This article has been reprinted from the March 5 USDA Grain Transportation Report.

Mexico is the largest importer of U.S. grain (corn, soybeans, and wheat).

Based on the past 3-year average, it is the leading importer of U.S. corn and the second largest importer of U.S. wheat and soybeans.

Grain can be transported to Mexico through cross-border movements by land or shipped via the sea route to an appropriate port for inland distribution.

In this article, we examine the costs of transporting grain from the United States to Mexico through the land and water routes and track how those costs change from quarter to quarter and year to year.

From the third quarter to fourth quarter 2019 (quarter to quarter), the transportation costs of shipping grain (corn, soybeans, and wheat) to Mexico through the water route declined, while the costs of shipping by the land route remained steady.

Also, quarter to quarter, lower barge and ocean freight rates pushed down the transportation costs of seaborne corn and soybeans.

Lower truck and ocean freight rates pushed down the transportation cost of shipping wheat by the water route.

The transportation costs of shipping corn and soybeans to Mexico by the land route remained relatively unchanged from quarter to quarter, while the costs of shipping corn by the land route fell by less than 1 percent.

Quarter to quarter, the decline in barge rates likely resulted from a higher-than-average empty barge supply in the Mississippi River System during the fourth quarter.

More grain barges were unloaded in New Orleans in the fourth quarter than in the third quarter.

This pattern, in turn, sent 258 more empty barges returning upriver during the fourth quarter—4 percent more than in the third quarter.

In addition, the navigational difficulties that had plagued the river through most of the summer cleared up by the fourth quarter, making travel easier.

A lower risk of delays made carriers more willing to sell, as there was less risk of unanticipated cost overruns.

Better navigation also made shippers to more willing to ship since deliveries to export elevators would have been more reliable.

In the fourth quarter, 9.16 million tons of grain were shipped downriver, compared to 6.35 million tons in the third quarter.

Also, in the fourth quarter, ocean freight rates for shipping bulk items, including grain, fell as a result of a weak trade of iron ore and coal (see January 16, 2020 GTR).

Tariff rail rates remained fairly steady during the quarter.

Lower quarter-to-quarter landed costs for corn (over both water and land routes) reflected reduced transportation costs and farm values.

However, soybean landed costs increased—mostly from the increase in the farm values—while the landed costs for wheat were unchanged.

The fourth-quarter landed costs for the water route ranged from $192 per metric ton (mt) to $375 per mt (see table and fig. 1).

For the land route, landed costs ranged from $230 per mt to $407 per mt (see table and fig. 2).

The share of landed costs for transportation ranged from 12 percent to 31 percent for the water route and from 25 percent to 41 percent for the land route (see table).

Higher farm values pushed up the year-to-year landed costs for corn and soybeans, while lower year-to-year landed costs for wheat reflected farm values that were lower than in fourth-quarter 2018.

Although Mexico imported slightly less grain from the United States than it had in the previous quarter, it imported more U.S. grain than in fourth quarter 2018.

According to USDA’s grain inspection data, Mexico imported 3.07 million metric tons (mmt) of corn, 1.30 mmt of soybeans, and 0.86 mmt of wheat—3, 0, and 8 percent less than the previous quarter, respectively.

However, year to year, U.S. inspections for export to Mexico rose 10 percent for soybeans and 33 percent for wheat, while corn inspections fell 14 percent.

The recently signed trade agreement among the United States, Mexico, and Canada could boost U.S. grain export to Mexico.