This study investigated the impacts of U.S. biofuel production and barge navigation impediments on agricultural transportation and markets. Both past and future impacts of U.S. biofuel production levels mandated by the Renewable Fuel Standards of the Energy Policy Act of 2005 (RFS1) and the Energy Independence and Security Act of 2007 (RFS2) were examined. Examination of barge navigations impediments included analysis of the impact of lock failure and low water levels on rivers due to drought, on agricultural transportation, and on consumer welfare. All scenarios were simulated using the International Grain Transportation Model, a price endogenous mathematical programming model.
The results showed that RFS-associated (RFS1 and RFS2) U.S. corn ethanol production increased the total corn supply and diverted corn from non-ethanol consumption, reduced regional grain transportation volumes, and contributed to a rise in corn prices. The results of the forward-looking scenarios indicated that grain exports and transport volumes were increased. Exports from Gulf ports increased by 41%, while grain movements by rail increased by 60%. Additional investments in the expansion of the grain handling capacities of Gulf ports and the railroad industry are needed in the near future unless a large increase in biofuel production occurs.
The results of navigation impediment scenarios indicated that both lock failures and low water levels on rivers adversely affect U.S. grain exports. The Gulf ports were most negatively impacted, relative to Pacific Northwest and Atlantic ports. Truck and barge freight volume declined while rail freight volume increased. Because trucks deliver grain from grain elevators to barge locations, truck volume also decreased in response to the decline in barge volume. The scenarios imposed welfare losses on society with most accruing to consumers, while the barge industry lost $10-154 million in revenue. The low water levels were more expensive than the lock failures. Major rehabilitation of the locks is needed to avoid lock failures and more dredging of the shallow parts of the river system is required because of frequent droughts
