WASHINGTON, D.C. — Transportation strikes in South America are expected to have little impact on global commodity prices.
Attention on trucking strikes in Argentina and Brazil have been in the news, as trade discussions continue with China, Mexico and Canada. Tariffs announced by the United States have caused retaliation tariffs from many of its trading partners and have focused on U.S. agricultural commodities.
While discussions on tariffs have caused global prices to fluctuate, strikes in South America will have less impact. Richard Johansson, chief economist at the USDA, said strikes in Argentina and Brazil are common, usually short-lived and have minimum impact on commodity prices.
“South America in general … often have logistical issues with getting their crops to port. Sometimes bad infrastructure, sometimes that’s labor,” he explained.
On Friday, Brazil’s government revoked a minimum freight rate, after putting a minimum rate in place to avoid a truckers’ strike. The ag community filed legal cases to challenge the new rates as being an unfair burden. Now the truckers’ unions are threatening to strike again, according to AgriCensus Daily Report.
South American countries produce large quantities of the world’s soybeans and corn, but have difficulty getting the crops onto ships and out to sea. Johansson said if the infrastructure in these countries was better, they would be stronger competition for the United States.
He noted commodity prices are always fluctuating globally. News of tariffs might cause prices to go down, while news of a drought in a different region of the world might cause them to go up.
The news of potential tariffs on U.S. soybeans caused prices to drop when compared to the price of Brazilian soybeans, but a drought in Argentina caused the overall price of soybeans to increase. In agriculture, these market shifts are normal, Johansson said.
In the United States, a truckers’ strike would have a bigger impact on global prices. There are concerns about the aging infrastructure of U.S. roads, bridges, rails and waterways.
He said the infrastructure of the country is, in general, strong. The administration is working to develop a plan to prioritize projects. The goal is to repair and replace the aging infrastructure.
Hurricane Katrina shut down the port in New Orleans; a severe winter in Chicago slowed railway services. Johansson said the commodity prices did increase a little at these times. The price increases will usually get pushed onto producers. Individual farmers are the ones hurt when something happens to the infrastructure, he pointed out.
As a result, any improvements to infrastructure also help farmers, which was seen after Hurricane Katrina, when the federal government focused on improving U.S. ports.
Prioritizing the list of needed projects will not be an easy job, Johansson said. Many commodities travel for some distance on roads before being loaded onto trains or barges. In some areas of the country, produce may go from a truck, to a train, to a boat, using a vast array of infrastructure.
But the infrastructure is used for other things, too. Most people use roads to get to work every day, for example. The river system is used for recreation. Each use of the infrastructure needs to be considered when trying to prioritize a list, Johansson added.
From 1978 to 2014, the total amount of grain movements in domestic and export markets doubled, according to the USDA Agricultural Marketing Service. While soybeans contributed to that growth, corn had the most dramatic impact – more than tripling movement.