With China’s increasing dependence on Brazil’s imports of soybeans, domestic oil meal prices have become more sensitive to the local situation in Brazil. Brazil’s soybean exports are transported to ports via inland truck or rail transportation, and then transported to China via multiple routes. Compared with the convenient inland transportation of Mississippi in the United States, Brazil’s inland transportation is more difficult. Especially during the peak soybean export period in April and May every year, strikes by truck drivers and congestion on transportation roads are normal.
- Overview of China’s soybean imports and Brazil’s soybean exports
In recent years, China has become increasingly dependent on Brazilian soybean imports. According to data released by the General Administration of Customs, China’s soybean imports from Brazil accounted for 59.64% of total soybean imports in 2019. In 2018, when the Sino-US trade disputes were more serious, Brazilian soybean imports accounted for 75.04% of the annual imported soybeans. Even when the Sino-US trade friction was not affected in 2017, the imported Brazilian soybeans accounted for 53.3%. This is higher than the 34.3% share of U.S. soybean imports. As can be seen from the figure below, the peak period of China’s imports of Brazilian soybeans is mainly from May to August, because Brazilian soybeans are harvested mainly from January to April, and shipping takes another 40 days.
From the perspective of monthly data, Brazil’s export peak is in March-July each year, which corresponds exactly to the peak of China’s imports from April to August. Brazil’s exports to China are basically the same as its output, and the largest state of production, Mato Grosso, exports the most to China. In addition, by port, Brazil’s soybean exports to China mainly go through the Santos port. In recent years, Rio Grande and Paranagua ports have also increased their soybean exports to China.
- Shipping from Brazil to China
The global soybean international trade mainly relies on maritime transportation, with multiple maritime transportation routes from the main producing country to the importing country. In the figure below, we have marked the 7 main transportation routes from the main producing country to East China, which are
①Western America (PNW) to East China, ②Gulf of America (Gulf of Mexico) to East China, ③Brazil to East China via the Panama Canal, ④Argentina to East China via Cape Horn, ⑤Brazil to East China via Cape Horn, ⑥The United States goes through the Cape of Good Hope to East China, ⑦Brazil goes through the Cape of Good Hope to East China, and ⑧Argentina goes through the Cape of Good Hope to East China (see the figure below for the route). Among them, the transportation from the United States to China is mainly based on the Gulf of America, and the transportation through the Cape of Good Hope is mainly used for Brazil and Argentina.
Due to the different routes and ship types, the shipping cost of soybeans varies greatly. The following are the cost of ships from the Gulf of Mexico in the U.S. to Shanghai, China and Argentina and Brazil to Shanghai, China from October 15, 2019 to November 15, 2019.
As can be seen from the above table, passing through the Panama Canal requires additional fees and waiting time, which will increase the cost of transportation. Except for Meiwan passing through the Cape of Good Hope, other transportation distances are similar. The sea voyage time ranges from 35 days to 52 days, mainly concentrated in the time interval of 35 days to 40.5 days. Shipping time in Brazil is similar to that of Argentina and the United States. Relatively speaking, Brazil’s average unit maritime transport cost is the lowest among the three exporting countries, all under US$40/ton, while the maritime costs of Argentina and the United States both exceed US$40/ton, mainly due to the low cost of Brazilian ports. Lower than the port fees of Argentina and the United States, and this is also conducive to reducing the total cost of soybeans.
From the perspective of the shipping cost of soybeans from various Brazilian states to China in 2018, the shipping cost from Mato Grosso, Brazil’s largest main producing state, to Shanghai through the Santos port is the highest, regardless of whether it is transported by truck or rail. It is higher than the export freight of US soybeans and the freight of other Brazilian states. The Brazilian states of Maranhao and Rio Grande do Sul are closer to the port and lower inland transportation costs, so the overall freight is lower than the transportation cost of U.S. soybeans.