6 II. COMMODITY FORECASTS Commodity flow forecasts are an essential part of a benefit/cost analysis for water navigation projects. The costs of building more lock capacity on a waterway must be justified, in most situations, by the value of the benefits derived from larger commodity flows made possible by the expanded capacity. Without the likelihood of such increased commodity movements, there will usually be no economic reason to expand the waterway's capacity. In addition, the future level and growth rate of traffic are important determinants of the proper timing of waterway investment decisions. The Corps of Engineers developed several commodity forecasts for the Locks and Dam 26 replacement proposal including a "most likely" traffic level which was used as a basis for the benefit/cost analysis described in Design Memorandum 11 (the document that underlay the recommendation for two 1200 foot locks). Several commentators, including the Department of Transportation in its Advisory Report to the Senate Commerce Committee, have indicated that they felt these projections were unrealistically high. Subsequently the Corps reexamined and revised certain components of their projections in the Final Environmental Impact Statement. Inasmuch as the Corps' basic forecasts used 1972 as the base year at least a limited evaluation of their accuracy can be made by comparison with actual data for the years 1973 to 1976. Other Government agencies have also been revising their forecasts of various phenomena which importantly influence future traffic through Locks and Dam 26 and these new projections will be reviewed. This chapter concentrates on projected traffic movements through the year 1985 because analysis of this type is especially useful in evaluating whether the short run growth in tonnage can be handled by the existing facility. As noted earlier, a quite different approach would be necesssary to determine the long run capacity needs at Alton and the rest of the waterway system. Comparison of Actual and Forecasted Traffic, 1972 - 1976 The Corps' "most likely" forecasts made in 1972 predict that 76.2 m tons of commerce will pass through Locks and Dam 26 in 1985, an average am. 7 owth from 1972 levels of 2.9 percent. Using this constant growth rate, is possible to generate "forecasts" for the intervening years. The me technique can be applied to individual commodity groups to come up th specific commodity predictions. The results in Table II-1 are mpared with the actual tonnages transiting Locks and Dam 26 as reported the lockmaster's records. This table shows that total commodity roughput fell below the implied growth path for 1973-75 and exceeded for 1976. However, the commodity by commodity composition of the tal was quite different from what was predicted for 1976. While actual ain traffic, in fact, was much higher than predicted, the traffic growth te for most other commodities including the three major groups (coal, troleum, and chemicals) was significantly lower. 1/ The Corps' forecasted traffic for 1985 implies a total increase of ughly 17.0 million tons. For such an increase to occur, it would seem at either grain movements through L&D 26 must grow at a very high rate compensate for the likely short fall in traffic growth of other ommodities, or traffic in commodities such as coal, petroleum and chemicals ust accelerate sharply in order to catch up and return to the Corps' reviously predicted long run growth path. These possibilities are discussed elow. mpact of the National Economic Conditions One reasons suggested for the failure of traffic in certain commodities o reach the levels predicted by the Corps is the depressed state of the ational economy during the years 1973-75. Some preliminary work by the epartment of Transportation on this question, however, suggested that t was much more fruitful to consider the factors influencing individual ommodities separately. 2/ The validity of certain assumptions used by the Corps in making traffic orecasts for grains and coal were also reexamined. In Design Memorandum 1, it was suggested that grain movements through the locks would be roportional to grain exports and coal movements would be proportional to .S. coal consumption. For both of these commodities, the 1972 relationships ave not been maintained. Movements of grain and coal through L&D 26 have oth been lower than the Corps' assumptions would suggest. Information in Supplemental Economic Data recently released by the Corps shows that constant percentage growth between 1972 and 1985 was not assumed. Specifically, the average annual growth rate for 1972-80 was assumed to be 2.0 percent and for 1980-85,4.5 percent. The use of such growth rates would not change the basic qualitative conclusions of this study, although it would reduce but not eliminate, the apparent deficits for 1973-75. DOT is somewhat hesitant, in any event, about accepting the proposition that the growth rate will more than double in the last five years of the period under consideration. / In fact, simple correlation coefficients between the percentage change in L&D 26 tonnage and (a) percentage changes in the unemployment rate for U.S., and (b) percentage changes in durable goods output (in real terms) were found to be statistically insignificant (-.08 and .29, respectively). - Forecasted values are interpolated from Corps figures in Final EIS. Notes: - Actual tonnage from Lockmasters Records, 1976 Actuals are preliminary, derived from 10 months data. - "Forecasted" tonnage for 1972 is in fact actual tonnage moved in 1972 according to Final EIS. 13 ū 9 The Corps' grain forecasts were based on a variety of assumptions The Department of Transportation consulted with the Department of in exports in the period 1975-76 were higher than the USDA forecast Table 11-2 compares estimates of 1975 and 1976 actual grain exports USDA higher export demand forecasts for 1985. If 1976 is used as the e year for predicting L&D 26 throughput instead of 1972 and if the 6 grain exports increase by a constant percentage to reach the 1985 h export forecasts, it is estimated that the 1985 grain tonnage through locks will be 38.2 million tons.3/ Under the assumptions used here, growth in grain through L&D 26 by 1985 will be 6.6 million tons. It previously been pointed out that the growth of all commodities must 17.0 million tons if the 1985 forecasted total is to be met. The aining 10.4 million tons will materialize only if the traffic in all other modities grows by 3.6 percent a year. Between 1972 and 1976, there been an average annual decline in traffic for all other commodities of percent. According to DM 11, the percentage shares of various grains moving through Locks and Dam 26 in 1973 was: corn 75 percent, wheat 5 percent, soybeans 19 percent, other grains 1 percent. These percentages were applied to 1976 grain tonnage to estimate the amounts for each specific grain. Growth rates for the individual commodities were derived from the USDA high export forecast, leading to the estimate of 36.3 million tons. A second way of looking at this is that using the assumptions stated here, grain traffic is 12.6 million tons above the Corps of Engineers' forecasts of the Final EIS. To meet the "most likely" total tonnage, traffic through L&D 26 estimates for 1985 other commodities cannot be more than 12.6 million tons below their 1985 predicted values. |