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The impact of the Staggers Rail Act of 1980 on Pacific Northwest wheat transportation : a spatial equilibrium analysis

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  • This study analyzes the impact of the 1980 Staggers Rail Act (SRA) on Pacific Northwest (Oregon, Washington, Idaho and Montana) wheat transportation. A minimum cost uncapacitated transshipment network flow model is employed to simulate the origination and destination pattern of grain flows before (1977) and after (1985) the SRA. The grain transportation flow for those two years is compared and analyzed as a basis for measuring the impact of rail deregulation. The Transportation Simplex Algorithm is used to find the optimum (minimal cost) wheat transportation flow for the two time periods. Four modes of transportation—truck, barge, rail, and ocean carriers—are used to link a sample of inland grain elevators (source), barge terminals (transshipment), PNW ports on the Lower Columbia River and Puget Sound (transshipment), and foreign countries (sink). The empirical results indicate that the SRA has had a significant impact on modal distribution, overall transportation costs, and rate competition. Under the assumption of perfect information and profit maximizing behavior, and considering both single car and multicar rates, two-thirds of the total PNW wheat traffic should have moved by rail in 1985. This represents a significant increase compared to 1977, when this percentage was estimated at only 46.43 percent. This increase in rail modal share has come at the expense of truck-barge shipments. The truck-barge share of wheat transportation declined from 47.53 percent in 1977 to 25.66 percent in 1985. Most of this increase in rail shipment is the result of lower shipping costs offered through multicar rates. If only single car rail rates are considered in 1985, the rail market share is only 25.66 percent; while truckbarge market share is 66.60 percent. The volume of wheat exported through the Lower Columbia River ports and Puget Sound appears not to have been affected by the SRA. Overall wheat transportation cost decreased significantly over this time interval. In nominal terms, it cost an average of 5.32 percent less in 1985 than in 1977 to transport a metric ton of PNW wheat to the port terminals on the west coast. When adjusted for inflation, average wheat transportation cost decreased around 44 percent. Sensitivity analysis showed that the wheat transportation market in the PNW has been very competitive since 1977 with some apparent changes in market behavior. First, railroads had a greater ability in 1985 than in 1977, to capture wheat traffic from truck-barge by lowering rates. When rail rates are reduced by one percent, rail traffic increases 7.93 percent in the 1985 model and only 2.40 percent in the 1977 model. Rail rate increases, on the other hand, lead to higher traffic losses in 1977 than in 1985. For an increase of one percent in rail rates, rail traffic decreased 10.21 percent in 1977, and only 4.76 percent in 1985. The conclusion of this study is that there has been a significant diversion of wheat traffic from truck-barge to rail, during the period of rail deregulation. Overall transportation costs have also decreased, and the railroads ability to capture wheat traffic by reducing rates has been enhanced. It is concluded that the impact of the SRA on PNW wheat transportation is due largely to the introduction of multicar rates by the railroads serving the region. The implications of these findings are that railroad deregulation has provided many of the benefits expected by this legislation. Shippers are favored by the SRA because they are paying lower transportation costs. Railroads have benefited, to the extent that their market share has increased. Barge companies, however, have been adversely influenced by the SRA because they have lost their modal share of wheat traffic to railroads. Shippers, while benefiting from lower rates, seems now more vulnerable to the potential for future rail rate increases.
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