The transportation premium that has kept United States’ soybeans competitive in world markets is being squeezed. That was the message that emerged from a webinar sponsored by the American Soybean Association and hosted by Sara Wyant, veteran farm journalist and editor and publisher of Agri-Pulse.
Scott Gerlt, chief economist at ASA, said the transportation advantage of U.S. infrastructure has been key to maintaining the competitiveness of soy exports. Brazil can produce quality soybeans because of lower costs. However, that cost of production advantage has been offset due to the high costs of transportation in Brazil, with most Brazilian soybeans moving by truck.
That has been changing, however, as Brazil invests in road and port infrastructure.
About 54% of U.S. soy exports move down the Mississippi River to the Gulf of Mexico, with another 25% being shipped by rail to the Pacific Northwest. In recent years, soybean growing has been moving north to the northern Plains, while the biggest domestic destination for soymeal is the southeast, where the poultry industry is concentrated. Hogs are the second-biggest domestic consumer of soymeal after chickens.
At the same time, noted Mike Steenhoek, CEO of the Soy Transportation Coalition, U.S. infrastructure has been facing numerous challenges, from low water on the Mississippi River two years in a row, to crumbling rural bridges. During last year’s low water, barge rates soared to $49.88 per metric ton of soybeans in St. Louis and $45 in Memphis, versus $14.40 in St. Louis and $10.42 in Memphis in 2020, during a more normal year. River levels are already as low in Memphis as they were last year in October, with no rain relief in sight. Midwestern soils are so parched that it will take a lot of rain to affect river levels.
Soy farmers have stepped up to address both of those issues in recent years. After some research, soy farmers donated $2 million to the state of Louisiana to help with its 24% share of costs toward the deepening of the mouth of the Mississippi River from 45 feet to 50 feet, which has been completed for the first 175 river miles.
Soy farmers have also been active in helping counties to lower costs of replacing or repairing rural bridges. Steenhoek noted that a rural county might have anywhere from 100 to 300 bridges. The STC convened engineers to create a list of Top 20 innovations to reduce the costs of bridge replacement or repair by the use of innovative means. Railroad flatcar bridges are the top innovation; they can cut the cost of a new small bridge from hundreds of thousands of dollars to $100,000.
Another innovation is the use of so called geo-synthetic replacement systems. “All these ideas can stretch taxpayer dollars further, since it’s unlikely that the federal government will win the lottery and dramatically increase funding,” said Steenhoek. Where counties are willing to use these innovations, the Soy Transportation Coalition can offer help with costs. One Ohio county has installed 31 of these lower-cost bridges.
In the end, said Steenhoek, infrastructure is like health—it’s best when it’s “boring” and little noticed, just doing its job. “There’s an old saying that you never notice a road until you hit a pothole,” he said. “We have had a lot of ‘potholes’ in the logistics system in recent years. But we are working for a multi-modal transportation world where there is no drama and no surprises.”
Steenhoek cautioned that it was wise for farmers not to put all their destination eggs in one basket. China’s population has apparently peaked, and while it will remain an important customer, customers in Asia and Africa need to be cultivated too. Similarly, the southeast will probably not rival the Gulf Coast or West Coast as a domestic destination for soymeal anytime soon but should still be further developed as more crush plants locate there to serve domestic demand.
Both men noted in the question-and-answer period that due to Brazil’s spring marketing year, the window after harvest when U.S. soybean farmers can hold on and wait for a better price has shrunk. On the other hand, U.S. soybean production is down this year due to drought, while demand has remained strong, boosting prices.
David Murray can be reached at [email protected].
