cases (particularly grain), tariff rates are still applied. However,
there is rarely any dependable means for determining whether a contract rate or a
tariff rate should be used to price a particular movement.
For the purposes of this study, actual rates, as provided by shippers,
receivers, or river port operators, are used whenever possible. Sources for these
rates are identified by footnotes within the worksheets for the individual
movements. All other rates were obtained from published sources or, when this was
not possible, estimated by TVA based on the mode of transportation, the tonnage,
and other shipment characteristics. All rates, whether actual or estimated, are
based on those that were in effect on June 30, 1995. However, when necessary,
reported rates have been refined to eliminate seasonal impacts or the effects of
abnormal market conditions. The methodologies employed in the estimation of
unobservable rates were developed through extensive contacts with shippers,
railroads, motor carriers, and the barge industry. This information was often
integrated with confidential federal data and/or the output of computerized
simulation and costing models. This process was both guided and augmented by
in-house TVA rating and costing expertise developed through decades of experience
as a major shipper of coal and other bulk commodities and through the
implementation of navigation-based economic development programs throughout the
Tennessee River Basin.
Barge Rates
With the exception of grain and feed ingredients, unobservable barge rates are
calculated through the application of a computerized Barge Costing Model (BCM)
developed by the Tennessee Valley Authority. The TVA model has been refined to
include 1995 fixed and variable cost information obtained directly from the towing
industry and from 1995 data published within the Corps' annual Estimated Towboat
and Barge Line-Haul Cost of Operating on the Mississippi River System. These data
are provided in Appendix 3, while an explanation of barge model parameters is
provided in Appendix 4.
The TVA model contains three costing modules - a one-way, general towing
service module; a round-trip, dedicated towing service module; and a round-trip,
general towing service module. The one-way module calculates rates by simulating
the use of general towing conditions between origin and destination, including the
potential for a loaded return. The dedicated towing service module calculates
costs based on a loaded outbound movement and the return movement of empty barges
to the origin dock. The round-trip general towing service module is similar to the
one-way, except that it provides for the return of empty barges to the point of
origin. This module does not calculate costs for towboat standby time during the
terminal process but does include barge ownership costs for both the terminal and
fleeting functions. It does not require that the empty barges be returned with the
use of the same towboat. Depending on the module in use, inputs may include
towboat class, barge type shipment tonnage, the interchange of barges between two
or more carriers, switching or fleeting costs at interchange points or river
junctions, and barge ownership costs accruing at origin and destination terminals,
fuel taxes, barge investment costs, time contingency factors, return on investment,
and applicable interest rates.
Barge rates on dry commodities are calculated with the use of the general
towing service round-trip costing module. Inputs, based on information from
carriers and the Corps' Performance Monitoring System (PMS) database, were
programmed into the module to simulate average towboat size (horsepower) and
corresponding tow size (barges) for each segment of the Inland Waterway System.
Other inputs include barge types, waterway speeds, horsepower ratios and empty
return ratios. These inputs are documented in Appendix 4.
An example of a typical shipment cost in this analysis would be a dry bulk
commodity (sea shells) originating on the Mobile River at Mobile, Alabama and
terminating on the Missouri River at Kansas City, Missouri. Based on the modeling
process, this shipment would be assumed to move in an eight barge tow from Mobile
to the Mississippi River at New Orleans, a thirty barge tow from New Orleans to
Cairo, a fifteen barge tow from Cairo to St. Louis, and a nine barge tow from
St. Louis to Kansas City. At each interchange point, appropriate fleeting charges
would be calculated. Empty return (back haul) factors would also be included for
each segment of the movement11.
With the exception of movements involving northbound and tributary rivers,
barge rates for grain and feed ingredients are estimated on the basis of a
percentage of base rates formerly published in Waterway Freight Bureau Tariff 712.
For movements with origins in the Missouri River Basin, the five year average
percent of base for the Lower Mississippi, Mid Missouri, Illinois, and Missouri
Rivers is used (See appendix 5). For movements on the Tennessee and Gulf Inter
Coastal Waterway, an arbitrary is added to the New Orleans rate.
Barge rates for asphalt are calculated through the use of the dedicated
service round-trip costing module. Twenty-four hours standby time is allocated at
origin and destination for towboat terminal functions. Finally, rates for sodium
hydroxide, vegetable oils, liquid chemicals, and molasses are calculated through
the use of the general service, round-trip costing module. As a result of
comparable barge sizes, these commodities normally move in the same tow with dry
commodities.
Barge rates calculated by the use of the TVA model reflect charges that would
be assessed in a period of traditional demand for waterway service. It should be
noted that the model does not explicitly consider market factors such as intra or
inter modal competitive influences, favorable back haul conditions created by the
traffic patterns of specific shippers, or the supply and demand factors which
affect the availability of barge equipment. These and other factors can influence
rate levels negotiated by waterway users. The model does, however, calculate rates
based on the overall industry's fully allocated fixed and variable cost factors,
including a reasonable rate of return on assets. It is TVA's judgment that the
rates are representative of the industry and provide a reasonable basis for the
calculation of NED benefits.
In addition to supplementing shipper-reported rates within a traditional NED
analysis, the TVA barge model also allows the calculation of barge costs under a
variety of different operating scenarios. Within the current context, this
attribute is particularly useful. A number of the operating alternatives under
consideration would entail that flows deviate from full service levels.
Consequently, the TVA model was used to calculate barge transportation costs for
most movements under a variety of different flow conditions13. The results of these
alternative calculations are contained within Appendix 10.
Railroad Rates
As in the case of barge, reported rail rates are used in every case for which
they are available. However, in the face of incomplete information, most movements
require the calculation of probable railroad rates. For grain and feed ingredients,
two methods are used. First, the appropriate tariff rate is identified. Next, the
Rebee Rail Costing Model is used to generate an estimate of rail movement cost.
This cost is then inflated to reflect rail carrier market power in order to produce
a final estimate of the most likely rail rate. For those cases in which the
published tariff is lower than the estimated rate, the tariff rate is selected for
use. Conversely, when the estimated rate is lower than the tariff rate, it is the
estimated rate that is retained for inclusion in the surface and alternative rate
analysis. Estimated full and variable railroad costs based on the Uniform Rail
Costing System are included for each movement14.
Rates for all other commodities are calculated based on the Rebee cost
estimates plus an appropriate mark-up. Mark-up factors and shipment characteristics
were determined through a variety of means, with shipper information being the
preferred source. However, in the absence of a superior source, information from
the Interstate Commerce Commission's annual Carload Waybill Sample was used15.
Appendix 6 details the parameters used to compute the Rebee estimates. For
shipments originating in Canada, the rail rates are converted to U.S. currency
through the exchange rate and surcharge published for June 15-30, 1995.
Motor Carrier Rates
Actual truck rates for off-river movements are used whenever possible. All
other rates are estimated based on published motor carrier tariffs or regional
rate quotations from truck brokers and contract motor carriers.
Handling Charges
Handling charges between modes of transportation are estimated on the basis
of information obtained from shippers, receivers, stevedores, and terminal
operators. Handling charges for transfer of commodities from or to ocean-going
vessels are on the basis of information obtained from ocean ports or stevedoring
companies. For import or export movements that involved mid-stream transfer
operations, handling costs to or from land modes at a competing port with rail
access are applied.
Except as noted within individual worksheets, it is assumed that movements of
bulk products (for example, grain or fertilizer) would be handled through elevators
or storage facilities. It was also assumed that liquid commodities transferred
between modes would require tank storage. Additional costs are incurred at both
river and inland locations if shipments remain in storage past the free-time period
allocated by the facilities involved. Storage charges are usually assessed on a
monthly basis.
Loading and Unloading Costs
Because loading and unloading costs are not usually documented by shippers and
receivers, they are particularly difficult to obtain16. Moreover, these costs can
vary considerably across firms. In an attempt to provide the best possible
estimates of these costs, we use available shipper and receiver information in
combination with data from Corps studies performed by other researchers, as well as
previous TVA studies. These data are revised to reflect 1995 conditions, then
averaged, as required. In those cases where varying sources produced disparate
estimates, we relied most heavily on shipper and receiver estimates. A table of
handling and transfer costs is included in Appendix 7.
Methodological Standards
Two points should be noted regarding the methodological standards applied
within this study. First, the standards described above reflect essentially the
same processes TVA has applied (or will apply) in developing transportation rates
for other recent (or ongoing) Corps studies. Specifically, the outlined
methodology was used in the Upper Mississippi Navigation Feasibility Study and
the Ohio River Navigation Feasibility Study and will be employed in Port Allen
Cutoff Assessment. Thus, inter-project comparisons are made more possible by this
uniform approach. More importantly, recent methodological improvements enable TVA
to produce transportation rate/cost materials that are, at once, more complete and
more reliable than the transportation data TVA (or any other agency) has produced
for similar studies in the past.
Based on the second quarter 1995 cost levels, those users of the Missouri
River represented by the 283 sampled movements saved, on average, $1.01 per ton
over the best possible routing alternative. Savings for each of the 8 commodity
groupings identified for this analysis are summarized in Table 3.
The appropriate application of the rate information summarized in Table 3
affords many opportunities for interpretation. There are, in general, several
caveats or exceptions that are worthy of note. Moreover, at the commodity level,
there are a number of specific circumstances that significantly affect the
magnitude of the observed benefit from barge transportation.
NED Shipper Savings
| Group |
Commodities |
Average Per-Ton Water Route Cost |
Average Least-Cost Alternative Per-Ton17 |
Average Per-Ton Water Route Saving |
| 1 |
Grain and Other Farm Products18 |
$20.41 |
$24.37 |
$3.96 |
| 2 |
Grain Products and Other Food Products |
$27.79 |
$30.50 |
$2.72 |
| 3 |
Non-Metallic Minerals |
$2.95 |
$3.42 |
$0.47 |
| 4 |
Metallic Minerals and Processed Metallic Products |
$20.71 |
$28.11 |
$7.40 |
| 5 |
Petroleum Products |
$15.27 |
$20.65 |
$5.38 |
| 6 |
Non-Agricultural Chemicals |
$22.14 |
$33.05 |
$10.90 |
| 7 |
Fertilizers and Agricultural Chemicals19 |
$33.83 |
$34.80 |
$0.96 |
| 8 |
Manufactured Products |
$46.00 |
$60.16 |
$14.16 |
| AVERAGE ALL COMMODITIES
| $6.72 |
$7.73 |
$1.01 |
General Considerations
First, apparent anomalies may, in some cases, indicate that the sample captured
a transitory use of barge that occurs when pipelines lack capacity or when rail cars
are in short supply. That is to say, for some particular shipper/receiver, barge
is only the mode of choice when other transportation markets are unusually active.
Secondly, long-term contracts and large capital investments may lead to
hen other transportation markets are unusually active.
Secondly, long-term contracts and large capital investments may lead to
discontinuities in the relationship between relative rates and modal choice. While
this is a short-run situation, it may, nonetheless help to explain what appears to
be perverse behavior. Next, the analysis superimposes 1995 transport market
conditions on set of 1991-1994 modal choice decisions. In the vast majority of
cases, this dichotomy is of little import. However, in a few isolated cases,
transportation rates may have changed sufficiently, so that in 1995, barge would
no longer have been the mode of choice. Finally, regulatory constraints on the
new construction of coal and hazardous materials handling facilities may preclude
the development of facilities necessary for some shippers to take advantage of
changes in the vector of available transportation rates.
Wheat, Corn, Sorghum, and Soybeans
Based on the observed timing of shipments, it is our general conclusion that
the grain movements that once dominated waterborne commerce on the Missouri River
now serve as a back-haul to the movement of fertilizers and other agricultural
chemicals into the region. Routine out-bound grain movements require available
empty barges that are only made affordable by in-bound fertilizer movements.
Even within this general scenario, however, there are specific situations that
demand further consideration.
As indicated in Section V., wheat and soybean movements that have their river
origins at Kansas City reach that transload location independent of the effects of
available navigation. Survey information indicates that wheat moves to Kansas City
for blending and that soybeans are shipped to the area in response to local
processor markets. Consequently, these movements are viewed as having their actual
origin in Kansas City even though the production occurred as much as 150 miles away.
Given that blending and processing demands draw these commodities into the Kansas
City area, barge transportation to export locations is a relatively attractive
option. However, in the absence of the processing influence, these shipments would
almost certainly be consumed locally or moved to export via an all rail routing.
Footnote 18 indicates that Table 3 excludes grain sorghum movements with a
Kansas City origin. Unlike wheat and soybeans, sorghum moving over Kansas City is
not drawn there by processor markets. Instead, these movements reflect transitory
market conditions in which typical markets and/or routings are unavailable. Again,
the details of this situation are explained more fully in Section V. However, it
is our conclusion that these movements reflect transitory market anomalies rather
than any sort of typical shipment pattern20. Consequently, it is not appropriate
to infer that these routings impose negative benefits as barge routing offers any
sort of long-run benefit. Any advantage associated with the Kansas City routings
of sorghum movements when they are compared to any less favorable alternative are
transient in nature and do not reflect any sort of equilibrium efficiency gain.
While the above discussion helps to clarify the conditions under which sorghum
is shipped by barge, it also brings to light a corollary topic that must be
considered when assessing future waterborne traffic potentials. As described in
Section V., grain movements are generally the back-haul to inbound fertilizer moves.
In particular, the sorghum shipments under discussion here appear to be the back-
haul for inbound phosphate movements. If, as we suggest, currently observed sorghum
movements are transitory in nature, then it very probably means that this back-haul
will cease to be available in some future period. Again, equilibria in fertilizer
markets within this region are very fragile. A movement by movement examination of
phosphate shipments into the Kansas City area reveals that even a marginal increase
in barge rates would very probably divert the whole of this traffic to an all rail
routing. Consequently, if the sorghum moves currently observed do disappear, and
if they are not replaced by some other outbound commodity, the associated inbound
phosphate movements are likely to cease as well.
Fuel Movements
The original sample includes a few relatively large, localized fuel movements.
However, investigation reveals two important factors. First, the volumes reported
by the Waterborne Commerce records were incorrectly indicated to be tons. These
volumes, in fact, were reported in gallons. More importantly, the movements do
not reflect the transportation of fuel. Instead, these were shore-to-vessel
movements undertaken strictly for the purpose of refueling. Consequently, no
rates are reported for these movements.
Phosphate Movements
Two points should be considered when applying the rates for phosphate
movements into the Missouri River basin. First, the relative benefits for
movements with Florida origins appear remarkably low because of the zone or "zip
code" pricing practices of the particular rail carrier involved in the land
alternative. Indeed, the few phosphate movements that have their origin in
Mississippi actually reflect alternative land rates that are greater than those
from Florida. It is also worth noting that the relative proportion of mono-
ammonium phosphate (MAP) to di-ammonium phosphate (DAP) is much larger in the
Missouri River basin than in other mid-western locations. As discussed in
Section V., this deviation from the norm owes largely to the ready availability
of anhydrous ammonia in the area and the ease with which MAP can be combined
with poly-phosphate and nitrogen solutions to form customized liquid fertilizers
and fertilizer suspensions for direct farm application.
Asphalt Movements
As indicated above, shipper or operator information was used where available.
In the case of asphalt, records indicate tonnages that are consistent with
something less than full service loadings for movements to Kansas City, Council
Bluffs, and Sioux City. The light loadings, more than likely, reflect the
hazardous nature of the commodity and the fact that these movements are typically
handled by towing companies that do not otherwise operate on the Missouri River
System. The estimated costs associated with these movements are higher than those
that would be incurred with a full service loading. Nonetheless, the lower
reported weights were used. The difference between the estimated costs and those
that might have been incurred under full service loadings may be interpreted as a
voluntary premium paid to avoid the additional risk of deeper drafts.
Liquid Nitrogen Fertilizer Movements
Reference Numbers 195-219 reflect the movement of liquid fertilizers at rates
which sometimes do not appear to compete with available land rates. These movements
were, however, motivated by a set of specific economic conditions not generally
capturable by the typical NED benefit process.
First, a number of these movements, having Nebraska origins, reflect the
repositioning of unused supplies for winter storage. Nitrogen solutions must be
stored in heated/insulated tanks or in a climate where temperatures remains above
freezing where there is significant risk of salting. If the solution does salt
out, the cost of cleaning a tank is quite high. Because the storage tanks at the
Nebraska origins are not insulated and because of the risk of salting, distributors
must relocate any excess nitrogen solution at the end of the third application
season. Additionally, some of the shorter moves within the Missouri River Basin
occur because of the storage capacity provided by tank barges. The value of
transportation's storage function is neither routinely nor easily incorporated
into the NED assessment process.
Finally, a number of the barge movements of nitrogen solution have their
origin at Catoosa, Oklahoma and destinations in the Missouri River Basin.
Barge transportation was used even though this transportation clearly could
have been provided more cheaply through an all rail routing. This apparent
anomaly very probably owes to two factors not captured within the NED
transportation calculations. First, the shipper, in these cases, was bound by a
minimum quantity agreement with the towing company responsible for the move. At
the point in time when the shipper opted for barge transportation, this additional
tonnage very probably was necessary to meet the minimums specified by the
agreement. Thus, barge transportation was the mode of choice, not because it
offered any sort of incremental transportation savings, but because it helped the
shipper avoid contractual penalties. Were the specific terms of the contract
available, it would have been possible to incorporate this additional aspect into
the aggregate transportation analysis. However, in the absence of this information
any reliance on the line-haul rates for the calculation of benefits is
inappropriate. Because, these nitrogen solution movements were motivated by
economic factors that are clearly outside the scope of any traditional NED analysis,
both the tonnages and rates for these moves are excluded from the summary
information presented in Table 3.
Heavy Lift Movements
The sample includes two heavy lift movements for which no land alternative was
available. Consequently, no alternative rate is reported.
FOOTNOTES:
1 Houston is, in fact, used as the alternative. However, as the text reflects, the Burlington Northern tends
to equalize rates between Houston and Mobile.
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2 Agricultural economists, to some degree, involved in the Master Manual review process suggested alternative
domestic destinations for corn and wheat. When feasible, these are the alternatives used in this analysis. In the case of
soybeans, the nearest major processing facility was selected as the alternative.
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3 This methodology reflects a significant improvement over the past efforts that simply fixed origins and destinations.
Nonetheless, because the analysis does not consider the ways in which changing commodity flows might also induce
changes in rail rates, motor carrier charge, or terminal market prices, it does not reflect a true general spatial
equilibrium.
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4 A team track is a railroad owned siding which is available for public use. Often, they are accompanied by ramps or
other limited load facilities.
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5 The one exception to this assumption is in regard to the availability of covered hoppers for rail shipments from
smaller elevators during the harvest.
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6 Use of contract rates for the movement of grains appears to have peaked in 1986 when approximately 40% of all grain
moved under contract. Since that time, a number of Class I carriers have returned to the use of traditional tariffs
as the basis for rate calculations.
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7 C6-X cars are the over-sized covered hoppers, holding 110 tons of grain each that were introduced by some carriers
in 1994. Certificates of Transportation (COT) programs are carrier programs in which period-specific car guarantees
are sold by rail carriers to shippers. These COTs may alse be resold. OT-5 authority is the authority rail carriers
grant to shippers for the use of privately owned cars.
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8 When economic theory suggests that rail carriers would have a long-run incentive to make available the rail cars
necessary to accommodate the additional barge-diverted traffic, area producers contend that the lack of effective
competition would dampen this incentive, so that increased car delivery delays would be the probable result of a
river closure.
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9 The proportion of nitrogen products entering the region through Kansas City was relatively small and the sample of
barge movements did not include potash movements to any point in the region. However, a significant proportion
(roughly 50%) of the phosphates moving into the Missouri River Basin entered over Kansas City for positioning during
the sample period. Thus a like proportion of land route movements into the region were forced to include Kansas City
as a transload point.
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10 In fact, it is possible, in the absence of navigation, to use river-to-bank pumping operations which might significantly
reduce production costs. However, given no precedent for such operations on the Missouri River, we declined to explore
this alternative.
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11 Current economic conditions and operating practices on the Missouri River allow for virtually no empty return.
In order to afford barge usage on the head-haul, barge operators must almost always be assured of a back-haul movement.
Consequently, empty return ratios on the Missouri River range between 5% - 18%, while they may reach as high as
75% on the middle segment of the Mississippi River only a few hundred miles away.
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12 The expression of barge rates for agricultural commodities as a percentage of waterway Freight Bureau Tariff 7 is
consistent with industry standards.
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13 Barge costs under alternative flow conditions are not reported for heavy lift, sand and gravel, or waterway improvement
material movements. It should also be noted that different operators respond to flow deviations in different ways.
Consequently, the same deviattion for full service costs depending on the operator in question. The results reported herein
reflect the average across all relevant operators.
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14 Rebee is an URCS based model.
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15 In addition to shipper information and the Carload Waybill Sample, shipment characteristics were also identified from
Association of American Railroads publications.
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16 Loading and unloading costs are often considered a part of through-put or production costs.
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17 As indicated within the text, this "Least-Cost" alternative considers both the all land routing and a water / land
combination over the Port of St. Louis.
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18 All figures exclude sorghum tonnage with Kansas City origins.
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19 All figures exclude nitrogen solution movements.
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20 The fact that these truck barge sorghum movements over Kansas City occur in each of the last several years may lead
some to dispute our conclusion. It should be noted, however, that even in the resonably recent past, local and regional
processing and consumption was far less of an option and direct-to-Gulf rail rates were far less attractive. Consequently,
all rail or rail/barge routings over Kansas City were much more common. Following the trend, we would expect that future
sorghum shipments over Kansas City will decline to zero. In the long-run, if these seasonal excesses continue, we would
anticipate the addition of local storage and/or additional railroad capacity, either of which would represent an option
which is more efficient than a Kansas City routing.
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