The State of U.S. Waterways

Image Credit: © Kovalenko Inna – Fotolia.com

The agricultural trade is at a crossroads, quite literally. The state of American infrastructure—from our roads to our rails to our rivers—is something that should command the type of global market speculation typically reserved for the world’s great financial capitals. Why? Because this system, which starts at the farm gate and ends at the ports of our export partners, will dictate the future success of so many agricultural industries in the U.S.

Soybeans in particular have the most at stake as we discuss the state of our supply chain. The farmer leaders of the American Soybean Association (ASA) grow a crop that represents the most significant American agricultural export. In the 2014-2015 crop year, the U.S. will export a record 1.77 billion bushels of soybeans.

Barge Benefits

Currently, more than half of soybeans grown in the U.S. are exported, and the vast majority of those are headed for China. Considering the country’s main production areas in the Midwest, and central and northern Great Plains, most American soybeans are transported by barge down the Mississippi River to Gulf Coast export terminals near New Orleans.

A small part of our reliance on waterways transportation is born of geographic convenience, but the larger driver is the efficiency with which the barge transportation industry carries soybeans to market. Transportation via barge is by a large margin the most efficient and cost-effective transportation mode when compared with transportation of soybeans by rail and by truck.

To lend some perspective on the efficiency of moving product by barge when weighed against moving the same cargo by truck or by train, take the example of one standard 15-barge tow of soybeans. That 15-barge tow moves more than 787,000 bushels of soybeans, but it would take two 100-car trains or 870 large semitrailers to move the same volume of soybeans.

Speaking specifically of safety, moving products by rail and by truck represent a risk of 1.15 and .87 deaths per billion ton-miles, respectively, compared to a risk of only .01 for barge transport.

Barges are also clearly more fuel efficient from a miles-per-gallon perspective than rail and truck transportation, moving cargo 514 miles on 1 gallon of diesel fuel, compared to 202 miles for trains and 59 miles for trucks.

While these numbers should be enough as standalones to secure waterways transportation as the preferred and dominant mode of moving soybeans from point A to point B, there are several factors that have prevented this from truly taking hold.

Image Credit: © Vasilius – Fotolia.com

…most American soybeans are transported by barge down the ­Mississippi River to Gulf Coast export terminals near New Orleans.

The Competition

Until two years ago, the U.S. soybean industry was the global leader in both planted acres and exports of soybeans. Within the last 24 months, we have lost both of those titles to our South American competitors Brazil and Argentina. Even though the South American markets have eclipsed our domestic production and export capacity, U.S. soybeans still maintain a premium based on the ability to grow a high-quality soybean and deliver it more reliably with a smaller environmental impact than our competitors.

It is clear that the American waterways transportation network provides a significant portion of that competitive advantage for U.S. soybeans in global markets, especially relative to competitors in Brazil and Argentina. While South American markets can beat our production costs, we still enjoy a significant advantage over those markets on the cost to transport soybeans to foreign customers.

Illustrative of this advantage, analysis commissioned by the Soy Transportation Coalition (STC) looked last year at the costs of moving 1 ton of soybeans from an elevator in Davenport, Iowa, to a customer in China, and compared those costs to those of moving a ton of soybeans from Mato Grosso in the heart of Brazil’s soybean production region to the same customer in China. What STC found clearly underscored the advantages of the American infrastructure system. Overall, moving the cargo the entirety of the route from Iowa to China cost $85.20, a decided advantage over the price tag of $141.73 for the same cargo originating from Brazil.