As a soybean surplus country, exports are important to the U.S., making it critical that the country continues to improve its transportation system to accommodate the changing world transportation system. Improvements to America’s waterways systems will enhance the competitiveness of U.S. farmers and grain companies, resulting in a stronger cash basis.
Improvements to U.S. Waterways
Because of Asia’s distance from the U.S., ocean freight rates play a major role in the price a farmer ultimately receives. The most dependable way to lower ocean freight rates is to increase the depth of the waterways system, enabling vessels to load heavier because shippers charter the vessel. For example, many foreign ports depended its ports when the Panama Canal was expanded, which creates an opportunity for U.S. grain exports. The result is either more soybean business shifted to the U.S., or increased the basis received for farmers, or some combination therein. The U.S. Soybean Export Council (USSEC) recently published a report on the benefits of dredging the lower Mississippi River to the authorized 50-foot depth.
Ocean Freight Costs
After ocean rates bottomed out in March 2016, grain rates more than doubled until November 2018. As can be seen below, ocean rates were at historically low rates in March 2016, but the freight rate increase was eating into profit margins. The good news is the ocean rates are expected to decline for the next few months, being welcome support for U.S. soybean prices.