The United States has an extensive network of transportation infrastructure including roads for trucking, tracks for railroad, and navigable inland waterways for barge movements. Whether by one transportation mode or a combination of modes, grain is moved from inland locations to export ports for shipping to overseas destinations. Sustaining moderate transportation costs is essential to keeping U.S. exports competitive.

Mexico is one of the largest importers of U.S. grain and, because it is a U.S. neighbor, uniquely well situated as a trade partner. In marketing year (MY) 2019/20, Mexico was the leading importer of U.S. corn, second-largest importer of U.S. soybeans, and largest importer of U.S. wheat. Lower transportation costs to Mexico are key to keeping U.S. grain competitive in this vital market. U.S. grain is transported to Mexico either by the water route to Vera Cruz, Mexico, for inland distribution thereafter, or by the land route to Guadalajara, Mexico.

The data and methodology for estimating cost indicators presented in this analysis have changed over time because of data constraints and availability issues. Before fourth quarter 2011, the transportation costs for U.S. shipments to Guadalajara represented both water and land routes. However, since fourth quarter 2011, transportation costs for U.S. shipments to Vera Cruz, Mexico have represented the water route, while shipments to Guadalajara continue to represent the land route.

The figures below break down quarterly transportation costs in a variety of ways. The first figure shows the quarterly total transportation costs of moving corn, soybeans, and wheat from U.S. inland locations to Guadalajara or Vera Cruz, via the water route. It also shows quarterly transportation costs for the same commodities to Guadalajara, by the land route. The second figure shows the same quarterly total transportation costs via select water and land routes (choosing origin and destination). 

The next two figures show the quarterly total transportation costs broken down by grain type on the water and land routes, respectively. In the left figure, where all commodities are shipped by the water route, corn and soybeans are shown to have lower transportation costs than wheat because of inland barge movements from Illinois to New Orleans. This result occurs because Mexico-destined wheat is represented by a Kansas origination which requires (higher cost) rail to the Texas Gulf. In contrast, in the figure on the right, wheat transported by the land route incurs lower transportation costs than do land-routed corn and soybeans. Wheat is transported by rail from Kansas to Guadalajara—a shorter distance than for corn and soybeans, which are transported from Iowa and Nebraska, respectively. 

Although transportation costs are an important consideration, landed costs approximate the commodities’ final costs upon arrival at their destination markets. Landed costs include the total transportation costs and the farm values. The first figure below shows the landed costs of U.S. grain to Mexico via the water and land routes. Consistent with the earlier explanation of how the water route has changed, the landed costs before fourth quarter 2011 are for shipments to Guadalajara, and landed costs after then are for shipments destined to Vera Cruz.

In contrast to the water-route-by-commodity transportation costs figure above, which shows soybean and corn total transportation costs were below those of wheat for the water route shipments, the figure below on the left shows soybean landed costs were the highest, followed by wheat and corn. Higher farm values for soybeans and wheat pulled up their landed costs relative to corn. The figure on the right also shows a similar pattern, with soybeans transported by the land route having the largest landed costs, and wheat and corn more or less even (though varying).

The two figures below sum the inland transportation costs for each mode of transportation (truck, barge, rail, ocean) and the farm values for U.S. grain transported via the water route and land routes. Because farm values respond very slow to global market forces, it is important to keep the transportation costs low. Doing so will not only keep U.S. grain competitive overseas, but will also increase producers’ profit margins.

To underscore transportation costs’ role in determining shipping decisions, the figures below show the relationships between total transportation costs and total grain shipments by water and land routes. The figure on the left clearly shows fewer shipments by the water route when transportation costs are high and vice versa—more shipments by water when costs are low. Regarding the land route, there is no discernible pattern. However, there are periods in which land-route shipments are low or falling in relation to high transportation costs. These findings support the idea that transportation costs must be kept low or moderate to sustain the competitiveness of U.S. grain exports overseas.