Federal Role in Developing Grain Subterminals Should Be Coordinated by USDA

In response to a congressional request, GAO reviewed selected activities on the development of subterminal grain storage facilities. The review was concentrated in States with significant grain production, available information, and the potential for subterminal development and improvement. The GAO objective was to gain an understanding of subterminal development benefits, obstacles, and potential.

Farmers have benefited from subterminals in two ways: they receive higher prices for their grain, and they are able to sell more grain when prices rise. Elevators that have become subterminals as a result of the construction of new, larger facilities or the upgrading of existing ones have benefited by significantly increasing their grain volume. The larger volumes reduce handling costs by spreading fixed costs over larger grain volumes. Subterminals generally have lower variable costs than older grain elevators and pay less for transportation due to lower multiple-car and unit-train rates. Railroads have benefited from subterminals by becoming more price competitive with barges and trucks through the cost efficiencies of multiple-car and unit-train shipments, thus softening the decline in the railroads' market share of grain shipment. In addition, the faster turnaround times of multiple-car and unit-train shipments have enabled railroads to haul more grain with the existing fleet of rail cars. The potential exists for further development of subterminals since their operations are more adaptable to high-yield-per-acre crops. They may also be feasible for lower yielding crops-per-acre in certain circumstances. Problems involving subterminals which adversely affect their operations and future development include: failure of some railroads to offer multiple-car and unit-train rates, overdevelopment, and port congestion. Recently enacted legislation authorizes planning grants for developing State and regional subterminal facilities plans and insured construction loans.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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