Chinese Lunar Year Celebration May Slow Ocean Freight Rates
Increase Ocean freight rates for shipping bulk grains have declined for two consecutive weeks. For the week ending February 8, the rates for shipping grain from the U.S. Gulf to Japan at $43.00 per metric ton (mt) fell 4 percent over the past two weeks, while the rate from the Pacific Northwest (PNW) to Japan at $23.25 per mt fell 7 percent in the same period.
The rates are likely to be stable, or fall even further, amid excess vessel supply and impending Chinese Lunar Year celebrations. The Chinese New Year begins on February 16 and celebrations last about 2 weeks. Typically, shipments and vessel activities are slowed during this period, decreasing or slowing the rate of increase in ocean freight rates.
Wheat and Soybeans Inspections Up but Total Exports Down
For the week ending February 8, total inspections of grain (corn, wheat, and soybeans) for export from all major U.S. export regions, reached 2.72 million metric tons (mmt), down 6 percent from the previous week, and unchanged from last year and the 3-year average. Although wheat and soybeans increased 14 and 1 percent, respectively, from the past week, the increases could not offset the 24 percent drop in week-to-week corn inspections.
Pacific Northwest grain inspections dropped 19 percent from the previous week, as shipments to Asia declined, but Mississippi Gulf inspections remained unchanged for the same period. Outstanding (unshipped) export sales of grain continued to increase from the previous week for corn, but decreased for wheat and soybeans.
U.S. Crude Oil Production and Prices Continue to Rise in 2018
For 2017, The Energy Information Agency (EIA) reported that the U.S. crude oil production averaged 9.3 million barrels per day, and the annual average price for crude oil was around $54 per barrel. For January 2018, EIA reported that oil production went up to 10.2 million barrels per day.
Both crude and diesel prices have experienced some weather-related price support as colder-than normal temperatures affected much of the United States in the first half of the month. On January 26, ultra-low sulfur diesel reached its highest price since February 2015.
During the week ending February 12, average diesel fuel prices decreased 2 cents from the previous week at $3.06 per gallon, 50 cents higher than the same week last year.
Snapshots by Sector
For the week ending February 1, unshipped balances of wheat, corn, and soybeans totaled 33.8 mmt, down 10 percent from the same time last year. Net weekly wheat export sales were .394 mmt, up 36 percent from the previous week. Net corn export sales were 1.77 mmt, down 4 from the previous week. Net soybean export sales were .743 mmt for the same period, up 163 percent from the previous week.
U.S. Class I railroads originated 24,699 grain carloads for the week ending February 3; up 10 percent from the previous week, down 4 percent from last year, and up 3 percent from the 3-year average.
Average February shuttle secondary railcar bids/offers per car were $400 above tariff for the week ending February 8; up $334 from last week, and $1,500 lower than last year. There were no non-shuttle bids/offers this week.
For the week ending February 10, barge grain movements totaled 764,331 tons, 15 percent higher than the previous week, and up 13 percent from the same period last year.
For the week ending February 10, 478 grain barges moved down river, up 17 percent from last week. There were 750 grain barges unloaded in New Orleans, 18 percent lower than the previous week.
For the week ending February 8, 36 ocean-going grain vessels were loaded in the Gulf, 33 percent less than the same period last year. Fifty-nine vessels are expected to be loaded within the next 10 days, 9 percent less than the same period last year.
For the week ending February 8, the ocean freight rate for shipping bulk grain from the Gulf to Japan was $43 per metric ton, 3 percent less than the previous week. The cost of shipping from the PNW to Japan was $23.25 per metric ton, 5 percent less than the previous week.