Working Paper: NBER ID: w23924
Authors: James B. Bushnell; Jonathan E. Hughes; Aaron Smith
Abstract: Grain shippers and political figures in North Dakota and nearby states have voiced concern that the dramatic increases in shipments of crude oil by rail have caused service delays and higher costs. We investigate the potential impact of crude shipments on grain markets accounting for harvest effects and other potential sources of rail congestion. Increased crude oil shipments are associated with substantially larger spreads between wheat prices at regional elevators and in Minneapolis, the market hub. The effect on corn and soybean spreads are an order of magnitude smaller. Increased oil traffic is associated with small increases in rail rates but large increases in rail car auction prices. We document increases in wheat carry (storage) costs and decreases in shipment quantities. Surprisingly, little of the spread increase is due to lower prices paid to farmers, suggesting consumers rather than producers paid the cost of increased rail congestion.
Keywords: Agricultural Prices; Crude Oil Shipments; Rail Transportation; Grain Markets
JEL Codes: H22; Q02; Q35
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased oil shipments (L92) | larger spreads between wheat prices at regional elevators and in Minneapolis (R19) |
| increased oil shipments (L92) | increases in wheat carry storage costs (Q11) |
| increased oil shipments (L92) | substantial decreases in the quantity of grain shipped from North Dakota and nearby states (N72) |
| increased oil shipments (L92) | burden of increased transportation costs falls on consumers (L90) |
| increased oil shipments (L92) | lack of decrease in prices paid to farmers (Q11) |