Railroad wheat transportation markets in the central plains: modeling witherror correction and directed graphs

Time series methods are used to study the dynamics of regional, export-whea t, railroad rates linking seven central US regions to Texas Gulf ports. Res earch focuses on the extent and nature of regional rate interactions to det ermine whether regional rail transportation rates are established independe ntly, through interaction and/or dominated by several regional leaders. Ana lysis is carried out on 1988-1994 public waybill data for seven Business Ec onomic Areas (BEA) located in Kansas, Oklahoma, Texas and Colorado: these r egions originate virtually all of the eight million tons of hard red winter wheat annually shipped to Texas Gulf ports. Results show all rail transpor tation markets linked in varying degrees. Some regions are near-independent or highly exogenous regarding rate-setting, while others interact with and to rates established in other regions. Regions that are dominated by a sin gle carrier tend to be more independent and insulated regarding rate-settin g. Export rates in regions dominated by the Union Pacific (UP) generally ac count for a significant Variation in the rates of other regions. Data show the UP to have been aggressive in providing incentives for country elevator s to consolidate for purposes of making unit train shipments, thus their pr esumed influence on rates of other regions. As expected, export rates for r egions with substantial storage and transhipment facilities are sensitive t o export rates of regions which ship to the transhipment facilities. Finall y, results suggest that rate-setting in a particular region is in part a fu nction of the dominant railroad's management and its aggressiveness, an exp ected outcome in an oligopolistic market. (C) 1999 Elsevier Science Ltd. Al l rights reserved.