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Moving Grain: Bulk Ocean Freight Rates Highest Since 2014

Ernst Undesser
From USDA April 20, 2017

Moving Grain: Bulk Ocean Freight Rates Highest Since 2014

Bulk Ocean Freight Rates Highest Since 2014

Ocean freight rates for shipping bulk grains reached the highest level since December 2014. As of April 13, the rate for shipping a metric ton (mt) of grain from the U.S. Gulf to Japan was $40.25–64 percent above last year. The rate from the Pacific Northwest (PNW) to Japan was $22.25 per mt–51 percent above last year.

Since the beginning of the year, the Gulf-to-Japan rate has increased 15 percent from $35 per mt and the PNW-to-Japan rate increased by 25 percent from $17.75 per mt. The rates increases were driven by strong grain movements and increased demand for other bulk items such as coal, iron ore, and steel.

However, according to the April 13 Transportation and Export Report by O’Neil Commodity Consulting, Inc., the Baltic Dry-bulk Freight Forward Agreement market remains inverted, indicating that traders are not as optimistic about rates remaining at these levels into the third and fourth quarters of 2017.

Total Grain Inspections Down but Corn and Wheat Increase

For the week ending April 13, total inspections of grain (corn, wheat, and soybeans) for export from major U.S. export regions reached 2.5 million metric tons (mmt), down 13 percent from the previous week, but up 33 percent from the same time last year, and 21 percent above the 3-year average.

Despite the decrease in total grain inspections, wheat and corn inspections increased 2 and 10 percent, respectively, from the previous week. Soybean inspections, however, dropped 52 percent from the past week due primarily to lower shipments to Asia.

Grain inspections in the Pacific Northwest decreased 15 percent from the previous week, and Mississippi Gulf inspections decreased 16 percent for the same period. Outstanding export sales continued to fall for corn, wheat, and soybeans.

Container Carriers Negotiating New Contracts

April is traditionally the busy negotiation season for new contracts between ocean container carriers and beneficial cargo owners (BCOs). Cargo owners have approached this season cautiously because of the new carrier alliance structure implemented April 1 as well as the carrier merger and bankruptcy events of 2016.

According to the Journal of Commerce (JOC), rates have followed normal patterns so far this year despite these uncertainties. Rates jumped briefly just before April 1 as BCOs increased cargo volumes to avoid possible delays from the new structure. Going forward, the JOC reports both carriers and BCOs are allowing for increased rates in the new contracts understanding rate levels of 2016 are unsustainable.

Snapshots by Sector

Export Sales

For the week ending April 6, unshipped balances of wheat, corn, and soybeans totaled 29.2 mmt, up 52 percent from the same time last year. Net weekly wheat export sales were .422 mmt, down 25 percent from the previous week. Net corn export sales were .738 mmt, down 35 percent from the previous week, and net soybean export sales were .402 mmt, down 3 percent from the past week.

Rail

U.S. Class I railroads originated 23,778 grain carloads for the week ending April 8, up 3 percent from the previous week, up 26 percent from last year, and up 14 percent from the 3-year average.

Average April shuttle secondary railcar bids/offers per car were $225 below tariff for the week ending April 13, up $94 from last week and unchanged from last year. Average non-shuttle secondary railcar bids/offers per car were $63 below tariff, up $63 from last week and unchanged from last year.

Barge

For the week ending April 15, barge grain movements totaled 695,362 tons, 2 percent lower than the last week, and up 2 percent from the same period last year.

For the week ending April 15, 443 grain barges moved down river, down 5 percent from last week, 649 grain barges were unloaded in New Orleans, down 1 percent from the previous week.

Ocean

For the week ending April 13, 51 ocean-going grain vessels were loaded in the Gulf, 55 percent more than the same period last year. Fifty-six vessels are expected to be loaded within the next 10 days, unchanged from the same period last year.

For the week ending April 13, the ocean freight rate for shipping bulk grain from the Gulf to Japan was $40.25 per metric ton, 3 percent more than the previous week. The cost of shipping from the PNW to Japan was $22.25 per metric ton, 6 percent above the previous week.

Fuel

During the week ending April 17, average diesel fuel prices increased 2 cents from previous week at $2.60 per gallon, 43 cents higher than the same week last year.

Full report.

Ernst Undesser
From USDA April 20, 2017