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Food vs. Fuel? Impacts of Petroleum Shipments on Agricultural Prices

James Bushnell (), Jonathan Hughes () and Aaron Smith ()

No 23924, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Grain shippers and political figures in North Dakota and nearby states have voiced concern that the dramatic increases in shipments of crude oil by rail have caused service delays and higher costs. We investigate the potential impact of crude shipments on grain markets accounting for harvest effects and other potential sources of rail congestion. Increased crude oil shipments are associated with substantially larger spreads between wheat prices at regional elevators and in Minneapolis, the market hub. The effect on corn and soybean spreads are an order of magnitude smaller. Increased oil traffic is associated with small increases in rail rates but large increases in rail car auction prices. We document increases in wheat carry (storage) costs and decreases in shipment quantities. Surprisingly, little of the spread increase is due to lower prices paid to farmers, suggesting consumers rather than producers paid the cost of increased rail congestion.

JEL-codes: H22 Q02 Q35 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-ene and nep-tre
Date: 2017-10
Note: EEE
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