Domestic transport costs make the difference in the global corn markets

In the US and Brazil – both globally leading corn exporting countries – the bulk of corn production has to be shipped as far as 2,200 km to the main export terminal.

But, yet they face very different domestic transportation costs. The cost to transport a tonne of US corn is less than USD 40, while the Brazilian competitor has to pay as much as 3 times that, approximately USD 120, to transport grain the same distance to port. The key reason behind this difference: in the US barges are being used along the Mississippi river, while Brazil transports corn by truck.

A similar situation occurs between Argentina and Ukraine – the other two main players in global corn markets. Both key production regions are approximately 500 km inland, however their domestic modes of transport vary: Argentina relies on trucks while Ukraine has a rail network at its disposal. Consequently domestic costs favour Ukraine’s train transport per tonne, USD 12, while Argentina producers have to pay approximately USD 60. 

These differences in domestic transport costs are quite influential on total costs. For instance, if  producers from these exporting nations were to try and save 20 USD per tonne of corn, they would need to reduce total cost of production per hectare by 120 to 240 USD. This is equal to about 15 % to 20 % of cost of production, depending on yield levels and production systems. Becoming more competitive in exports tends to be easier by improving infrastructure than by improving farm productivity.