This article has been reprinted from the Sept. 5 USDA Grain Transportation Report.
Despite mixed transportation costs, lower farm values pushed down soybean landed costs in both the United States and Brazil during the second quarter, compared to the previous quarter.
The landed costs of shipping soybeans from Minneapolis, MN and Davenport, IA to Hamburg, Germany through the U.S. Gulf declined 3 and 4 percent, respectively, from the previous quarter (table 1).
The landed costs of shipping soybeans from the same origins to Shanghai, China decreased 2 and 3 percent, respectively, from the previous quarter (table 2).
Soybean landed costs from Fargo, ND and Sioux Falls, SD to Shanghai, China fell 3 percent from the previous quarter (table 2).
Similarly, the landed costs for shipping soybeans from North Mato Grosso (North MT) and South Goiás (South GO), Brazil to Hamburg, Germany fell 3 and 5 percent, respectively, from the previous quarter.
The landed costs from the same locations to Shanghai, China declined also by 3 and 5 percent, respectively, during the quarter.
The decrease in the U.S. landed costs was caused by a combination of reduced farm values and transportation costs for the shipments to Europe. However, the reduction in the landed costs for shipments to China was caused primarily by falling farm values.
Both transportation costs and farm values also fell in Brazil. For the U.S. shipments to Europe, the decline in barge and ocean freight rates more than offset the increase in truck rates, lowering the transportation costs.
Barge rates fell due to reduced demand for barge services from persistent flooding and navigation disruptions during the quarter (see April 4, 2019 and June 27, 2019 Grain Transportation Reports (GTR)).
However, ocean freight rates from the United States to China increased during the quarter, primarily due to strong demand for coal and iron ore (July 25, 2019 GTR).
Increased truck and ocean freight rates pushed up transportation costs for China-bound soybeans during the quarter.
The landed costs from the United States to Hamburg, Germany ranged from $372 to $388 per metric ton (mt) (table 1) and $368 to $413 per mt to Shanghai, China (table 2).
The landed costs from Brazil to Hamburg, Germany ranged from $346 to $367 per mt (table 1) and $357 to $377 per mt to Shanghai, China (table 2). The U.S. transportation share of the landed costs increased slightly due to the fall in the soybean farm values.
The U.S. transportation share of the landed costs to Hamburg, Germany ranged from 20 to 21 percent (table 1) and 24 to 28 percent to Shanghai, China (table 2).
Brazil’s transportation share of the landed costs to Hamburg, Germany ranged from 19 to 26 percent (table 1), and 21 to 28 percent to Shanghai, China (table 2).
In general, year-to-year landed costs fell in both the United States and Brazil as soybean values significantly declined from a year earlier.
According to USDA’s grain inspection data, China imported 3.54 million metric tons (mmt) of U.S. soybeans during the second quarter of 2019, compared to 4.61 mmt in the previous quarter, and 1.34 mmt during the same period in 2018.
Although second quarter 2019 imports were 23 percent less than the previous quarter, they were about 3 times more than the second quarter of 2018.
In addition to all other economic factors, the current low soybean farm prices could boost the competitiveness of U.S exports to China.