Grain Transportation Costs and Global Competitiveness
The grain transportation cost indicators provide a quick reference to compare weekly changes in transportation costs against previous time periods and the relative competitiveness among the modes. Both grain market seasonality inherent in the production cycle (usually spikes around harvest in October) and inter-year changes due to harvest sizes, export demand, domestic use, transportation disruptions, and other factors are captured through the highs and lows of these indices. USDA uses the weekly U.S. average diesel fuel price as a proxy for trucking cost, the weekly Illinois barge rate for barge cost, weekly secondary rail bids plus the underlying monthly tariff rates and fuel surcharges for rail cost, and weekly ocean freight rates from the U.S. Gulf and Pacific Northwest to Japan for ocean-vessel cost. (The base year is 2000 for these indices.)
Global Grain Transportation Cost Indicators
U.S. grains and oilseeds are sold in highly competitive world markets. While some costs in the U.S., like land and labor, tend to be relatively high compared to elsewhere in the world, the U.S. stays competitive by having an efficient, low cost transportation system. Grains and oilseeds rely on an integrated multimodal transportation system to move from farm to market, including truck, barge, rail, and ocean vessels. Each mode plays a crucial role in moving U.S. agricultural products and, especially, in ensuring the final product can be delivered at a competitive price to all parts of the globe. Thus, changes in demand for U.S. agricultural goods are directly related to transportation costs.
To provide insight into the cost behavior of each mode, USDA tracks transportation costs over time and in comparison to competitor countries, like Brazil. These indices enable farmers and stakeholders to track movements in the cost of grain transportation and better understand how transportation costs relate to demand.
This page provides regular updates of transportation cost data—some weekly and some quarterly. Check back often to see the latest changes!
U.S. vs Brazil Soybean Competitiveness
The United States and Brazil are the two leading producers and exporters of soybeans in the world. Though they compete for the same markets, the two countries have different production practices and transportation infrastructures, which ultimately affect each country's competitiveness in the world market.
More than 60 percent of U.S. soybean exports shipped out of Gulf ports in 2016, arriving from inland growing States either by long-haul barge or rail movements. Brazil’s agricultural production, including soybeans, is focused primarily in two regions—the South and Center-West. However, unlike the United States, Brazilian soybean exports move primarily by truck to export ports.
The comparative analysis below uses two of the leading soybean producing and exporting regions from each country—Davenport, Iowa, and Minneapolis, Minnesota, and North Mato Grosso (North MT), Brazil, and South Goiás (South GO), Brazil. China is the main importer of soybeans from both countries. Soybean shipments from Iowa and Minnesota to Shanghai, China, are exported through U.S. Gulf ports, and soybean shipments from North MT in Brazil are exported through the Port of Santos—Brazil's largest soybean export port, accounting for roughly 24 percent of its soybean exports in 2017. Shipments from South GO, Brazil, are exported through the Port of Paranaguá—accounting for roughly 16 percent of its soybean exports.
In past years, transportation costs from U.S. locations were much lower than those from Brazil. However, there have been occasional periods when the costs from one or both U.S. locations were higher than the costs of shipping from South GO in Brazil to Shanghai. The data below present an historical view of the two countries' transportation cost comparisons. While exploring the data, it is worth noting the gap between the United States' and Brazil’s transportation costs are becoming increasingly smaller and tighter.
Soybean Transportation Cost Spreads to China: U.S. vs Brazil
The difference (spread) between the transportation costs in the United States and Brazil can be used to determine relative competitiveness of soybean exports from the United States and Brazil. The figure below shows the spread between the cost of shipping soybeans from North Mato Grosso, Brazil, and two U.S. origins, Minneapolis and Davenport, to Shanghai, China. The higher the spread value, the more competitive advantage the U.S. has. Values close to 0 indicate neither country has an advantage.
The relative proximity of South GO to Paranaguá makes the transportation costs from South GO sometimes competitive to those of the United States, especially during periods of relatively high ocean freight rates (as seen during 2007 and the early part of 2008). In general, the spread between the United States and Brazil is falling, implying that Brazilian exports are becoming more competitive to the United States.
The figure below shows the spread between the cost of shipping soybeans from South Goais, Brazil, and two U.S. origins, Minneapolis and Davenport, to Shanghai, China. The higher the spread value, the more competitive advantage the U.S. has. Values close to 0 indicate neither country has an advantage. Negative values indicate Brazil has the competitive advantage.