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F 313
Federal ileserve Barth of Chicago -

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December 8, 1972

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TRANSPORTATION BOTTLEECY<PSi t011,,tn4afk:
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grain exports in the months ahead. 'rile proble 'renters
around an insufficient number of railroid cars to Rtd gr2in 1972
from interior points to coastal ports. Rail car shorYages have
been a chronic problem for many years. The ro
SECT1OM
Number 1199
greater than ever this year, however,
RECORDS
At AL
.
beckdnt
increase in grain exports schedulerfcPURE
Total exports of grains and soybeans and soybean products for
the year ending June 30, 1973 are estimIted at 83.4 million
metric tons, compared to 62.5 million metric tons in fiscal
Other potential bottlenecks exist. Many Soviet ports do
1972. Disregarding seasonal fluctuations in shipping, quarterly
not have the storage capacity of U. S. ports, and delays of up
exports would have to average nearly 21 million metric tons to
to two weeks in unloading ships have been reported already.
meet these commitments.
As more ships arrive in Soviet ports in the months ahead, this
problem could work back across 7,000 miles of ocean and
Exports of grain, soybeans, and associated oil seed proddisrupt U. S. port operations.
ucts totaled 17.6 million metric tons in the first three months
of fiscal 1973. Though this was the highest rate of export in
Another bottleneck could result at interior elevators
any quarter since 1965, shipments during the balance of fiscal
faced with burdensome drying and handling problems, re1973 must average more than 22 million metric tons per
flecting the unusually wet harvesting conditions this year. Illiquarter to meet commitments.
nois elevators, in particular, may be adversely affected by curtailment of natural gas to operate drying facilities.
Department of Agriculture estimates of rail carloadings
necessary to accommodate the expected volume of exports for
Possible transportation bottlenecks may be most costly
the remainder of fiscal 1973 average 41,000 carloadings per
for grain export firms. These firms are under substantial presweek in October-December, 33,000 per week for Januarysure to meet their wheat export commitments by May since
March, and 36,000 for April-June. Carloadings during October
this is the last month in which they are eligible to receive
through the week ended November 25 have lagged well behind
export subsidies. Trade sources estimate that as of Decemthis pace, averaging only 30,000 per week, with a high of
ber 1, three-fourths of the over 400 million bushels of
33,000. Past experience indicates car shortages start to develop
Russian-bound wheat was yet to be shipped. This implies that
around 30,000 carloadings per week. To date, however, critical
wheat shipments are likely to receive priority over corn and
shortages have not become evident.
soybean shipments in the months ahead.
A special task force within the Association of American
Railroads has been assembled to monitor rail car movements
and locations to prevent bottlenecks before they develop. Reports indicate rail companies and grain firms are being exceptionally cooperative in assisting the task force in gathering
information and implementing corrective actions. The Association of American Railroads and the Interstate Commerce Commission (ICC) have authority to issue directives that require
various railroads to share all existing cars. This helps to insure
that cars are made available where they are most needed regardless of ownership. Several such directives have been issued
in recent months. The railroad association and the ICC also
may place an embargo on certain ports when a backlog of
unloaded cars begins to develop. Several embargoes were
issued in October, but the last one was lifted during the past
week. The apparent success of these coordinating efforts was
probably aided by a weather-delayed harvest that has eased the
typical seasonal congestion at interior grain elevators, and the
fact that actual exports in July-September were well off the
pace required to meet export commitments.

Demoorage charges, the penalty on shippers for holding
rail cars over two days for loading or unloading, were doubled
in April of 1971 and could be another source of financial loss
to grain firms if bottlenecks and the attendant delays in loading
and unloading rail cars should occur. Charges range from $10
to $30 per day per car depending on the length of time a car is
held out of service.
Farmers, too, may suffer from transportation bottlenecks. Unfavorable price relationships at country points could
develop if local elevators are unable to maintain the flow of
grain through their facilities. Farmers in unfavorable locations
could be forced to find additional storage facilities. Grain
spoilage on the farm could increase. Many farmers already
hard-pressed to repay loans because of harvesting problems
may be forced to ask for further extensions of credit if marketing problems develop.
Dennis B. Sharpe
Agricultural Economist