U.S. Soybean Transportation: Reliable And Cost-Effective, But For How Long?

Checkoff works to make sure infrastructure remains a benefit for U.S. soybean farmers’ bottom lines

The viability of the U.S. soybean industry, and the profitability of the American soybean farmer, is not only a function of abundant supply and increasing demand. It also is dependent upon having connectivity between supply and demand.

America’s system of roads, bridges, highways, railroads, navigable waterways and ports allows soybean farmers to access customers around the world. This system has allowed the U.S. soybean industry to achieve the reputation of being the most cost-effective and reliable supplier of soybeans and soy products in the international marketplace.

However, without continued attention and investment, the nation’s infrastructure will be unable to keep up with the U.S. soy industry’s growing transportation needs. The soy checkoff is working with the Soy Transportation Coalition (STC) to raise awareness of this issue.

A Need to Keep on Track

The U.S. freight-rail industry is an excellent example of the need for increased investment. While waterways depend on government funding, the railroads have an opportunity to invest privately to help solve the impending transportation crisis.

Railroads are proving to be increasingly incapable of accommodating the volume of soybeans and grain produced, particularly in the Upper Midwest, where soybean farmers rely on rails even more than farmers from other regions to move their crop to export terminals in the Pacific Northwest.

Historically, a journey from North Dakota, South Dakota, western Minnesota and Nebraska to the Pacific Northwest would take five to six days with a five- to six-day return trip. Earlier this year, the journey increased to eight days with an eight-day return trip. Not only does this increase the transit time from the farm to the ultimate customer, it decreases the reliability of those shipments.

North Dakota soybean farmer Mike Appert feels the effects of an overloaded railway system.

“We have an issue in North Dakota trying to get our soybeans to export,” Appert says. “The Bakken oil field has consumed a lot of capacity of our rail system, so the grains are trying to compete and it’s caused some delays, late shipments and higher freight costs.”

On top of soybean prices sitting at four-year lows, farmers like Appert are taking a hit to their basis from these railroad difficulties.

“Right now, the basis on soybeans is about 25 to 40 cents wider than what it normally is,” Appert says. “We raise 500,000 bushels of soybeans, so if our basis is 40 cents wider than normal, that’s $200,000. If our basis on corn is 50 cents less than normal and we raise 750,000 bushels, that’s $375,000. Just on my farm alone, it’s over a half-million-dollar impact.”

According to the U.S. Department of Agriculture, U.S. soybean farmers are projected to harvest more than 83.4 million acres this year, netting nearly 4 billion bushels of soybeans, for a projected average national yield of 47.5 bushels per acre.

As this year’s expected record-setting soybean crop continues to come in, it will only add fuel to the fire.

“It’s more bushels that need to be put in an already overloaded system,” Appert says.

While the U.S. transportation system deteriorates, South American countries are working to invest in their infrastructure.

Building a transportation network is a long process, but investment and a focused effort in Brazil and Argentina could allow farmers there to take over U.S. soy’s competitive advantage. Lower profit margins at home and the risk of U.S. soybean farmers losing their competitive edge to the soybean industries in Brazil and Argentina are two of the reasons why the soy checkoff has made increasing public and private investment in soy transportation modes a priority issue in its Long-Range Strategic Plan.

How the Checkoff Is Addressing the Issue

The checkoff explores the effects of the aging infrastructure on railways, highways and waterways because railroads are just one piece of the transportation puzzle. Stress on the transportation infrastructure affects all links in the supply chain.

The checkoff commissions studies to gather data on how transportation issues affect U.S. soybean farmers. A few recent examples include:

    Analysis of Transit Times, Transportation Costs and Predictability of Delivery – The most recent study on transportation compares the cost, transit time and predictability of transporting soybeans from the United States, Brazil and Argentina to nine international destinations. Although the distance in the U.S. from the farm to export terminals is much longer than in Argentina and comparable to certain areas of Brazil, the U.S. soybean industry is consistently the most economical and reliable supplier to international customers due to a more extensive and better maintained transportation system.
    Expanding Rail Infrastructure – This study looks at the current national freight system and assesses its capacity to support economic growth in agriculture and the rest of the economy. It assessed the potential impacts of government programs that could expand the rail sector’s capacity to alleviate highway congestion and create a more efficient transportation system overall.
    America’s Locks & Dams– This research examined the condition of key river locks, analyzed their usage and determined which are most likely to suffer catastrophic failure.
    Farm to Market – A Soybean’s Journey – This report analyzed the transportation of soybeans, soybean products and other grains and products. The conclusions define and quantify the impact of the infrastructure on U.S. agriculture production and moving that production from farm to final market position.