A vital link in the grain transportation system, trucks ship grain from producers to multiple destinations for a range of industries. Whether for an entire or partial route (with transfers to or from other modes), trucks deliver grain from producers to grain elevators, ethanol plants, processors, and feedlots. This article provides an overview of changes in truck availability, use, and short-haul rates in the grain sector between 2019 and 2020.
The research was based on data from USDA/Agricultural Marketing Service’s quarterly Grain Truck and Ocean Rate Advisory (GTOR), and the sample comprised representative grain movements in the North Central region, where much U.S. bulk grain originates.
Results revealed the COVID-19 pandemic did not cause major disruptions to that region’s grain trucking.
Truck Availability
Using a 1 to 5 scale (1 = very easy and 5 = very difficult), the grain truck availability index represents the ease of finding and booking trucking services to meet demand for shipping grain (fig. 1). Starting in 2020, the grain truck availability index showed increasing availability (i.e., the index dropped) both for the North Central region and the Nation as a whole. The index also shows higher availability (lower index) for most quarters compared to the prior three-year average.
This unusually high availability in 2020 could be due to lower-than-usual transportation demand in other sectors, including fuel and ethanol in the early months of the pandemic. Soft demand in these other sectors may have diverted some trucks and truck drivers to grain transportation.
Further enhancing grain truck availability, for most of 2020, the Department of Transportation’s Federal Motor Carrier Safety Administration offered regulatory relief to increase truck drivers’ availability to haul essential supplies (including feed grains).
Truck Use
Using another 1 to 5 scale (1 = much lower and 5 = much higher), the grain truck use index reflects the demand for trucks from grain shippers (fig. 2). Seasonal fluctuations in grain truck use (captured by the index) mirror typical patterns of seasonal demand.
Overall, the North Central region’s seasonal variations in 2019 paralleled those of the country as a whole. The decline in truck use from first to second quarter 2019 reflected declining grain exports (particularly corn) — a lagged effect of the U.S.-China trade dispute begun in 2018. U.S corn exports were further weakened by strong competition from South America.
In the third quarter, North Central regional truck use rose with high demand at the start of the harvest season before dropping in the fourth quarter, echoing historical patterns. From first quarter 2020 to second quarter 2020, both U.S. and North Central truck use increased in response to rising export grain demand after Phase 1 of the U.S.-China trade agreement took effect. North Central truck use remained high until the end of harvest in the third quarter and exceeded the prior 3-year average. On the other hand, from second to third quarter 2020, national truck use dropped. The decrease reflected an overall decline in transportation demand due to widely adopted disease-prevention measures in the pandemic’s early months. However, demand recovered in the last quarter, as the economy adapted to the “new normal.”
Short-Haul Truck Rates and Fuel Price
Truck rates are a key component of agricultural transportation costs, affecting the viability of many trucking companies and profit margins for the grain producers. Besides fundamental supply and demand conditions, myriad other factors determine rates for grain hopper trucks, including basis, export market perspectives, fuel price, inventory, storage costs, back haul availability, and historical rates.
Because of the complexity involved in rate determination, contract rates may not necessarily reflect changes in the spot market and the fuel price when the contracts are fulfilled.
For the first three quarters of 2019, North Central rates exceed the prior 3-year average—possibly because of combined higher export demand and longer operational time.5 Compared to the same quarter in 2019, third quarter 2020 showed a 17-percent decline in rates. The sharp drop was mostly due to rising truck supply because of pandemic-driven declines in demand in other sectors (fig.3).
From first to second quarter 2020, fuel price dropped 17 percent (fig. 3), which partially explains the simultaneous drop in short-haul rates. A sharp decline in fuel demand in early 2020 caused inventories of petroleum products to reach near record-high levels, pushing prices to unexpected lows. During this time, the drop in fuel price helped lower short-haul truck rates and agricultural production costs, saving producers 8 cents/bushel/mile to ship corn, wheat, and soybeans.
Conclusions
Based on the GTOR data from 2019 to 2020, the U.S. grain trucking sector, specifically the North Central region, did not experience major pandemic-driven impacts. Data show the changes in truck availability and use were relatively stable, and lower truck rates may have benefited the agricultural producers.
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