This article has been reprinted from USDA's Sept. 24 Grain Transportation Report.
The United States and Brazil are the world’s leading producers and exporters of soybeans.
Both countries compete for the same overseas markets, including China—the world’s largest importer of soybeans.
Despite vying for the same markets, the United States and Brazil have different production methods and transportation cost structures.
Whereas the United States transports soybeans from inland production sites to export ports by truck, rail, and/or barge, Brazil relies mainly on truck for its inland transport.
This article compares quarterly and yearly changes in the costs of moving soybeans from the United States and Brazil to Hamburg, Germany (table 1), and to Shanghai, China.
Transportation costs: U.S. and Brazilian total transportation costs of exporting soybeans to Germany (table 1) and China (table 2) through the U.S. Gulf decreased from first quarter 2020 to second quarter 2020 (quarter to quarter) and generally decreased, also, from second quarter 2019 to second quarter 2020 (year to year).
Quarter to quarter, U.S. transportation costs via the Gulf fell when the upper segment of the Mississippi River reopened after being closed to navigation because of ice for most of first quarter 2020.
In general, transportation costs tend to fall when the entire length of the Mississippi River is open and barge transportation is chosen for whole length of the shipment’s journey.
Quarter to quarter, transportation costs for soybeans fell because rates for all modes declined. Barge rates were generally lower, with the repositioning of empty barges along the Mississippi River (see August 13, 2020, Grain Transportation Report).
Truck rates fell because of reduced demand for trucking services.
Finally, ocean freight rates for shipping bulk items, including grain fell because of weakened demand for commodities in Europe and Asia during the second quarter. (See July 23, 2020 Grain Transportation Report).
Truck and ocean freight rates fell not only in the United States, but, also, in Brazil, causing total transportation costs to drop there as well.Landed costs: In general, from both quarter to quarter and year to year, both U.S. and Brazilian landed costs for soybeans fell, mostly because of falling transportation costs.
Quarter to quarter, soybean farm values declined in all producing regions, except Minneapolis, MN, and North Mato Grosso (North MT), Brazil.
However, even in the cases of Minneapolis and North MT, landed costs to both Germany and China fell from quarter to quarter because farm values did not rise enough to offset declining total transportation costs.
Year to year, the only exception to the decline in U.S. landed costs was for shipments from Sioux Falls, SD, to Shanghai.
For these shipments, rising farm values slightly surpassed declining total transportation costs and stabilized landed costs.
As in the United States, Brazilian landed costs fell from year to year, with the exception of shipments from North MT to Germany.
For those shipments, rising farm values slightly offset declining total transportation costs and stabilized landed costs.
In second-quarter 2020, the share of U.S. landed costs comprising transportation costs ranged from 12 percent to 14 percent for shipments to Germany (table 1) and from 17 percent to 23 percent for shipments to China (table 2).
The transportation cost share of Brazil’s total landed costs ranged from 18 percent to 22 percent for shipments to Germany (table 1), and from 20 percent to 23 percent for shipments to China (table 2).
Quarter to quarter, the transportation-cost share of U.S. and Brazilian landed costs fell.
U.S. Exports to China: According to USDA’s Federal Grain Inspection Service, China imported 0.68 million metric tons (mmt) of U.S. soybeans in second quarter 2020 versus 2.90 mmt in the previous quarter and 3.54 mmt in second quarter 2019.
Lower U.S. transportation and landed costs to China could boost soybean exports to China in the coming year.
For more on soybean transportation see Brazil Soybean Transportation.