Impact of port user charges on the U.S. grain export marketing system and producers' welfare

Abstract

During the past few years, legislative initiatives introduced to the U.S. Congress have aimed at recovering the federal government's outlays to operate, maintain, and improve the nation's deep-draft navigation facilities. Most proposed legislation seeks to levy a port charge for commercial users (ship operators) to raise the funds that would be recovered by the federal government. The objective of this study was to assess the impact that such user charges would have on the U.S. grain export marketing system and the welfare of grain producers. Analyzed commodities include corn, grain sorghum, hard red winter and spring wheat, soft wheat, durum wheat, and soybeans. Several port user charge scenarios were analyzed based on the major features of most proposed legislation. The impact of the various port user charge scenarios was evaluated by means of a cost minimizing network flow model. Analysis included changes in ocean shipping rates (the user charge), and their associated effect on prices and quantities traded in the relevant markets. With the exception of grain sorghum, results indicate that the grain export marketing system was sensitive to the imposition of port user fees. It was found that port user fees had the potential to generate significant deviations from historical grain flow patterns, which may affect competition between and within port areas. Analyses to assess the impact of port user fees on the welfare of U.S. grain producers were based on a model of international trade for each studied commodity. The procedure to estimate relevant welfare changes was based on the elasticities of supply and demand relationships in both the grain world and U.S. domestic markets. Results indicate that the welfare losses, associated with the imposition of port user fees, to U.S. producing agriculture would be rather modest.