But Upgrades Needed as Soy Demand Increases

It’s no secret that Illinois is well centered to take advantage of multiple modes of soybean transportation.  It’s reflected in a solid basis.  But as soybean demand grows, so will the need to make sure that Illinois soybeans are transported as efficiently and competitively as possible.

“Demand for freight movement is expected to increase by 75 percent over the next 25 years.  We need to make sure we adequately finance the three major freight modes — truck, rail, barge — to accommodate that,” says Mike Steenhoek, Soy Transportation Coalition (STC) executive director.  “We are working on issues that include continuing to promote sufficient investment in our nation’s locks and dams, promoting increased containerized shipping, and calling greater attention to our deficient rural infrastructure, including unpaved roads and county bridges.”

Steenhoek says soy transportation costs have risen with higher fuel prices and higher steel costs to build barges and rail lines, as well as needs to maintain the aging U.S. infrastructure.  As costs rise, prices to farmers for soybeans delivered to elevators and processors often decline.

Illinois farmers, however, often see less impact.  “For Illinois farmers, the variety of options is reflected in stronger basis levels than other places,” says Dean Campbell, soybean farmer from Coulterville and STC chair.  “More competitive transportation options put downward pressure on cost, which will often allow Illinois farmers to enjoy higher prices.  Even so, Illinois farmers, along with other soybean farmers, should focus attention on the factors that are affecting the cost and efficiency of various modes of transportation.”

Barges

According to the publication, “How the Global Oilseed & Grain Trade Works,” from the United Soybean Board (USB) and U.S. Soybean Export Council (USSEC), a number of factors affect transportation costs beyond high fuel and steel prices.  The age of the barge fleet and reluctance of companies to take old barges out of service are key cost factors as well.

The report notes that companies can earn more money by keeping old barges in service.  Costs are also negatively affected by rising demand for barge freight that is driven by ethanol and imports of intermodal goods from Asia.  The ongoing problem with locks and dams on the Illinois and Mississippi River systems being too old and too small further exacerbate costs.

The National Waterways Foundation asserts that barge use helps ease rail and highway congestion.  Inland waterways transport has a low injury and fatality record compared to rail or truck, generates fewer emissions and is more energy efficient than the other two modes.  The group also asserts that a typical cargo barge can carry 1,750 tons, compared to a rail bulk car’s capacity of 110 tons and a highway tractor-trailer that carries about 25 tons.

Railroads

Higher railroad costs have been recently tied to congestion in major corridors like Chicago, increased demand for railcars driven by imports of intermodal goods from Asia, and ethanol production and rail demand in the Western Corn Belt.  An increase in railroad fuel tariffs due to fuel prices, lack of new rail infrastructure and service quality also are concerns.

“Illinois enjoys a variety of rail service options, although there is a sizable amount of soybeans and soy products moving at high rail rates,” Campbell says.  “Since most of these transportation costs are passed onto farmers, this is an issue that merits monitoring and engagement.”

In fact, nearly 20 percent of Illinois soybeans are transported by rail, along with 64 percent of the soybean meal produced in Illinois and more than 60 percent of the soybean oil.  Large interior elevators near major rail lines have an edge.  Such elevators sell soybeans nationally, while smaller interior elevators do not have the shuttle loading capacity on major rail lines.  Upriver elevators with rail and barge access also have an advantage.  They can ship to local customers by truck or rail, to other river elevators down river by barge, or to exporters.

Trucking

Like barges and rail, the trucking industry makes its money by keeping trucks on the road.  Delays cost money.  Other factors affecting truck costs include high fuel prices, the deteriorating U.S. highway system, increased traffic on major highways and a shortage of qualified drivers.

“Most soybeans are transported to buyers by trucks farmers own and drive.  The price of fuel has increased so much over the past few years that moving soybeans to the elevator or processing facility has become a major cost.  Farmers have begun to sell soybeans to the closest buyers,” states the USB/USSEC report.  Large-scale farmers and co-op members may have an advantage, as they can sell via rail or barge to regions with better marketing infrastructures or short supplies.

“In rural America, trucks are often the only viable option for transporting freight,” Steenhoek says.  “The rail industry, even short line and regional railroads, are not in the position to provide the same comprehensive and time-sensitive service that trucking provides.  This is particularly the case for the initial deliveries from the farm to the elevator or processor.”

The STC is studying requests to increase semi-trailer weight limits on highways.  “For those occasions where higher weight limits could divert traffic from railroads onto trucks, the result would likely be downward pressure on rail rates.  By increasing the efficiency of trucking via higher weight limits, railroads would need to lower rates or improve service to maintain a customer base.”

Containers

Containerized shipping is a relatively new opportunity for soybean farmers.  Increased U.S. demand for Asian products has led to a rise in container shipments to U.S. ports.  Soybeans are loaded in back-haul arrangements when the ships return to Asia.  Seen as a growing business, nearly 10 percent of U.S. soybean exports are now handled by container vessels.

“It’s difficult to identify the best combination of transportation options in the future.  Each mode is unique and serves different niches of the overall economy,” Steenhoek says.  “The concern is that policymakers in Washington, D.C., tend to focus on urban transportation needs and largely ignore the challenges experienced in rural America.  There needs to be a better balance.”

*Content Funded Through Soybean Checkoff