Modeling Containerized Hay Shipments in the Pacific Northwest: Investigating Cost and Volume Impacts as Port of Portland Container Services is Reduced

A recent issue impacting freight shipments in Washington State involves the reduction of container services at the Port of Portland, Oregon. Prior to this change, export containers filled with hay were shipped almost exclusively via barge down the Columbia River to the Port of Portland. After reaching Portland, the containers were then loaded onto one of three ocean container lines: Hyundai, K-Line, or Hanjin and destined to markets in Japan and China. As of September 2004, Hanjin is the only remaining carrier that calls at the Port of Portland. This research effort has collected firm level data on the production, transportation and marketing of hay in Washington and incorporates this information in the design and development of a transportation optimization model of regional hay movements. This model is then utilized to evaluate industry shifts in transportation usage and modal choice in reaction due to these industry changes after September 2004. The results indicate that after all barge and hay shipments are eliminated into Portland, region-wide transportation costs actually decrease initially overall, while some individual producers experience increased shipping costs. Both rail and truck volumes increase substantially in the absence of container shipments on barge. The total industry impact is a $6.3 million increase in transportation costs from the Base Scenario to Scenario 3. Also, once truck rates are allowed to increase due to the shortage of trucks and the increased demand for truck services, the total transportation cost increases by $8.7 million. As trucking rates increase due to the increased demand for trucking services, the industry transportation cost does increase to $47.5 million, a 15 percent increase from Scenario one and a 22 percent increase from Scenario two. While this increase is significant, it is not as severe or adverse as previously expected throughout the Pacific Northwest agricultural and hay industry. As expected, there is greater reliance on rail and truck transportation once barge shipments to Portland are eliminated.