CoBank’s new report on shuttle loader ‘saturation’ in the U.S.

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CoBank’s Knowledge Exchange Division released a new report on the increased concentration of shuttle loader facilities in the U.S. grain belt. In the report, titled “Shuttle Loaders Approaching the Saturation Point,” CoBank economist Dan Kowalski explains that shuttle loading has revolutionized grain transport over the last two decades, but rapid construction and expansion during the 2000s has led to the potential for overcapacity. For grain cooperatives and multinational companies, compelling opportunities to invest in new facilities are increasingly limited.

“It is now estimated that the remaining feasible locations west of the Missouri River represent the last 1-2 percent of worthwhile opportunities,” notes Kowalski. “With capacity at, or near, the saturation point, grain managers considering a new shuttle loader must be realistic about the potential returns on investment.”

The cost of building a shuttle loader facility has soared from about $7 million in the 1990s to about $25 million today. In the past, grain handlers could expect a solid 15-20 percent return on investment (ROI), but as the number of shuttle facilities increased throughout the 2000s, anticipated ROI slipped to 10-15 percent and then down to 5 percent. Today, new shuttle investments, particularly in the western Grain Belt, may not break even, according to the report.

“The firmly entrenched perception that a shuttle loader enables growth, critical access to export markets and market intelligence, can lead co-ops to infer that if they do not build, the business will deteriorate over time,” says Kowalski. “Ultimately, co-op leadership is attempting to derive the cost/benefit of a major investment, while multiple unknowable risk factors loom on the horizon.”

Kowalski argues that larger grain merchandisers with multinational reach have a very different vantage point when considering investing in a shuttle loader. While they have access to export markets, sound infrastructure assets and are financially stable, these firms often lack direct origination from interior parts of the Grain Belt.

“Depending on the size and reach of each firm, the objectives for considering building a new shuttle loader tend to be very different,” Kowalski said. “However, both middle-market grain handlers and multinational firms will experience heightened risks associated with these investments and will need to employ a comprehensive operational and strategic review before committing to new ventures.”

The new report was issued by CoBank’s Knowledge Exchange Division, a knowledge-sharing practice that provides strategic insights regarding the key industries. Knowledge Exchange draws upon the internal expertise of CoBank, deep knowledge within the Farm Credit System and boots-on-the-ground intelligence from customers and other stakeholders to enhance the collective understanding of emerging business opportunities and risks.

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