USDA soy report stresses need for infrastructure investment

Agency says efficient transportation network is one key element for remaining competitive.

Joining a growing chorus of stakeholders concerned about the reliability of the U.S. transportation system, a newly released U.S. Department of Agriculture’s (USDA) Agriculture Marketing Service (AMS) report said the U.S. is losing its world market share to South America, where soybeans have a lower cost of production. (Feedstuffs, Sept. 29) But, the report also stressed that infrastructure improvements are also need for growing domestic demand.

According to the report, which examined transportation implications of the recent trends and outlook for U.S. soybeans, during the last 10 years, over 40% of production was exported on average each year, relying on barge and rail transportation to be shipped to port. Growth in demand for U.S. soybeans over the past 10 years occurred mostly in Asia, especially mainland China.

Together, Argentina, Brazil, and the United States account for about 85% of total soybean, soybean meal, and soybean oil exports. Yet U.S. exporters are able to remain competitive against lower foreign production costs because of the United States’ advantage in domestic and transoceanic transportation, noted the report.

The world soybean trade is projected to increase 40 million tons (36%) over the next 10 years, with Brazil firmly taking the lead as the world’s major soybean exporter, according to the report. Prior to 2012/2013, the United States had been the world’s leading soybean exporter, but the deteriorating U.S. transportation infrastructure has put the U.S. soybean industry’s global competitiveness in jeopardy.

“Transportation is an essential part of agricultural marketing,” said the authors. “America’s soybean farmers depend on an adequate and efficient transportation system to move their crops to market and to bring them inputs such as fertilizer and seed, all of which are usually transported great distances.”

U.S. soybean production is concentrated in the Midwest. In 2013, the largest soybean-growing states were Illinois, Iowa, Minnesota, Indiana, Nebraska, and Ohio, each of which produced over 200 million bushels. Together, these six states accounted for 57% of U.S. soybean production, stated the report.

Soybeans exported are moved from that region to major ports for export, mostly via barge to the Mississippi Gulf and rail to the Pacific Northwest, according to the report. In 2002, 64% of soybean exports were carried by barge and 31% were delivered by rail. During 2011, 31% of export-bound soybeans were shipped by rail, 49% by barge and 20% were transported by trucks during 2011.

U.S. transportation costs via two routes (U.S. Gulf and PNW) are consistently much lower than Brazil’s transportation costs of shipping soybeans from North Mato Grosso through Santos. The United States has also generally had an advantage over Brazil’s costs of shipping soybeans from South Goias through Paranagua to China. “To remain competitive with Brazil, which is investing heavily in its transportation infrastructure, U.S. rail and barge transportation must remain competitive for U.S. soybeans to continue to compete with the lower-cost-of-production soybeans from South America.”

The report also predicted that over the next 10 years, most of the growth in demand for U.S. soybeans will occur in the domestic demand categories, which creates the need for continued investment in highway and bridge infrastructure to support intra- and inter-State commerce since domestic soybean processors rely on efficient truck transportation. 

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