1

In recent years, the United States—the world’s leading producer and exporter of soybeans—has lost 

market share to Argentina and Brazil. At the farm level, the 2013 per-bushel production costs in the 

main producing areas of the U.S. Midwest averaged $9.62 per bushel, compared with $7.14 per bushel 

in Argentina, $8.15 per bushel in the Brazilian State of Mato Grosso, and $7.68 per bushel in Brazil’s 

Paraná. Even though U.S. production costs are higher, the total transportation costs from point of 

production to the destination in Asia are generally lower than for South American soybeans, allowing U.S. 

soybeans to compete. 

Relatively small differences in seaborne transportation costs can make South America soybean exports 

more competitive than those of the United States, diverting trade from the United States to Brazil or 

Argentina, or the reverse. Ocean freight spread is the cost difference between two vessel routes to the 

same destination, such as the U.S. Gulf and the Pacific Northwest (PNW) versus South America to Asia 

(China and Japan), or the U.S. Gulf versus South America to Europe and China.1 

A researcher with the International Grains Program Institute at Kansas State University found that the 

ocean freight rates for grain cargos from South America to Asia are often less expensive than from the U.S. 

Gulf because of dry-bulk vessel route patterns, lower cost port charges, higher Panama Canal tolls, and 

less burdensome navigation restrictions. South America shipments provide some natural competitive 

advantages for Brazilian and Argentinean grains and oilseeds by sailing around Cape Horn and avoiding 

the Panama Canal when the need exists. South American shippers can load vessels too large to fit through 

the Canal, gaining economies of scale and avoiding Canal fees and delays. Brazilian ports also provide less 

expensive berthing (dockage) costs for vessels. 

1 The U.S.–South American ocean freight spread competitiveness occurs in the Atlantic route (U.S. Gulf) to China and not in 

 the U.S. Pacific Northwest (PNW) because of the Panama Canal and the Canal transit costs limitations.

Agricultural

Marketing 

Service

May 2015

United States–South 

America Ocean Grain 

Freight Spreads 

(Summary)

This paper is a summary of: U.S.–South America Ocean Grain Freight Spreads, by Jay O’Neil, International 

Grains Program Institute (IGP), Kansas State University (KSU). The full paper is available at http://hdl.

handle.net/2097/18876. 

Delmy Salin
2

Market conditions at any time may change the estimated route voyage cost. For example, the estimated 

vessel freight trade can be above or below these straight cost calculations. Consequently, the market will 

trade at whatever price level it deems appropriate. Seasonal port backlogs impact the logistical flow of 

commodities and shipper costs, but in a supply push market (markets where supply is abundant), these 

extra costs generally get passed back to the local producers rather than the shipper or commodity buyer 

and therefore have a smaller effect on ocean freight rate spreads. This is true whether commodities are 

sold free on board2 (FOB) or cost and freight3 (CNF).

Vessel costs from U.S. Gulf versus Argentina and Brazil to Shanghai, August 2014

Cargo Mean Quantity

U.S. Gulf Argentina Brazil

56,000 mt1 60,000 mt 66,000 mt

Nautical miles (nm) 9,977 11,186 11,031

Voyage days 39 42.5 42

Panama Canal 1

Laytime both ends 20 24 23

Total voyage duration days 60 66.5 65

Port and Canal fees $550,000 $430,000 $180,000

Percentage of total costs 16.2 13.0 6.0

Total costs $3,400,000 $3,303,500 $3,015,000

Freight rate: $56.67 $55.06 $45.68

1

Metric tons

Source: O’Neil Commodity Consulting 

Loading delays and vessel backups in South America are often much longer than in the United States. But 

these costs are charged to the charterer and not the vessel, so they do not influence the per metric ton 

(mt) freight rate. The cost of the resulting vessel demurrage, however, does have a significant impact 

on the value of the FOB cargo and the price received by South American producers. For example, “FOB 

Santos” shows that the Brazilian seller will pay for transporting the grain to the Port of Santos and the 

cost of loading the grain onto the ship, including inland haulage, customs clearance, origin documentation 

charges, and demurrage. Once all the grain is on board, the buyer pays for all costs beyond that point.

2 FOB Origin indicates that the sale is considered complete at the seller’s shipping dock, and thus the buyer is responsible for 

 freight costs/liability. 

3 CNF refers to a common type of shipping agreement where the seller pays for delivering the item to the port closest to the 

 buyer. CNF shipping terms does not include the cost of cargo insurance. 
3

There is no readily available public data identifying the ocean freight spreads between the United States 

and South America. This study is based on primary data from O’Neil Commodity Consulting. Secondary 

data sources are USDA-AMS Transportation Services Division, Bluewater Shipping Port statistics, and the 

Panama Canal Authority. Some ocean transportation data is derived from reports and database materials 

from 2012 to 2014 which are understood to be accurate through the end of the calendar year 2013. The 

study does not include inland transportation costs in each competing region. 

For more information on this summary, contact the author at Delmy.Salin@ams.usda.gov or 

202-720-0833

Preferred citation:

Salin, Delmy, United States–South America Ocean Grain Freight Spreads (Summary), U.S. Department of 

Agriculture, Agricultural Marketing Service, May 2015. Web <http://dx.doi.org/10.9752/TS213.05-2015>

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