A new study funded by the soybean checkoff shows the strong economic relationships between transportation costs and individual farmer profitability. The study concluded that U.S. farmers, more than any other segment of the agriculture industry, pay more than their fair share of the cost of shipping their products all the way to the end user.
Conducted for the checkoff-funded Soy Transportation Coalition (STC), the study shows the costs to transport ag products will be disproportionately absorbed by farmers through a wider, more negative basis when they deliver their crop to the elevator.
“All of these costs affect our pricing, because transportation affects our basis,” says United Soybean Board (USB) and soybean checkoff farmer-leader Joe Meyer, a soybean farmer from Williamsburg, IN. “Farmers, almost always, pay for the cost of getting their products to market, and that doesn’t just mean putting it on a truck and taking it to the local elevator. It also includes the costs that are further assigned as it goes along to its final destination.”
This study calls attention to another issue beyond the elevator that affects U.S. soybean farmers’ bottom lines. Meyer says all farmers should be aware of all the variables that affect the price they receive for their soybeans.
“We need to be informed on all of the issues that affect our profitability,” Meyer says. “We need to understand all of the factors that go into the price of soybeans, including the cost of transportation. Through our checkoff investment in the STC, we have become a lot more aware of issues like these.”
Meyer also urges his fellow soybean farmers to work collectively to find ways to ensure the U.S. transportation system remains well maintained and efficient, and not an obstacle to soybean farmer profitability.
Over the long term, Meyer says agriculture generally represents a high-supply, or supply-push, market. In this situation, transportation costs will be disproportionately paid by farmers. The study analyzed 36 soybean-loading facilities in seven states, studying the relationship between basis and transportation costs. Part of the study included a survey of 11 grain traders who were asked whether end users or farmers pay for transportation costs. Seven traders said farmers pay for shipping, while two replied that end users pay for shipping and two said farmers and end users split the costs.
USB, eight state soybean boards and the American Soybean Association established the STC to help maintain the U.S.’s transportation infrastructure as a global competitive advantage.
“Our current transportation infrastructure is deteriorating somewhat, but the STC works to make sure we maintain our competitive advantage,” says Meyer, an STC director representing the Indiana Soybean Alliance. “For example, we’ve found differences in the cost of shipping when there’s competition among railroad and barge companies. We’re also concerned with the condition of the locks on our rivers. All of these aspects affect our bottom lines and our ability to deliver our products to our customers.”