Logistics cost encompasses all expenses associated with moving, storing, and handling commodities from production sites to end users. These costs include transportation, storage, insurance, handling, documentation, and administrative expenses. Logistics costs significantly affect commodity pricing and can create geographic price differentials between supply and demand centers.

Understanding logistics costs is crucial for commodity trading, as these expenses often determine the viability of arbitrage opportunities and influence regional price relationships. Logistics costs vary based on distance, transportation mode, infrastructure quality, and seasonal factors. Efficient logistics management can provide competitive advantages in commodity markets.

Real-world example: Shipping soybeans from Brazil to China costs $65 per ton including ocean freight, port handling, and insurance, creating a logistics cost barrier that affects South American soybean competitiveness versus U.S. exports in Asian markets.