US agricultural freight growth demands infrastructure investment: supply chain restructuring from export corridors to domestic processing centers

Core Observations

1. Steady Growth in Freight Volume, Infrastructure Under Pressure: The latest USDA National Freight Strategic Plan predicts an average annual growth of 1.5% in agricultural freight over the next 20 years, driven primarily by population, income, and productivity growth. However, drastic changes in the global freight landscape (e.g., COVID-19, supply chain disruptions) have raised higher demands on the resilience of the intermodal transport system.

2. Domestic Processing Expansion Reshapes Traditional Logistics Flows: Since 2023, at least nine new or expanded soybean crushing plants have come online, with domestic crushing capacity expected to increase from 2.4 billion bushels to 2.9 billion bushels by 2027. This shifts soybean flows from direct farm-to-export terminals toward more truck and rail transport to inland processing clusters (Midwest and Plains regions), followed by outward shipments of soybean meal, oil, and byproducts.

3. Waterway System Remains Export Lifeline but Faces Investment Risks: About 60% of U.S. grain exports move via barges on the Mississippi River system to Gulf ports, and 60% of wheat exports go through the Columbia-Snake River system to the Pacific Northwest. However, without investment to address issues like aging locks and water level fluctuations, cost advantages will erode, leading to reduced export competitiveness.

Why Is Infrastructure Investment a Bottleneck?

The competitiveness of U.S. agriculture in global markets relies heavily on low-cost transportation. As noted in the USDA report: "The cost-effectiveness of inland waterway transport keeps U.S. agricultural products competitive in global markets, despite our higher labor and production costs relative to major competitors." A price increase of just a few percentage points can significantly reduce export capacity. And reduced exports lower user fee revenue, weakening the ability to reinvest, creating a vicious cycle.

Currently, barges account for 44% of U.S. grain exports, rail 45%, and trucks 11%. The Mississippi River system, Illinois Waterway, and Columbia-Snake River system are the core corridors. The Port of New Orleans handles approximately 60% of soybean and 78% of corn exports, and its throughput efficiency directly impacts global supply.

How Is Domestic Crush Capacity Expansion Reshaping the Supply Chain?

The traditional model saw farmers shipping soybeans directly to export terminals. But new crushing plants, concentrated in the Midwest and Plains states (e.g., Iowa, Minnesota, Nebraska), have changed this landscape. These facilities require substantial inbound truck transport of soybeans, then outbound shipments of soybean meal, oil, and byproducts to domestic feed mills, food manufacturers, and export terminals.

This shift has two effects: first, it increases short-haul truck and rail demand in the Midwest; second, it may boost exports of domestic processed byproducts (e.g., soybean meal), thereby altering the composition of port throughput. By 2027, crush capacity expansion is expected to keep more soybeans for domestic processing, with exports shifting toward higher-value-added products.

Beneficiaries and Those Under PressureBenefiting industries and enterprises: - Agricultural machinery and equipment manufacturers: Companies like John Deere and Caterpillar benefit from increased demand for farm and processing plant equipment. - Railway companies: BNSF, Union Pacific, etc., will see higher freight volumes from processing clusters to ports. - Barge operators: Inland waterway transport services will continue and potentially expand. - Port operators: Ports like New Orleans and Portland need to invest in expansion to accommodate new cargo structures. - Soybean processing equipment suppliers: Companies such as Bühler and Bühler will benefit from new plant construction.

• Stressed industries and areas:
• Small inland terminals reliant on traditional export channels: May face business contraction due to reduced direct soybean outbound shipments.
• Shipping companies facing lock congestion: If infrastructure investment is insufficient, delay costs will rise.
• Farmers in regions lacking multimodal connections: Transportation costs may increase.

How is policy driving change?

The Infrastructure Investment and Jobs Act (IIJA) has already provided funding for inland waterways and ports, but the growth in agricultural freight demand requires sustained investment. The USDA's National Freight Strategic Plan emphasizes data-driven approaches and port flexibility. As inbound and outbound flows become more balanced, ports need to manage container positioning, chassis supply, and cold chain access.

Outlook for the next five years

1. The expansion of U.S. soybean crush capacity will accelerate the formation of domestic processing clusters, reshaping the Midwest logistics landscape and potentially making the U.S. a net exporter of soybean meal and soybean oil. 2. Modernization upgrades of the Mississippi River system and the Columbia-Snake River system will become critical investment priorities; otherwise, export competitiveness will erode. 3. Seamless integration of rail and truck transport with the inland waterway network will become a source of competitive advantage, with rising returns on multimodal hub investments. 4. Growth in oil and manufacturing freight will compete with agriculture for infrastructure capacity, requiring unified planning to prevent bottlenecks. 5. Digitalization of agricultural supply chains (e.g., real-time tracking, predictive maintenance) will improve efficiency. Ports must adapt to higher-frequency, smaller-lot export patterns.