Soybean Transportation Costs Varied; Landed Costs Rose in Fourth Quarter 2019

This article has been reprinted from USDA's March 26 Grain Transportation Report.

The United States and Brazil are the world’s leading producers and exporters of soybeans.

Although the countries’ cost structures in production and transportation differ, both countries compete for the same overseas markets—including China, the world’s largest importer of soybeans.

Here, we analyze the quarterly and yearly changes in the costs of moving soybeans from the United States and Brazil to Hamburg, Germany, and Shanghai, China.

From the third quarter to the fourth quarter 2019 (quarter to quarter), the transportation costs of shipping U.S. soybeans to Europe (table 1) and China (table 2) fluctuated, and the costs from Brazil to both foreign markets (tables 1 and 2) declined.

However, U.S. and Brazilian landed costs to both Europe and China increased quarter to quarter. U.S. transportation costs to Europe and China through the Gulf were pushed down by combined decreases in barge and ocean rates, which more than offset a quarter-to-quarter increase in the truck rates.

Barge rates declined in response to a larger supply of empty barges heading upriver for repositioning. Also, navigation difficulties that had dominated most of the summer improved significantly, making travel easier.

The lower risk of delays could have made carriers more willing to sell because there was less risk of unanticipated cost overruns.

Ocean freight rates for shipping bulk items, including grain fell from quarter to quarter because of lackluster iron ore and coal trade (see January 16, 2019 Grain Transportation Report (GTR)).

However, quarter-to-quarter truck rates for shipments through the Gulf and Pacific Northwest (PNW) generally increased.

Truck rates increased partly in response to increased demand for trucking services from farms to either barge- or rail-served local or country elevators.

Soybeans are then transported downriver by barge to export ports on the Gulf or transported by rail to export ports in PNW.

A total of 5.38 million tons of soybeans shipped downriver in the fourth quarter, compared to 4.42 million tons in the third quarter.

In addition, the retail U.S. average diesel prices were relatively high during the fourth quarter of 2019.

The quarter-to-quarter costs of transporting U.S. soybeans through PNW increased, responding to increases in truck and tariff rail rates.

Generally, quarter-to-quarter landed costs of soybeans to Europe and China increased for both the United States and Brazil, mostly in response to higher soybean farm values.

From the United States, landed costs to Hamburg, Germany, were about $367-$368/metric ton (mt) (table 1) and to Shanghai, China, were $387- $402/mt (table 2).

From Brazil, landed costs to Hamburg, Germany, were $375-$411/mt (table 1) and to Shanghai, China, were $383-$419/mt (table 2).

For both the United States and Brazil, lower transportation costs and higher farm values pushed down transportation’s share of landed costs.

For the United States, transportation’s share of landed costs to Hamburg, Germany, was 15-16 percent (table 1) and, to Shanghai, China, was 21-25 percent (table 2).

For Brazil, transportation’s share of landed costs to Hamburg, Germany, was 19-25 percent (table 1) and to Shanghai, China, was 21-27 percent (table 2).

From fourth quarter 2018 to fourth quarter 2019, landed costs decreased in the United States and Brazil except for Sioux Falls, SD, and North Mato Grosso in Brazil where the farm values had increased over a year earlier.

According to USDA’s grain inspection data, China imported 8.17 million metric tons (mmt) of U.S. soybeans during fourth quarter 2019 versus 5.64 mmt in the previous quarter and 0.32 mmt during the same period in 2018.

Recent ease in trade tension between the United States and China may boost soybean exports to China in 2020.