May 12, 2017
By By Mike Steenhoek, Executive Director, Soy Transportation Coalition • From Spring 2017 American Soybean Magazine
It is either a facilitator of farmer profitability or an impediment to it. The multi-modal transportation system consisting of rural roads and bridges, highways and interstates, freight railroads, the inland waterway system and ports allows individual soybean farmers—often located 1,000 to 1,500 miles from our nation’s export regions—to be among the most international of enterprises. The condition of each mode and farmer proximity to it significantly determines whether an operation is profitable. After all, a viable soybean industry is not simply a function of abundant supply or robust demand. It also is a function of connectivity between supply and demand. Our transportation infrastructure provides that connectivity.
According to the American Road and Transportation Builders Association, over 55,000 bridges in the United States are found to be deficient. A higher percentage of these problematic bridges are located in rural areas and owned by counties or municipalities. Many of these bridges are load restricted or closed altogether, which can result in a journey from the farm to the local elevator becoming a 30-mile trip verse a 10-mile trip. This is consequential to the soybean farmer, not only in terms of lost time but also in lost revenue.
A research project focused on rural bridges funded by the Iowa Department of Transportation, Iowa State University and the Soy Transportation Coalition, highlighted the cost of a detour due to a closed or restricted access rural bridge. If a single truck each day transporting soybeans or another commodity would incur a five-mile detour due to a closed or restricted bridge, the total annual cost to those drivers of that five-mile detour would be $4,891. If eight trucks were impacted by that same five-mile detour each day, the total annual cost would be $39,128.
In addition to promoting greater investment in our nation’s rural bridges, the Soy Transportation Coalition is working with individual state soybean associations to promote the greater utilization of bridge testing technology to improve accuracy when evaluating bridges—reducing the potential for unnecessary bridge closures or load limits and increasing the likelihood that scarce taxpayer funding is directed toward the bridges that are in the most degraded condition.
Many problematic bridges are owned by counties or municipalities and are load restricted or closed altogether, which means a journey from the farm to the local elevator becomes a 30-mile trip verse a 10-mile trip. Photo by Joe Murphy
According to the Soybean Checkoff funded analysis, “Farm to Market: A Soybean’s Journey,” 100 percent of the soybean deliveries from the farm to the elevator occur via truck, or to a much lesser extent, grain wagon. Eighty-five percent of deliveries from the elevator to the processor, rail loading facility, or barge loading facility occur via truck. Therefore, if trucking is inefficient, farmers will be inefficient, and profitability will decline.
The American Soybean Association (ASA), the Soy Transportation Coalition and other agricultural stakeholders continue to promote the allowance on federal interstates and state roads of six-axle, 91,000 pound semis—an increase from the five-axle, 80,000-pound limit that persists in many areas of the country. Research by the Soy Transportation Coalition and other organizations consistently highlight that doing so will result in greater motorist safety, decreased infrastructure wear and tear and greater cost savings and efficiency gains for farmers and other shippers.
A comparison of farmers from Illinois and Iowa—the top two soybean producing states—offers a compelling example of how more restrictive semi weight limits can have tangible consequences on profitability.
Truck weight limits on federal and state roads within Illinois are restricted to 80,000 pounds. An Illinois farmer producing 135,000 bushels (110,000 bushels of corn + 25,000 bushels of soybeans) will require 142 truckloads (114 loads for corn, 28 loads for soybeans) to deliver to the elevator. If the elevator is 25 miles from the farm (50 miles roundtrip), 7,100 miles will be driven to deliver the total farm production.
In contrast, Iowa state and local roads allow six-axle, 90,000-pound semis. An Iowa farmer, therefore, producing an identical 135,000 bushels (110,000 bushels of corn + 25,000 bushels of soybeans) will require 126 trips (101 trips for corn, 25 trips for soybeans) to deliver to the elevator. If the elevator is equally 25 miles from the farm (50 miles roundtrip), 6,300 miles will be driven to deliver the total farm production.
Therefore, an Illinois soybean farmer producing the same number of bushels will incur 16 additional trips—driving 800 additional miles—to get his or her production to market compared to an Iowa farmer. Depending upon the area of the country, the cost to operate a semi can range from $1 to $2 per mile. Therefore, the 800 additional miles of driving will cost the Illinois farmer $800 – $1,600 each year simply due to lower trucking efficiency. For grain elevators delivering to processors, barge terminals, etc., the cost savings and efficiency gains become exponentially higher.
Greater trucking efficiency also permits farmers greater access to more distant delivery locations that may offer a higher price per bushel. Many farmers would like to deliver to an inland river terminal or a large soybean processor, but distance from the farm may make the delivery cost prohibitive. Increasing trucking efficiency will increase marketing options and increase profit opportunities for farmers.
Our nation’s inland waterways allow a significant percentage of U.S. soybeans to be efficiently transported hundreds of miles to export terminals near the Gulf of Mexico. Research consistently highlights how the price farmers receive for soybeans and corn increases the closer in proximity one is to the barge loading facilities located along our inland rivers. Two farmers can equally be 1,000 miles from an export terminal. However, if one is located near the river, and the other is not, the profitability of the two will significantly differ.
This benefit of being located in proximity to an inland waterway can diminish if one of the key locks and dams that accommodate barge transportation were to fail for a significant duration of time. According to the U.S. Department of Agriculture (USDA), an unanticipated closure of a lock and dam can result in a drop in soybean prices up to 44 cents per bushel. Farmer profitability will diminish, not due to any mistake on his or her part, but simply due to breakdown in the supply chain. If barge transportation is unable to occur, barge loading facilities will resort to discouraging deliveries from farmers by lowering the per bushel price offered.
Given the importance of locks and dams to farmer profitability, the ASA, the Soy Transportation Coalition and others continue to promote sufficient federal funding to ensure the system is well maintained and reliable.
If barge transportation is hindered, barge loading facilities will resort to discouraging deliveries from farmers by lowering the per bushel price offered. Photo courtesy of the Soy Transportation Coalition
The rail investment linking the Pacific Northwest with North Dakota, South Dakota, Minnesota, Nebraska, Kansas and other states, has provided international marketing opportunities to a key soybean producing region that years earlier did not exist. Overall, rail service over the past several years has been considerably efficient and predictable. However, in 2014, a number of events converged to result in a significant decline in rail service. Farmers in many of these states experienced a widening basis that impeded their profitability.
It should always be the aspiration of the Soy Transportation Coalition and its member organizations like ASA to examine each mode of transportation soybean farmers rely upon and ponder, “How can costs be removed, efficiency increased, or reliability enhanced?” The reality of a commodity industry, like soybeans, is that success is largely the result of transporting product from origin to destination in the most cost effective and reliable manner. This allows U.S. soybeans and soy products to be attractive to our customers, and of utmost concern, it helps enable farmers to remain profitable.