Agricultural and other shippers are concerned about the sufficiency in rural areas of transportation capacity, the sufficiency of competition in the transportation system, the reliability of transportation services, and the reasonableness of rates. This paper explores these questions with regard to the sufficiency of rail freight competition. The paper begins with a discussion of the importance of rail transportation for U.S. agricultural producers. Specific attention is paid to the nature of competition faced by railroads, especially since deregulation, using the analytical tool of inverse Herfindahl-Hirschman Indices (HHI) by USDA Crop Reporting Districts (CRD). As shown by the inverse HHIs, the overall level of rail competition has generally decreased since the 1985-1992 period, even though rail competition has increased for some CRDs. In addition, revenue to variable cost ratios (R/VC) increased in most of the CRDs analyzed and were related to the number of railroads competing in the CRD. Competition is then analyzed relative to the revenue per ton as well as the revenue to variable cost ratios (R/VC) associated with the level of competition for six States with the least rail-to-rail competition, and also distant from water transportation with those for four States having more rail-to-rail competition and close proximity to water transportation.


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