Food vs. Fuel? Impacts of the North Dakota oil boom on agricultural prices
Presented by:
Aaron Smith
Department of Agricultural and Resource Economics
University of California Davis
Friday, November 6, 2020
12:00 pm-1:15 pm
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Farmers and politicians in North Dakota and nearby states claim dramatic increases in shipments of crude oil by rail in 2013-14 caused service delays and higher costs. We investigate these claims accounting for other potential sources of rail congestion. We show that grain price spreads between the market hub and regional elevators expanded significantly when crude oil shipments increased. However, the incidence of those effects was borne mostly by buyers paying higher prices at the hub, rather than farmers receiving lower prices. The effects differ by the type of grain being transported. Wheat markets were affected much more than corn and soybeans, most likely because shipping delays were more costly for wheat than corn and soybeans. When rail capacity is scarce, railroads use rail car auctions to price discriminate over the time sensitivity of a shipment
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