Impact of Transportation Policies on Competitiveness of Brazilian and U.S. Soybeans

As the world’s two principal soybean producers, Brazil and the United States also export the majority of the world’s soybeans and, thus, compete for the edge in the world’s largest soybean-consuming markets of China and the European Union. Currently, the world’s three principal soybean exporting nations—the United States, Brazil, and Argentina—contribute to nearly 90% of the international trade. These data are represented in Figure 1 (3). The expected dramatic increase in Brazilian soybean production in the coming years has been cited as one of the three major structural changes occurring in the international grain trade, along with Chinese demand levels and U.S. ethanol production (4). According to the U.S. Department of Agriculture’s (USDA) projections, by the year 2019 Brazilian soybean exports will increase by 40%. This expected substantial change has been credited to the use of large reserves of previously uncultivated land and policies that enable farmers to respond to higher prices. Areas in the interior of Brazil, specifically in the states of Mato Grosso and Mato Grosso do Sul, which had previously underused their land resources, have begun to expand the harvest capacity by simply planting more acreage. The increased South American pressure, specifically from the growth in Brazilian soybeans, will result in the reduction of the U.S. total market share from nearly 40% to 30% by the end of the projections in 2019 (1). This shift in the balance of power in the soybean market will create opportunities for profit in Brazil. However, the Brazilian soybean market currently suffers from a disadvantage in comparison with its world-market competitors: cost of transport. Among competitors, Brazil maintains the lowest farmlevel cost of production (5) but loses out on this advantage between the field and the port on the way to the international market because of the large distances traveled by inefficient means of transportation in comparison with the competitors (6). In logistical terms, soybeans are a low-aggregated-value product, turning its transport policy into an essential element in cost control and, ultimately, competitiveness. According to Dornier et al. (7 ), transport policy involves the choice between modes of transportation, decisions about delivery size, and routing, and scheduling. A product’s transportation policy is highly related to client service, stock, and storage locations. The cost of transporting soybeans in Brazil is considerably higher than in the United States. In 2007, the Agricultural Marketing Service and the USDA measured the internal transport costs of Brazilian soybeans to be three times more than that of American soybeans (8). It is generally accepted that as infrastructural systems improve, the cost of transportation is reduced, thus implicating a reduction of the cost of Impact of Transportation Policies on Competitiveness of Brazilian and U.S. Soybeans From Field to Port