Soybean Transportation Cost Up, But Total Landed Cost Down
Date Posted: March 7, 2013
This article is reprinted from the USDA's March 7 Grain Transportation Report.
Although the transportation costs of shipping U.S. soybeans slightly increased during the 4th quarter of 2012, Europe and China imported more soybeans during October – December of 2012, compared to the previous year.
Although soybean prices fell during the 4th quarter, pushing down the landed cost of soybeans, farmers still received higher prices than they did a year earlier.
During the 4th quarter, 1.59 million metric tons (mmt) of U.S. soybeans were exported to Europe at a value of $0.93 billion (USDA, GATS).
The quantity exported increased by 485 percent, while the value of the exports increased by 634 percent compared to a year earlier.
China imported 13.02 mmt of soybeans—22 percent more than a year earlier (USDA, GATS).
The value of China’s imports was $7.96 billion— up 54 percent from a year ago.
The quarter-to-quarter transportation costs of shipping soybeans from Minneapolis, MN, and Davenport, IA, to Hamburg, Germany, increased by 4 and 6 percent, respectively.
Transportation costs from the same locations to Shanghai, China, increased by 3 and 4 percent, respectively.
The quarterto- quarter transportation costs of shipping from Fargo, ND, and Sioux City, SD, to Shanghai increased by only 1 percent.
The costs of shipping from Minneapolis and Davenport were pushed up by the seasonal increase in barge rates during harvest season.
Barge rates normally increase during the 4th quarter in anticipation of the closure of the Upper Mississippi River during winter.
This year rates also increased due to drought-related navigation restrictions.
Increased rail tariff rates pushed up the cost of shipping from Fargo and Sioux Falls.
Rail rates increased partly due to an increase in fuel surcharges during the quarter (see GTR, figure 7).
However, the quarter-to-quarter landed costs for all shipments fell because of the reduction in soybean farm prices.
Farm prices fell 5 to 8 percent in the United States during the 4th quarter.
The transportation costs of shipping from North Mato Grosso (MT), Brazil, to Hamburg decreased during the quarter, while the cost of shipping from South Goiás remained the same.
The costs of shipping from the same locations to Shanghai remained relatively unchanged.
As they did in the United States, quarter-to-quarter farm prices fell in Brazil, leading to reduced landed costs.
In general, year-to-year transportation costs fell in both the United States and Brazil.
The quarter-to-quarter drop in farm prices slightly pushed up the transportation share of the landed costs in both countries.
The transportation share of the landed costs ranged from 11 to 16 percent in the United States and 14 to 23 percent in Brazil.
Market Outlook: Europe and China imported more soybeans in 2012 than in the previous year.
During the period, 2.64 million metric tons (mmt) of U.S. soybeans were exported to Europe at a value of $1.48 billion (USDA, GATS).
The quantity exported increased 73 percent, while the value of the exports increased 86 percent from a year earlier.
China imported 26.34 mmt of soybeans—up 28 percent compared to a year earlier (USDA, GATS).
The value of China’s imports was $14.97 billion—up 43 percent compared to a year ago.
The trend is expected to continue during the marketing year (MY) 2012/13 as the forecasts for domestic soybean production in China were lowered due to a significant drop in planted area in Heilongjiang province (GAIN Report #: CH12061).
Many farmers in the Northeastern producing regions substituted more profitable corn and rice crops for soybeans in MY 2012/13.
Total Chinese soybean imports for MY 2012/13 are forecast at 61 mmt.
Continued strong Chinese demand for soybeans and soybean meal is driven in part by the crushing sector’s effort to regain losses from edible oil price control, and in part by the dynamic demand from the animal production sector, especially the swine sector (GAIN Report #: CH12061).
Lower landed cost may continue to boost the demand for U.S. soybeans. For more on soybean transportation, see Brazil Soybean Transportation Indicators Report.
For more information, call Surajudeen (Deen) Olowolayemo, USDA, at 202-694-3050.