The grain elevator industry is an essential and integrated part of the marketing system in North Dakota. A more efficient marketing system can benefit society either in the form of increasing producer income through higher grain prices, reducing consumer expenditures through lower retail prices, or both. The grain marketing system also is currently moving through a period of change brought on by a larger supply of grain, proposed branch line abandonment and deregulated rail rates. The purpose of this study was to analyze the cost characteristics of the elevator industry and determine the relative efficiency and existence of economies of size during the 1978-79 period. A statistical costing method was used to empirically analyze the cost structure of the country elevator system as it existed during that period. Few elevators were found to be operating near the minimum average cost. Decreasing average total costs were apparent within the elevator industry indicating the existence of economies of size. Upper Great Plains Transportation Institute Report No.43