The Impact of Unit Train Rates Upon Spatial Price Differentials for Corn
Harris, James Michael
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https://hdl.handle.net/2142/66789
Description
Title
The Impact of Unit Train Rates Upon Spatial Price Differentials for Corn
Author(s)
Harris, James Michael
Issue Date
1981
Department of Study
Agricultural Economics
Discipline
Agricultural Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Agricultural
Language
eng
Abstract
The grain marketing system is a complex of many activities in which transportation plays an important role. Transportation is not only an important physical function, but it also has an important role in price relationships, since prices at the numerous points comprising the grain market are linked by transportation costs. Changes in transportation cost (rates) can alter spatial price relationships, along with the pattern and direction of grain flow and the demand for transportation.
In recent years, numerous changes have been occurring in grain rates. One of the most significant changes has been the introduction of unit train rail rates for export grain. Proponents of these rates have asserted that the lower cost rates associated with unit trains result in higher prices paid to farmers in the grain producing areas. Opponents have disagreed. Therefore, the primary objective of this study was to analyze the impact of differentials in the availability and use of unit train rates upon producer prices for corn. Spatial price differentials (and not price levels) which may be attributed to these differentials represent the primary variable which was measured.
Corn price relationships were first analyzed using price maps. These maps represented the spatial price pattern for corn over time for a selected number of midwest corn producing states. An attempt was made to describe and explain any perceivable changes in spatial price relationships which have occurred concurrently with known changes in transportation costs--specifically the introduction of unit trains.
To better explore the effects of unit train rates on producer prices paid by country elevators, both normative and behavioral models were used to analyze price impacts. A single market area in East Central Illinois was selected for analysis. A linear programming model was first used to provide information on the impact of the introduction of unit train rates on structure, total marketing cost, and grain flows under assumed structural relationship. Behavioral or causal models were then used to test the hypotheses suggested by the normative solutions of the linear programming model.
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