Executi ve Summary
v 

Executive Summary 

This report is in response to Section 6206 of the Food, Conservation, and Energy Act of 2008 (PL 

110-246), which directs the Secretaries of Agriculture and Transportation jointly to conduct a 

study of rural transportation issues. The report reviews transportation and its effect on rural 

communities, with an emphasis on agricultural transportation. It looks in depth into each of 

the four major modes of transportation commonly used by agriculture in the United States: 

trucking, railroads, barges, and ocean vessels, examining each in the light of its ability to meet 

rural America’s transportation needs now and in the future. It identifies some broad issues that 

merit attention from policy makers. 

Transportation is critical to U.S. agriculture, which raises the food for America and feeds a 

hungry world with its abundance. Our transportation system moves food from farms to our 

tables, and to ports for export to foreign markets. The four major modes work together in a 

seamless network, cooperating and competing with one another in a balanced and flexible 

system that delivers products efficiently and economically in an ever-changing market. 

Agriculture is the largest user of freight transportation in the United States, claiming 31 percent 

of all ton-miles transported in the United States in 2007. Much of this freight travels out of the 

country. Global agricultural supply and demand have changed rapidly since 1990. Corn and 

soybeans have increased dramatically in both consumption and production. During the past 5 

years, half of American wheat was exported, along with 36 percent of the soybean crop and 19 

percent of the corn crop. These exports travel from the inland areas of the United States where 

they are produced to borders and ports by way of a network of trucks, trains, and barges. 

The need for agricultural transportation will continue to increase, based on projected growth in 

the demand for U.S. agricultural products domestically and overseas. 

Transportation Issues Affecting Agricultural Shippers 

This study highlights some policy issues that should be examined. These issues are described in 

greater detail in Chapter 15: Multimodal Issues. 

• Transportation needs should be viewed from a system standpoint. Current governance 

oversees each mode of transportation—trucks, railroads, barges, and ocean 

vessels—separately and disparately rather than as a single interlocking system of 

transportation. The U.S. agricultural supply chain is a major user of the nation’s 

transportation system, so its needs, especially in rural areas, should be taken into 

account in the planning and oversight of transportation in the United States. 

• Ocean shipping and railroads are exempt from many antitrust rules. These exemptions 

have the potential to decrease competition, reduce service, and raise rates. However, 

since each of these industries cooperate as part of a network (although in different 

ways), carriers believe the limited antitrust exemptions have facilitated this 

cooperation. 
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• The rapid consolidation of the railroad industry through mergers has resulted in a 

decrease in the unrestricted interchange of traffic, routing choices, and the level of 

competition among railroads. Shippers are concerned with switching limitations, 

restricted interchange, paper barriers, inconsistent service, high rates, excessive fuel 

surcharges, bottleneck rates, and the effectiveness of the rate challenge process. 

However, railroad productivity has increased greatly since deregulation in 1981, and 

rates have fallen for many shippers, although to a lesser degree for grain and coal 

shippers. At the same time, the financial health of the rail industry has improved, 

benefiting farmers and rural areas. 

• In 2005, Congress clarified the 100 air-mile radius agricultural exemption from the hours 

of service rules, first granted in 1995. It means that drivers transporting an agricultural 

commodity or farm supplies for agricultural purposes are exempt from the maximum 

driving and on-duty time provisions required of long-haul drivers. The agricultural 

exemption is important because of agriculture’s unique requirements; however, 

questions remain about its impact on highway safety. 

• Funding for new waterway projects is nearly depleted, and there is a growing funding 

gap to finance ongoing projects. A consensus on the best way to tackle these funding 

issues is needed. 

Transportation Supports Rural America 

An effective transportation system supports rural economies, reducing the prices farmers pay 

for inputs, such as seed and fertilizer, raising the value of their crops, and greatly increasing 

their market access. The economies of rural areas are intertwined. As agriculture thrives, so 

does its supporting community. Providing effective transportation for a rural region stimulates 

the farms and businesses served, improving the standard of living. 

The interaction of agriculture and the off-farm jobs it supports provides a solid base for rural 

communities. Agriculture is far from the largest employer in rural America. Four other 

sectors—services, government, retail and wholesale trade, and manufacturing—comprise 80 

percent of rural employment. Agriculture is responsible for less than one in ten rural jobs but, 

because it is so capital-intensive, it generates much more economic activity in the community 

than just the jobs it creates. 

The transportation system that contributes to the success of agriculture also supports rural 

manufacturing. Although the traditional view of rural America is agricultural, it is, in fact, 

manufacturing that is critical. Manufacturing employs 15 percent of the rural workforce. As a 

share of total employment, manufacturing is 42 percent more important to rural America than 

to metropolitan America. The availability of rail, air, and highway services is one of the most 

commonly cited requirements of manufacturing and commercial establishments. 
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Transporting Biofuels 

The burgeoning use of biofuels contributes towards our country’s policy goals of addressing 

climate change, supporting the domestic economy, and reducing the nation’s dependence on 

imported petroleum. By 2008, U.S. ethanol production had reached 9.3 billion gallons—

equivalent on an energy basis to approximately 36 percent of the gasoline produced from crude 

oil imported from Persian Gulf countries. Renewable fuel standard (RFS-2) goals target biofuel 

use to be 36 billion gallons by 2022—a very brief time in which to develop the distribution 

infrastructure. 

The biofuels most commonly used in the United States are ethanol and biodiesel. Ethanol is 

produced in much greater quantities than biodiesel, making its transportation requirements 

more complicated because more demand is placed on the transportation system. Most is 

currently produced from corn, and most ethanol plants are in the Corn Belt. As cellulosic 

ethanol is commercialized production density is likely to remain in the Midwest due to the 

abundance of crop residue. 

To achieve the RFS-2, EPA estimates that 40 unit train destinations*

 will be needed by 2022. 

There are currently 13 unit train destinations. Additional unit-train destinations would create 

more ethanol corridors on the rail network, preventing congestion points that could develop 

with increased biofuel shipments. Future transportation needs will be influenced by the 

location of feedstocks and production facilities and the extent to which the next generation of 

biofuels can use existing distribution infrastructure. 

Transporting Coal 

Coal is a major source of energy in the United States. In 2006, it was responsible for one-third 

of domestic energy production and almost half of electric power generation. Despite the 

growth of alternative energy sources, coal will continue to be a major source of power for rural 

consumers. Because coal plays such an important role in generating electricity, its costs—

including its delivery costs—are reflected in the price consumers pay for electricity. The cost of 

coal delivered to electric plants has increased every year since 2000. 

The Clean Air Act Amendments of 1990, which limited sulfur dioxide emissions, increased the 

demand for coal with less sulfur. Production shifted from the Appalachians to the Powder River 

Basin of Wyoming and Montana, which now produces 43 percent of the Nation’s coal. This 

western shift has resulted in the use of cleaner coal, but production is now far from river 

transportation systems, and competitive access to railroads is limited, raising issues about 

generating electricity at affordable prices. 

Since 1979, when the first coal mines began production in the Powder River Basin, the railroad 

industry has constructed the longest new rail line built in the 20th century, purchased many 

locomotives and coal hoppers, and made investments in existing infrastructure on routes from 

 

*

 Unit train destinations are petroleum blending terminals and intermediate storage terminals that are equipped 

to handle unit trains of at least 50 cars. 
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Wyoming to coal consumers in the Midwest and on both coasts. Railroad investment in this 

infrastructure has benefitted shippers of other commodities as well, since few rail lines carry 

only coal. 

Railroads are vital to coal transportation, and coal is vital to railroads. Coal accounted for 46 

percent of railroad car loadings in 2007 and will continue to be important in the future. 

Sufficient railroad capacity is essential to move this traffic. 

Coal shippers are concerned about bottleneck rates and contractual paper barriers that prevent 

interchange with competing railroads, which can result in higher rates. Railroad service 

problems and high rates can directly impact rural consumers by pushing up electricity rates. 

Rail Competition and Agriculture 

Rail is the only cost-effective mode of transportation available to many agricultural producers. 

Railroads transport nearly all the grains and oilseeds produced in Montana, more than 70 

percent of the commodities produced in North Dakota, and more than half of those produced 

in Arizona, Oklahoma, and South Dakota. 

The Staggers Rail Act of 1980 economically deregulated railroads, encouraging greater reliance 

on free markets to promote railroad profitability and relying on competition to protect shippers 

and the public. The preservation and protection of competition is vital for the prosperity of 

agricultural producers and shippers operating with a deregulated railroad industry. Railroads 

have had certain exemptions from antitrust laws since 1914. When deregulation leaves the 

protection of customers to competition, antitrust laws are vital to protect that competition. 

The loss of rail-to-rail competition due to railroad mergers and the associated increase in 

market power was not foreseen by many when the Staggers Act was passed. However, the 

abandonment of rail lines was a predictable outcome of railroad deregulation. Prior to 

deregulation, the railroad industry was characterized by excess capacity. Following 

deregulation, railroads reduced costs by eliminating excess capacity. Many routes and branch 

lines were abandoned, railroads merged to eliminate duplicative facilities, and costs fell as 

productivity increased. The mergers increased railroad market power and profitability. 

Nevertheless, rates for many shippers fell from 1981 through the end of the 20th Century. Since 

2004, however, rates have begun to rapidly increase as railroads reach the limits of their 

capacity. 

The level of rail-to-rail competition for grains and oilseeds decreased significantly between 

1992 and 2007. Almost 75 percent of agricultural areas lost rail competition from 1992 to 

2007, and the areas in which a railroad had a monopoly in transporting grain and oilseeds 

increased from 10 percent to 15 percent. At the same time, the revenue-to-variable-cost ratio 

in 83 percent of those areas increased. 
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Rail Rates 

The passage of the Staggers Act in 1980 enabled railroads to increase their return on 

investment, in part by allowing differential pricing in which different rates can be charged to 

different shippers and therefore some shippers bear a greater share of fixed costs than others. 

Agricultural commodities have historically carried higher rates than traffic more subject to 

competition from other modes. When selling their products farmers have little control over the 

prices they receive, so higher transportation costs result in lower net prices to farmers. This 

not only can affect the economic vitality of U.S. agriculture but also the competitiveness of U.S. 

agricultural exports in world markets. 

Nationally, not only are rail rates for grain and oilseeds higher than those for other 

commodities, but the rates have increased more rapidly during the four years since 2003. Rail 

rates for grain and oilseeds rose 46 percent from 2003 to 2007; rates for all other commodities 

increased 32 percent in the same period. 

Railroads have structured their rates to favor larger movements. There is a significant rate 

advantage for the largest trainload shipments of grain and oilseeds. Many costs that were once 

included in railroad rates have been shifted to shippers, such as car ownership. Railroads have 

also paid billions in merger premiums, which causes higher rates for shippers. 

Railroad rates have increased significantly since 2004, increasing railroad profitability. In part, 

this has resulted from a lack of rail capacity and a need for additional investment in 

locomotives, freight cars, and fixed plant. In part, the increase in rates has been a response to 

rising costs, as pointed out in a report by Christensen Associates in 2007. 

There is considerable evidence that railroad fuel surcharges recovered more than the additional 

cost of fuel, artificially boosting railroad profits. From 2001 to 2007, surcharges were 55 

percent higher than the incremental increase in the cost of fuel. 

Bottleneck rate situations constrain the options available to shippers, decreasing routing 

efficiency, increasing rates, and increasing the market power of railroads. 

Rail Service 

The railroad share of the grain transportation market has been shrinking in recent years, in part 

because of changes in the way grain is marketed and in part because of increases in rail rates. 

The closure of many rail branch lines and a shift to “shuttle train” service by railroads has 

resulted in the closure of many country grain elevators, resulting in the movement of grain for 

longer distances on rural roads to shuttle train terminals. 

The U.S. railroad system is a network. The unrestricted interchange of traffic among railroads 

could allow shippers to achieve higher efficiency and better access to markets. In many cases, 

however, railroads restrict network interchange—restricting shipper choices of markets in the 

process—in an effort to increase profitability. 
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The abandonment of grain branch lines has in some cases limited the markets farmers can 

economically reach, resulting in lower prices due to the cost of transportation or a lack of 

access to markets. While the concentration of grain loading at fewer points has increased the 

efficiency of rail transportation, it has also resulted in the movement of grain over local roads 

for longer distances, resulting in higher road maintenance costs for many rural communities. 

Railroads have since the 1990s been moving to larger-capacity grain cars as a cost-reducing 

measure. While these cars permit mainline movement of grain at lower cost, many branch 

lines cannot accommodate the heavier weights, and smaller railroads often lack the resources 

to make necessary investments in their infrastructure to handle the heavier cars. 

Rail Capacity 

Rail capacity is usually examined in terms of average tonnages carried and investment 

strategies, which gives a misleading picture of the situation. Capacity should be looked at in 

light of the specific characteristics of agricultural movements. The seasonal needs of 

agriculture, its regional variation, and the presence of local nodes of congestion show that 

attention must be paid to specific components rather than aggregate data. 

Rail capacity constraints were common from 2003 through the first half of 2006. Weaker 

demand for rail freight transportation beginning in late 2006 and a recession that began in 

December 2007 slowed demand and resulted in adequate rail capacity for agricultural products 

since the harvest of 2006. 

The increased use of rail transportation, which has benefited the railroads financially, also has 

contributed significantly to rail congestion. Each route mile during 2007 carried, on average, 

171 percent more traffic in ton-miles—nearly triple the traffic—than in 1980. 

Rail Investment 

Significant and sustained growth in freight demand is expected, and could double by 2035. 

Investment in the railroad industry, however, is not expected to keep up with demand once the 

economy fully recovers, especially in agricultural areas. This shortfall of investment could 

threaten the United States’ competitive position as a low-cost supplier of high quality grain. 

Railroads are a capital-intensive industry. The railroad industry’s profitability has surged in 

recent years, finally giving it adequate revenue*

 and increased access to capital. In an attempt 

to meet the rising demand for their services, railroads spent $420 billion on infrastructure 

between 1980 and 2007, investing almost 18 percent of their revenue on capital expenditures. 

 

 

*

 Revenue adequacy is a regulatory concept used by the Surface Transportation Board to determine whether 

railroads are earning adequate profits in relation to their investments. 
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According to a recent supplement to the Christensen study, Class I railroads may need to invest 

$89 billion by 2035 to satisfy demand. Some observers have suggested that public funding 

might still be needed because in a slower economy railroads have less revenue available for 

improving future rail capacity. 

Rail Rate Relief 

Tariff rail rates can be challenged before the Surface Transportation Board (STB) when revenue 

exceeds 180 percent of operating cost and the railroad has market dominance. Rail rates for 

contracted and exempted movements may not be challenged; STB has no jurisdiction over 

those movements. 

STB has created two classes of rate cases: coal rate and non-coal rate. Coal rate cases take 

millions of dollars and two to four years to pursue. They have no restrictions on the amount of 

the award if the contested rate is higher than 180 percent of the railroad’s variable costs. 

Simplified procedures are available for appealing non-coal rate cases, but have limits to the 

amounts that can be awarded. Shippers contend that the cost of pursuing these rate appeal 

procedures is too high and the monetary limits too low; they could result in shippers receiving 

little more than the cost of using them. A chemical company has used the simplified 

procedures, but no agricultural shipper has appealed rates using them. 

Barge Transportation 

For shippers near the inland waterways, barges offer a low-cost transportation alternative for 

moving their crops and fertilizer. Critics, however, argue that all the operational and 

maintenance costs and half the capital costs of these waterways are covered by the 

government through appropriations to the U.S. Army Corps of Engineers, which is responsible 

by law for maintaining the Nation’s inland waterways. Barges move more than a third of our 

corn exports and 17 percent of our soybean exports through the New Orleans region along the 

Mississippi River and Illinois Waterway. The market share of barges has been slowly shrinking 

for a number of years, and traffic on these waterways has declined. 

Although aging, the locks and dams on the system are generally reliable. As locks age, however, 

repairs and maintenance become more extensive and expensive. The balance of the Inland 

Waterways Trust Fund, which finances 50 percent of most of the capital costs of the inland 

waterways, has been declining since 2002 because expenditures have increased and revenues 

have declined, indicating a there is a structural imbalance between the two. It is unclear how 

the funding will be provided. The lack of a clear path forward on funding is of significant 

concern to farmers that depend on the inland waterways to move their crops to market. The 

funding to maintain and rehabilitate the existing infrastructure needs to remain a priority. 
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Truck Transportation 

Trucking is critical for American agriculture. The industry carries 70 percent of the tonnage of 

agricultural, food, forest products, alcohols, and fertilizers. It links farmers, ranchers, 

manufacturers, and service industries to grain elevators, ethanol plants, processors, feedlots, 

markets, and ports. More than 80 percent of cities and communities are served exclusively by 

trucks. The first and last movements in the supply chain from farm to grocery store are by 

truck. Agriculture’s trucking needs are seasonal, requiring frequent trips during planting and 

harvest seasons. Many agricultural products are perishable and time sensitive, requiring the 

efficiency, special handling, or refrigerated services best provided by trucks. 

The trucking industry is highly competitive. Half of all trucking companies own one truck, 

driven by the owner. This keeps rates low; the average operating costs are 95 percent of 

operating revenue. 

In 1995, Congress recognized the needs of farmers and ranchers during the busy planting and 

harvest seasons and provided a seasonal 100-air-mile radius exemption from hours-of-service 

rules for drivers transporting agricultural commodities or farm supplies for agricultural 

purposes. Congress also allowed the U.S. Department of Transportation (DOT) to provide an 

exemption from the commercial driver’s license (CDL) requirement for drivers of farm vehicles 

used to transport agricultural products or supplies to or from a farm within 150 miles of the 

owner’s farm. 

However, interstate commerce case law has affected farm trucks driving short distances within 

States or across State borders, requiring compliance with the same Federal rules that apply to 

professional, full-time, long-haul truck drivers. Any goods eventually destined for interstate or 

foreign trade are considered part of interstate commerce. 

Trucks are governed by Federal law limiting axle weights and gross vehicle weight to 80,000 

pounds on the Interstate Highway System. Agricultural interests argue that farm and forest 

products are heavy, bulky, and of low value, making transportation a large component of their 

final price, and would like to see a limit of 97,000 pounds with a sixth axle on Interstates. 

Studies have indicated that trucks do not bear the full cost of the damage they cause to 

highways. Increasing allowable weight without a sixth axle would increase pavement 

maintenance costs, requiring more revenue for maintaining the highways. Also, existing bridge 

design capacities may not permit heavier loadings without significantly shortening bridge lives, 

which would of course increase the required investment in highways. One proposal is to charge 

a fee for heavier vehicles with a sixth axle and dedicate the receipts to bridge repair and 

maintenance. 
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Ocean Transportation 

Ocean shipping of agricultural products is in either bulk vessels, which are contracted for 

individual shipments (tramps), or in container ships, which usually ply scheduled routes (liners). 

Grains and oilseeds are frequently moved in bulk vessels, which are usually the least expensive 

shipping method. The market for bulk shipments is highly competitive. Fleet capacity is 

determined by the rate at which old ships are scrapped and new ones built. High shipping rates 

before the recession slowed scrapping and spurred building, moderating rates. Companies are 

responding to the current downturn by removing ships from the fleet or laying them up. 

More than half of U.S. agricultural exports by value move in marine shipping containers. 

Containers haul all types of agricultural products, from bulk grains to frozen beef. Agricultural 

shippers report that container availability is the greatest challenge facing their business. The 

recent decline in import cargo reduces the availability of containers for export cargo, resulting 

in lost sales and unreliable service to overseas buyers. 

Infrastructure and technological improvements are needed at U.S. ocean ports to expand 

capacity to accommodate the forecast growth in U.S. trade and avoid costly congestion. 

Multimodal Issues 

The seamless network that makes up America’s transportation system has four major 

components: trucks, trains, barges, and ocean vessels. For example, a cargo, such as wheat, 

might be moved off the field to an elevator by truck, loaded into a train at the elevator, 

transported to another elevator on the Mississippi River, where it is moved to barges, then 

taken downriver to New Orleans for transfer to a ship bound for Africa. Each mode of transport 

is important, but their interaction is vital. 

Current United States policy is mode-oriented; different agencies focus on each mode of 

transportation, and each mode has its own funding mechanisms. Investment and planning 

could be better focused if it were more system-based. A systems-based approach could 

identify choke points in the network, and investments could be targeted to improve the 

interaction between modes. 

Transportation will continue to be integral to the successful functioning of the agricultural 

sector. The Federal Government can play an important role in supporting improvements to the 

multimodal transportation system that will benefit rural America and global consumers of U.S. 

food and agricultural products. 

 
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