This article has been reprinted from the March 29 USDA Grain Transportation Report.
The transportation costs of shipping soybeans from the United States to Europe and China increased during the fourth quarter of 2017.
The transportation costs of shipping soybeans from Minneapolis, MN, and Davenport, IA to Hamburg, Germany—through the U.S. Gulf—increased 16 and 18 percent, respectively, in the fourth quarter, as compared to the previous quarter (table 1).
The costs of shipping from the same locations to Shanghai, China increased 14 and 15 percent, respectively (table 2).
Compared to the previous quarter, the cost of transporting soybeans from Fargo, ND, and Sioux Falls, SD—through the Pacific Northwest to Shanghai, China—cost 6 percent more (table 2).
From the previous quarter, the transportation costs in Brazil for shipping soybeans decreased 14 percent out of North Mato Grosso (North MT) and 10 percent out of South Goiás (South GO) to both Hamburg, Germany (table 1) and Shanghai, China (table 2).
U.S. transportation costs were pushed up by increases in truck, barge, and ocean freight rates.
Truck rates increased partly due to higher diesel fuel prices and increased demand for trucking services following the harvest season.
Similarly, there was an increase in U.S. barge rates.
Ocean freight rates were pushed up by robust trading in thermal coal and grain during the fourth quarter (February 8, 2018 Grain Transportation Report).
Conversely, Brazil’s transportation costs were pushed down by a reduction in trucking rates.
Except for Fargo, ND, soybean farm values declined across all U.S. locations, but they increased in Brazil. U.S. soybean farm values ranged from $324 to $338 per metric ton (mt) (tables 1 and 2), compared to $296 to $302 per mt in Brazil.
Total landed costs were mixed in the United States, but declined in Brazil.
Despite their increase, U.S. transportation costs still represent a smaller portion of the total landed cost of shipping soybeans to a foreign market
compared to Brazil.
The transportation share of the U.S. landed cost ranged from 14 to 16 percent to Europe and 20 to 22 percent to China.
The transportation share of Brazil’s total landed cost ranged from 39 to 51 percent to Europe and 40 to 51 percent to China.
Year-to-year transportation costs increased in both countries.
Likewise, year-to-year farm values decreased in both countries.
Market Analysis and Outlook
In 2017, China imported 17.5 million metric tons (mmt) of U.S. soybeans during the fourth quarter 2017 and 32.0 mmt for the year 2017, which is 21 and 11 percent less, respectively, compared to the same periods a year earlier (USDA, Foreign Agricultural Service (FAS) GATS data).
However, China imported a total amount of 93.5 mmt of soybeans during the marketing year (MY) 2016/17, a net increase of 10 mmt over the previous year (USDA, FAS GAIN Report #: CH17055).
The increase in imports was driven by robust consumption of soybean meal, and low supplies of other protein meals.
Additionally, the imposition of anti-dumping and countervailing duties on imported U.S. distillers dried grain with solubles (DDGS) caused some feed mills to switch from DDGS to soybean meal.
China’s government also reduced its value added tax by 2 percent in July 2017 on some product imports, including soybeans, making soybean imports more attractive.
Despite a forecast of higher domestic production, and a relatively high carry in stocks, China’s soybean imports for MY 2017/18 are forecast at 95 mmt, a net increase of 1.5 mmt over the previous year.
The forecast is based on average growth in soybean meal demand (USDA, FAS
GAIN Report #: CH17055).
Lower farm prices and transportation costs could enhance U.S. soybean competitiveness in China.