Farm to Market Report Shares The U.S. Soy Transportation Advantage
Because 60 percent of U.S. soy is exported abroad, efficient transportation plays a vital part in meeting customers’ needs for a consistent, reliable supply.
The movement of agricultural commodities and products flows through many logistical options from farm to market. Each country faces its own difficulties with transportation of commodities. Movement of soybeans can include truck, barge, rail and deep-water vessel transportation. By type, the average move from farm to final destination in the U.S. requires 74 miles (119.1 km) by truck, 377 miles (606.72 km) by rail and 217 miles (349.23 km) by barge. Since every country has a different physical geography, regulatory regime, labor pool, and climate, as well as varying degrees of maturity of agricultural production, transportation is a complex topic to understand. The 2016 Farm to Market report outlines the benefits of the strong U.S. soybean transportation system compared to other countries around the world.
“Customers express they want a cost-effective and reliable delivery system, and it’s up to us to deliver,” says Mike Steenhoek, chief executive officer of the Soy Transportation Coalition. “The U.S. soybean industry has developed this unique reputation as the preeminent supplier of soybeans and soy products on the international marketplace. Transportation is clearly not a theoretical issue for farmers, it is very tangible. We therefore need to remain engaged to assure our nation improves its transportation system for our agricultural sector.”
Farm to Market: The Global Comparison
After soybeans are harvested, the first step in the transportation process is farm to market pipelines. Farmers have as many as six primary options to start, including on-farm storage, county elevators, container yards or transloaders (places where commodities are moved from one type of transportation to another), barge terminals, shuttle elevators or crushing plants. In addition, the option of on-farm storage gives farmers time to market directly to an export position, if they desire. This allows farmers to choose the best time to sell their beans, depending on market price, elevator times, busy season, or any other number of reasons instead of feeling that they have to sell right away. Comparatively, the report shows that Brazil faces constraints with respect to storage infrastructure, hindering this step. There is a lack of available storage in Mato Grosso, a major production area, to hold the expanding production. In Brazil, more effort has been focused on land expansion rather than the transportation infrastructure that includes highways and grain storage capabilities.
When it’s time to move the soybeans, the most efficient route must be considered, as beans are sometimes moved from the middle of a country to the coasts. The report shows wait times are significantly longer at several steps of the transport process in Brazil. Wait times for loading beans after harvest average 24 hours in Brazil, compared to just 1.5 hours in the U.S. Meanwhile, wait times for loading at a long-haul terminal are about 72 hours in Brazil and range between 20-48 hours in the U.S.
One of U.S. soy’s main competitive advantages is that the transportation system does not rely on one method, with options that include road, rail, and inland waterways to transport beans to ports.
“At Informa Economics we look at transportation and infrastructure and what it means to both the farmers and what it means to the global market to be able to have an efficient system,” says Ken Eriksen, senior vice president, client advisory and development with Informa Economics. “We are moving more cargo in the United States than we’ve ever moved in history and we need a well-functioning infrastructure.”
In the U.S., truck costs of moving soybeans to the next market position are considerably lower, between $10 and $15 per metric ton (or U.S. $.27 to $.41 per bushel). The transportation cost to export position is expensive in South America, especially in Brazil, where truck costs run upwards of U.S. $104 per metric ton (or U.S. $2.83 per bushel) during harvest on some routes.
Brazil relies heavily upon roadways for transport of agricultural goods, both domestically and internationally; however, the roadway system in Brazil is dismal. This is due to many factors, including poor quality and lack of roads, extra time on roads moving product from one mode to another, high diesel prices, insurance costs and product lost in transit. The Brazilian highway system extends 1,066,776 miles with only 14 percent paved. The roads are used heavily and bottleneck during the soybean harvest season. According to a Brazilian private sector lobby group, the National Transport Confederation, three quarters of Brazil’s highways are in bad condition.
When it comes time to ship the beans from ports to their export locations, the U.S. advantage lies in the several ports that cater to certain areas. Soybeans sent from the West Coast are destined for Asia. Center Gulf soybean exports are shipped to Europe or Asia, primarily. East Coast and Great Lakes exports travel to Canada and Europe. In 2017, 351 million bushels (.5 million metric tons) of soybeans also transited the Panama Canal.
River systems leading to ports throughout the U.S. are a reliable, easy to navigate network that spans the Midwest and other major agricultural areas in the country. According to the Farm to Market Report, Brazil has 39,060 miles (62,860.98 km) of river-lake surface water and 27,280 miles (43,902.90 km) of navigable rivers, but only 8,060 (12,971.31 km) miles are commercially navigated. Despite the Amazon’s shipping advantage, it is one of Brazil’s most underutilized corridors. The United States has more than 250,000 rivers, which translates to approximately 3.5 million river miles (5,632,704 km), according to the American Water College. Many of the navigable waterways, such as rivers or canals including the Mississippi River System, include more than 25,000 river miles (40,233.6 km).
“Whether by rail, river or road, it’s important for U.S. farmers to have an appreciation for these modes of transportation and how the system allows them to be more profitable,” says Steenhoek. “Brazil hasn’t developed its freight rail system to the extent that we have. As a result, it’s a lot more expensive to get the product to the export region. Basis levels in Brazil are much wider than in the U.S. It’s not because they’re growing inferior-quality beans; it’s because there’s more cost in getting those beans to the ultimate customer.”
For example, the transportation costs for one metric ton of soybeans to Shanghai, China are $66.81 from Davenport, Iowa and $80.57 from Mato Grasso, Brazil, according to the U.S. Department of Agriculture.
Continuous improvement of all transportation avenues in the United States is critically important for U.S. agriculture and will continue to protect farmers’ competitive advantage by keeping transportation costs lower than competitors. Doing so provides customers with confidence in the reliability and consistency of U.S. soy.