Grain freight elevator consolidation, transportation demand, and the growth of shuttle facilities

Increasing consolidation and concentration in the U.S. grain-elevator gathering system characterized by larger capacity elevators (shuttle) has altered shippers' relative usage and demand for transportation services. In this study, we estimate modal demand for individual elevator wheat shipments from the U.S. Northern Plains to export and domestic destinations between 2006 and 2013. We find a much higher rail dependence for shuttle elevators in comparison to non-shuttle elevators reflected by the relative size of modal demand elasticities. On the other hand, truck is more competitive for non-shuttle elevators. Shuttle shippers saved 24% in total transportation cost in 2013 in comparison to non-shuttle shippers, with savings in rail transportation costs alone of 22%. Our results support the idea that shippers receive better service and view rail more favorably after adopting shuttle facilities. Moreover, these service benefits may partially mitigate the disadvantages captive shippers (such as those in the Northern Plains) realize in comparison to shippers with more transport options.