Facing our challenges to guarantee our competitive edge
It’s a word that doesn’t easily roll off the tongue—it’s concrete dry and chunky in the mouth. At four syllables, it sounds important and bureaucratic, a victim of overuse in too many Washington meetings. Yet, the word "infrastructure" is a loaded buzzword, full of expectation and implications for our country.
At 3.79 million square miles and an estimated 310 million people with a $14.780 trillion gross domestic product, we are a nation on the move. How quickly and effectively we can move to meet the needs of a growing world population is in question, however.
All of the players who transport ag products are going to have to make big changes if we want to be competitive in the world market.
"We have a huge modal shift going on," says Ken Eriksen, senior vice president of Informa Economics and expert witness in the areas of transportation, logistics and supply chains.
"From October to February, it’s going to be all about the soybean. We say our grain is going ‘East by Northwest,’" he jokes.
Eriksen rattles off a list of changes taking place in the ag logistics world that reflect private investment efforts. For example, EGAT LLC is constructing a new intermodal grain facility in Longview, Calif., and a series of high-speed shuttle train loader elevators is in the works in Montana.
He also scolds others like port authorities that might not be able to accommodate Super Post-Panamax marine vessels that will want to take advantage of the Panama Canal expansion project when it is completed in 2014.
"We’re working on creating very efficient ways of getting to the ports and how we load ships, but if we want to double exports, we need to keep our shipping channels open to accommodate bigger vessels," he says.
Eriksen says that while demand might set prices, it’s the delivery that affects the local basis. "Farmers spend months every year raising and taking care of the pile of grain they produce, but don’t recognize the full value of grain until it’s transported," he adds. "Transportation inefficiency devalues grain and causes bottlenecks that back up all the way to the farm gate."
How it gets there and how long it takes to make the trip might prove to be a telling dry run for the grain shipping tsunami forecasted to arrive in the next 20 years. How does our infrastructure currently rate in terms of meeting the transportation demand?
The Report Card
|The most recent study by the American Society of Civil Engineers in 2009 shows the state of our infrastructure based on physical condition and necessary investments for improvement.
Inland waterways D–
|U.S. Infrastructure Grade: D*
|Estimated 5-year Investment Need: $2.2 trillion
|*Only categories relating to agriculture are listed here. The sum of all categories in the study also received the "D" grade. SOURCE: American Society of Civil Engineers
The dog ate the report card. This past August, the American Society of Civil Engineers (ASCE) published a report that ties the condition of our infrastructure to the economy. It states, "If investments in surface transportation infrastructure are not made soon …within 10 years, U.S. businesses would pay an added $430 billion in transportation costs, household incomes would fall by more than $7,000, and U.S. exports will fall by $28 billion per year."
ASCE garnered attention with its 2009 report on the state of American infrastructure. Known as "The Report Card" (see left), its "D" grade leaves little to the imagination. After years of trusted service, our bridges, roads, locks and dams have either become outdated or worn out.
Bob Fox, a county commissioner and farmer from the small southern Minnesota town of Franklin, agrees with the "D" grade for the overall condition of our nation’s infrastructure.
In a county where roughly half of the roads are paved, Fox is concerned about the funding for future maintenance and new projects. He has seen more bridge and road money going to basic maintenance of the current infrastructure. As a result, little money is left over to upgrade roads, some built 50 years ago, with wider shoulders and the ability to handle the heavier loads of modern farm machinery.
"Most older roads were 7-ton-load roads, but now they should be 10-ton-load roads because of the larger equipment and trucks used on farms today. Since 2005, the price of doing a road has doubled from $250,000 to $500,000 or $560,000 per mile," he says.
Even if parts of the infrastructure system were improved and American farmers doubled their grain output, the world would not hand them grain orders on silver platters. The crux of the matter is we have to be competitive.
Reality bites. Giving his reality check assessment, Peter Friedmann, executive director of the Agriculture Transportation Coalition, says, "There’s nothing that we produce here in the U.S. in agriculture and forest products that cannot be sourced somewhere else in the world. If we cannot transport and deliver it affordably to the foreign marketplace, then we lose our quality advantage and we lose our international customers."
"Agricultural exports are leading the way, but getting them to the foreign marketplace is always a challenge because the products we export often require special handling, speed to market and affordability," he adds.
Speed to market means lower costs. "It will do no good for the railroads to expand their capacity to bring farm goods to the gateway ports or to increase truck efficiency if, once arriving at the ports, there is insufficient infrastructure, or the pace of loading/unloading is anything but world-class," Friedmann explains.
According to a 2009 study by O’Neil Commodity Consulting for the U.S. Soybean Export Council titled "Transportation and the Farmer’s Bottom Line," it is the local basis that determines what proportion of the price a farmer will receive. The local basis is largely determined by local demand, logistics and transportation cost. It is transportation cost and equipment availability that determine the "spread" relationship for local commodities to the best potential markets and ultimately the relative value of local crop production.
The crucial question is: How streamlined and efficient can we be, given our current infrastructure quality?
Our deteriorating assets. Unfortunately, our infrastructure is crumbling to the point that it is not only a safety issue, but a national security problem. This presents doubts about our competitive edge now and in the future.
- 43% of all vehicle miles traveled are on roadways that are not rated as "good" for ride quality.
- More than 150,000 bridges—one in every four—are structurally deficient or functionally obsolete.
- The average bridge is more than 50 years old, but most bridges were designed for a 50-year life span.
- The U.S. lock and dam system is 50 to 100 years old. More than half are beyond their designed life span.
A smooth ride. The Federal Highway Administration’s "Planning for Transportation in Rural Areas" report says there are 3.1 million miles of rural roads, accounting for 80% of national road miles and 40% of vehicle miles traveled. The report states that 50% of rural roads are paved and, though this is an optimum travel surface, it is a problem with declining tax dollars for local budgets to keep them repaired.
Due to the high cost of petroleum products, we might not see an increase in paved roads anytime soon. Audrain County, Mo., commissioner Tom Groves says it’s improbable that any current gravel roads in his county will now be paved with asphalt. "A ballpark figure to lay asphalt has been around $300,000 per mile, and main-tenance doesn’t come cheap," he says.
|"It’s a real inconvenience not having this bridge open," says Mexico, Mo., farmer Gene Taylor. Fewer rural residents and a lower tax base has made it difficult for counties to finance bridge repair. The alternative is abandonment. PHOTO: John Buckner
Bridge trouble. Bridge construction and maintenance is a messy cooperative business among federal, state and local officials. County governments wield the power where the rubber meets the road for most Americans, within their respective state law statutes.
Audrain County has been a role model when it comes to fixing faulty bridges. "In the 1980s, Audrain County had 250 defective bridges, but due to a local ½¢ sales tax for bridge renovation, federal gas tax money and bridge offset money, which is a federal 80/20 cost-share program, there are only five defective bridges in the county today," Groves says.
That number doesn’t include bridges that were abandoned by the Missouri Department of Transportation due to low usage and nonexistent funds for renovation. Gene Taylor, an Audrain County corn and soybean farmer, says the abandoned bridge near his farm has been a real inconvenience when roading equipment or just to get from point A to point B.
"I feel cut off. If I want to go south, I’ve got to go north first," he says.
Mississippi mayhem. Dan Farney, a corn and soybean farmer from Morton, Ill., is concerned with the condition of our lock and dam system and feels we need to make necessary investments in
infrastructure. "Our river system is our competitive advantage compared to countries like Brazil," he says.
Approximately 60% of the nation’s grain is moved on our inland waterways, says Debra Colbert, spokesperson for the Waterways Council. "We’ll be moving twice as much grain in the next 15 to 20 years, so we had to ask, What can the inland river system do to meet this challenge?" she says.
For the Waterways Council and those who work on the river, the answer lies in the Inland Waterways Capital Development Plan, which calls for the current funding process of 50% industry and 50% federal cost sharing for new lock construction. Currently, there is a 20¢ per gallon tax on fuel paid by the barge and towing industry. This would be increased by 30% to 45%, which would fund 25 targeted projects instead of six under the current funding mechanism.
Colbert says the plan has the backing of more than 200 stakeholders, including the U.S. Chamber of Commerce, but not the Obama administration. "We’re puzzled because the plan meets all of the President’s objectives," she explains.
Summing up her frustration, she says, "We’ve got to do something, because we can’t afford not to in this country. The current system for appropriating and spending money for waterways infrastructure is broken."
Rail expansion. While some targeted rail expansion is going on, the U.S. Soybean Export Council says railroads will continue to be challenged by the cost of steel to build new railcars and lines; congestion on some of the major rail corridors, such as Los Angeles to Chicago; high fuel prices; and concerns about the quality of service. Beyond that, some rail carriers have discouraged the growth of intermodal service, which would divert business from the covered hopper services of shuttle car facilities.
Support infrastructure will also play a significant role in creating efficiencies that will make the U.S. competitive and allow it to meet the world’s growing need for grain. Power grids, pipelines, fuel availability, grain storage, broadband communications, smart technology and labor will all contribute to moving massive loads of grain from field to port.
The way forward? No one will know how infrastructure needs will play out in the 2012 budget until the end of November, when the bipartisan "super committee" made up of members of the House and Senate give their report on where to cut $1.2 trillion during the next 10 years.
President Obama’s fiscal year 2012 budget request includes a total of $129 billion for the Department of Transportation, as well as a $556 billion, six-year surface transportation reauthorization proposal to improve the nation’s highways, transit and rail infrastructure. The overall funding request is a 66% increase above fiscal year 2010, which was when the last
appropriated level was enacted.
Politics and our nation’s financial struggles aside, the state of the U.S. infrastructure delivers a harsh reality check for all of us.