1

Agricultural 

Marketing 

Service

Mar 2021

This is a summary of “Estimating the Demand for Railroad and Barge Movements of Corn in the Upper 

Mississippi Valley,” by Tobias Sytsma and Wesley W. Wilson.1 This research and analysis received funding 

from USDA’s Agricultural Marketing Service (AMS) through cooperative agreement number 

18-TMTSD-TN-0012. The opinions and conclusions expressed are the authors’ and do not necessarily 

reflect the views of USDA or AMS. The full paper is available at:

https://ageconsearch.umn.edu/record/308938.

WHAT IS THE ISSUE?

Freight flows are determined by market forces of supply and demand. In general, shippers seek to maximize their return, 

given the prices offered in different locations and the costs (handling and transportation) to reach those markets. Many 

Midwestern grain shippers enjoy access to barge transportation, which costs less per ton-mile than truck or rail. However, 

barge transportation is practical only for limited origins and destinations. As a given shipper’s distance to the waterway 

increases, barge becomes more expensive to access, and the shipper’s modal choice (barge or an alternative) becomes less 

obvious.

When barge is unavailable or too costly to access, many grain shippers choose to ship by rail. Therefore, changes in both rail 

and barge rates affect decisions about which route is taken. Overall, barge and rail markets are closely related, but how they 

interact and compete in overlapping territory (e.g., within 300 miles of the inland waterway) is not well understood.

The researchers studied the substitutability of barge and rail transportation for Midwest corn shippers and measured how a 

given shipper’s preference for each mode changed as the shipper’s distance to the waterway changed. The research reveals 

how demand for barge and rail respond to relative price changes. Analysis also reveals how the distance to barge affects 

barge and rail demand.

1 Sytsma is a former graduate student, and Wilson is a professor in the Department of Economics (College of Arts and Sciences) at the 

University of Oregon.

Estimating the Demand for Railroad and Barge 

Movements of Corn in the Upper Mississippi 

River Valley (Summary)

Jack Novak, Peter Caffarelli, and Jesse Gastelle

REPORT SUMMARY
2

WHAT DID THE STUDY FIND?

To study the interplay between barge and rail, the researchers established nine “catchment areas” along the 

Mississippi River, each containing potential origin and destination locations for barge and rail shipments of corn. 

They found barge handled most corn volumes in these areas, about 86 percent of the tonnage annually. The Central 

(Louisiana) Gulf was the most common destination for both barge and rail shipments originating near the Mississippi 

River. For barge movements originating in the region of study, nearly all tonnage terminated in the Central Gulf. For 

rail movements in the region, destinations were more diverse than for barge, but the Central Gulf was still the top 

destination. On average, 28 percent of annual rail tonnage terminated in the Central Gulf; 25 percent, in the Lower 

Ohio area; 16 percent, in the Illinois River area; and 15 percent, in the Mid-Mississippi River area.

The researchers found shippers substituted modes and, to a lesser extent, substituted destinations based on rail and 

barge prices. Specifically, shippers near a waterway generally preferred barge, but increasingly opted to ship by rail 

as the distance from the waterway grew. The preference for barge was strongest for shippers closest to a waterway 

and fell to approximately zero for shippers beyond 175 miles from the waterway.2 Likewise, as barge rates increased, 

shippers became more likely to ship by rail.

HOW WAS THE STUDY CONDUCTED?

Much of the previous literature studying modal choice and demand by shippers involves expensive surveys. In 

contrast, this paper’s new approach relied on data from the Surface Transportation Board’s Carload Waybill Sample 

(for rail) and the U.S. Army Corps of Engineers’ Waterborne Commerce Statistics (for barge) to calculate shipping rates 

and model barge and rail movements. Specifically, the researchers used data from corn shipments between 2000 and 

2017 that originated and terminated within the nine defined areas—Upper Mississippi, Middle Mississippi, Illinois, St. 

Louis, Lower Ohio, Upper Ohio, Memphis, Lower Mississippi, and Central Gulf. The researchers used these definitions 

of area origination and termination to model shippers’ choice of mode and destination as a function of transportation 

rates, distance to the waterway, and other shipment attributes.3

PREFERRED CITATION

Novak, Jack, Peter Caffarelli, and Jesse Gastelle. March 2021. Estimating the Demand for Railroad and Barge 

Movements of Corn in the Upper Mississippi Valley (Summary). U.S. Department of Agriculture, Agricultural Marketing 

Service. Web. <http://dx.doi.org/10.9752/TS315.03-2021>

Tractor wheel icon: ID 33434254 © Tribalium | Dreamstime.com

Photo credit: Adobe Stock

USDA is an equal opportunity provider, employer, and lender.

2 Some shippers close to the waterway may still choose to ship via rail based on contract obligations or special circumstances, such 

as time constraints.

3 More technically, they used a random utility model to reflect shipper decisions. The model assumed a shipper chose the 

destination and mode associated with the highest utility, where utility was based on (1) observed attributes of the route (e.g., 

transportation rates); (2) unobserved factors (e.g., commodity prices, which were taken as random); and (3) unobserved shipperspecific attributes (e.g., contracts). To study how a shipper’s distance from the waterway affected modal shares of grain shipments, 

the researchers first established 250 distance bands, each representing a 1-mile increment of distance from the waterway. (The 

entire distances ranged between 50 and 300 miles.) Then, they conducted a regression at each distance band with modal shares as 

the dependent variable and several potential explanatory variables.