World Grain - October 2008 - 40

FEATURE

long haul?
F

inancial market analysts commonly draw distinctions
between secular and cyclical trends. Secular trends are
viewed as permanent - or at least long-term - market
forces that are expected to drive market dynamics in predictable patterns. Cyclical trends refer to short-term swings
around this norm. They can also be considered a measurement
of how well the business in question correlates to general economic and business conditions.
Traditionally, industrial companies and activities have been
considered either one or the other. Once classified, they rarely
transition from one category to the other; however, there are
exceptions. Recently, the transportation of export grain has
undergone a significant modal change. The traditional bulk
transportation model has been challenged by containerized
shipping. The question is whether this transition is cyclical or
whether we are witnessing a secular change.
TRADITIONAL TRANSPORTATION
Compared to cargo destined for domestic consumption, export grain in the United States (U.S.) must usually travel extensive distances, for which railroads and barges have served
as the primary transportation modes. When railroad deregulation was enacted in 1980, railroads worked to balance supply
and demand. They shed branch lines that did not generate sufficient density (supply reduction) and also signed long-term
contracts with major customers (demand increase.) Heavier
grain cars (286,000-pound gross weight limits - a 33,000
pound increase) requiring volume density and adequate track,
40

by Theodore Prince

Numerous factors will determine
whether moving grain in containers
is a secular or cyclical trend
hastened network concentration.
By the mid-1990s, U.S. railroads recognized that allocating
railcars on a first-come, first-served basis resulted in railcar
shortages and cyclical service demands. To control the spot
market, railroads developed a rail freight guarantee program,
whereby shippers purchased capacity well in advance.
More significantly, in an effort to improve operations, railroads developed the grain shuttle train. These are unit trains
where the railcars and locomotives move as a dedicated train
on a continuous basis and free the railroad from multiple handlings of individual cars. The shuttle customer, who must utilize high-capacity and high-speed grain elevators, guarantees
a set period of loading and unloading to maintain high asset
utilization. Today, it is estimated that two-thirds of all grain in
the U.S. moves by shuttle train.
With fewer, larger elevators actually loading, most grain
is trucked from its production site to the loading elevator.
From there, grain moves by rail to the port of loading, where
it is stored before being loaded onto a vessel for trans-ocean
October 2008 / World Grain / www.World-Grain.com


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World Grain - October 2008

Table of Contents for the Digital Edition of World Grain - October 2008

Contents
World Grain - October 2008 - 1
World Grain - October 2008 - 2
World Grain - October 2008 - 3
World Grain - October 2008 - Contents
World Grain - October 2008 - 5
World Grain - October 2008 - 6
World Grain - October 2008 - 7
World Grain - October 2008 - 8
World Grain - October 2008 - 9
World Grain - October 2008 - 10
World Grain - October 2008 - 11
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