How Our Biggest Soybean Competitor Moves Their Product
USDA’s Agricultural Marketing Services recently released an interesting report called The Soybean Transportation Guide, which provides a visual snapshot of Brazilian soybean transportation in 2019. As one of our most important competitors in the global oilseed market, Brazil’s continued improvement to transportation infrastructure is continuing to reduce its costs of getting supply moved. For the most part, Brazilian and U.S. producers use the same advanced production and technological methods, meaning their soybeans are relatively interchangeable for buyers, making logistics and politics very important determinates of price and demand. There is a ton of great data in this report worth considering. Let’s also keep in mind, the USDA is forecasting that Brazil will maintain its hold being the world’s largest soybean exporter. Below are a few highlights but I encourage everyone to learn more about our largest competitor. You can take a deeper dive HERE. (Source: USDA)
Brazil Soybean Transportation Cost and Export Demand
- Brazil exported 74.1 MMT of soybeans in 2019, 11% less than 2018’s total, a decline that reduced transportation demand.
- Shipping costs for a metric ton of soybeans 100 miles by truck decreased 15% from $8.44 in 2018 to $7.19 in 2019. Truck rates also fluctuated because of the completion of the BR 163 road paving project, connecting Sorriso, North Mato Grosso, to Itaituba.
- Ocean rates from the southern Brazilian ports to Shanghai, China, increased significantly during the second half of the year, averaging 9-11% higher than 2018 ocean freight costs.
- From 2018 to 2019, Brazilian soybean transportation costs to Shanghai, China as a percentage of total landed costs for the routes of North Mato Grosso to Santos and Santarém slightly decreased in response to lower truck rates and farm prices. In Sorriso, North Mato Grosso, the largest Brazilian soybean-producing State, the 2019 transportation costs represented 28% of the total landed costs of shipping soybeans to Shanghai through Santos, compared with 34% in 2008 and 45% in 2006.
- Average Brazilian soybean export prices decreased nearly 12%, from $408 per mt to $360 per mt, from the same time in 2018. The weakening of the Brazilian real against the U.S. dollar partially offset the nearly 8% fall in farm gate prices.
- Brazil’s infrastructure is improving and thus narrowing the difference in shipping costs between Sorriso and Iowa to Shanghai, and during 2019, shipping soybeans by truck for the first leg, the route from Sorriso, North Mato Grosso, to Shanghai cost about $22 per metric ton more than the route from the U.S. Gulf and Pacific Northwest routes to Shanghai. However, the cost advantage to U.S. shippers narrowed to $10 per metric ton when North Mato Grosso soybeans were shipped by rail to Santos for the first leg and to $9 per metric ton when shipped by barge to Barcarena for the first leg.
- Soybean exports to China in 2019 declined nearly 16 percent to 58 mmt in 2018, because of an epidemic of African swine fever that reduced the country’s hog herd. In 2019, China received 78% of Brazil’s total soybean exports (74 mmt). The next highest shares of Brazil’s soybean exports went (in declining order) to Spain, the Netherlands, Thailand, and Iran. Of all the Brazilian States, Mato Grosso exported the most soybeans.
- During the 2019 peak harvest season, loading delays and vessel backups were similar in Brazilian ports and the U.S. Gulf, averaging 3-10 days and narrowing the time spread between the regions. Seasonally, the Northern ports had lower loading delays and vessel backups than the Southern ports of Santos and Paranaguá. Barcarena had vessel loading delays of 3-4 days, which nearly offset the roughly 3-day-longer voyage distance to Shanghai, compared with the ports of Santos and Paranaguá.