Soybean Landed Costs to China Decrease from U.S. and Brazil
Combination of lower transportation costs, farm values from previous quarter causes decrease
The third quarter landed costs of shipping soybeans from the United States and Brazil to Europe and China decreased from the previous quarter.
According to the USDA Grain Transportation Report, the landed costs fell due to a combination of lower transportation costs and farm values from the previous quarter. The landed costs for shipping soybeans from Minneapolis, MN, and Davenport, IA, through the U.S. Gulf to Hamburg, Germany decreased 9% and 10% from the previous quarter, respectively.
The landed costs of shipping from both origins to Shanghai, China decreased by 8% from the previous quarter (Table 2). The landed costs from Fargo, ND and Sioux Falls, IA through the Pacific Northwest to Shanghai, China fell by 8% and 9%, respectively, from the previous quarter.
In comparison, the landed costs of shipping soybeans from North Mato Grosso (North MT) and South Goiás (South GO) in Brazil to Hamburg, Germany fell by 7% and 5%, respectively, from the previous quarter. The landed costs of shipping from both Brazilian origins to Shanghai, China decreased by 7% and 5% from the previous quarter as well.
Although there were slight increases in ocean and rail tariff rates, quarter-to-quarter transportation costs fell in the United States due to decreases in truck and barge rates. Despite navigation disruptions caused by high water conditions, the average barge rate declined during the third quarter, compared to the previous quarter.
Reduced demand for barge services, caused by a recent decrease in soybean exports, led to lower barge rates. Reduced demand also caused the truck rate for transporting soybeans to barge-served river elevators, to fall during the quarter. On average, 88% of soybean deliveries for export, through the Mississippi Gulf, are delivered by barge. However, rail tariff rates to rail-served elevators increased slightly during the quarter, compared to the previous quarter.
Despite a reduction in soybean exports, strength in global iron ore and coal demand pushed up ocean freight rates for shipping bulk commodities, including grain from the United States to Europe and China, during the third quarter.
In addition to the transportation costs, soybean farm values fell in both the United States and Brazil during the third quarter, compared to the previous quarter. Year-to-year landed costs fell in the United States and rose marginally in Brazil. Soybean landed costs, from the United States to Europe, ranged from $379 to $383 per metric ton (mt), and $396 to $406 per mt to China.
Brazil’s landed costs to Europe ranged from $380 to $418 to Europe and $384 to $422 to China. The U.S. transportation share of the landed costs ranged from 16% to 18% to Europe and 21% to 23% to China. Brazil’s share of the landed costs ranged from 20% to 28%, to Europe and 21% to 29% to Brazil.
China imported 0.38 million metric tons (mmt) of U.S. soybeans during the third quarter of 2018, compared to 4.38 mmt during the same period in 2017. The significant drop in soybean imports comes after China imposed tariffs on U.S. soybean imports on July 6. Lower U.S. soybean exports and higher stocks have reduced soybean prices and basis. Lower U.S. farm prices contributed to the decline in soybean landed costs, which may boost the competitiveness of soybeans and U.S. exports in the longer term.