Ag Clip

Ahoy There!

from our buds @ the usda.

"During the week ending January 26, 38 ocean-going grain vessels were loaded in the Gulf, down 22 percent from last year. Fifty-three vessels are expected to be loaded within the next 10 days, 36 percent less than the same period last year.

During the week ending January 27, the ocean freight rate for shipping bulk grain from the Gulf to Japan was $49 per mt, down 4percent from the previous week. The cost of shipping from the Pacific Northwest to Japan was $26 per mt—down 4 percent from the previous week.

Although higher than during the global financial meltdown of 2008 and 2009, ocean freight rates for shipping bulk commodities, including grain, have been moderately low during 2011. Ocean freight rates were kept low in part by record deliveries of new vessels to the fleet, fueled by a wave of optimism about the anticipated pace of global economic recovery. In addition, natural disasters such as flooding in the coal-producing regions of Eastern Australia and cyclones in the iron ore exporting regions of Western Australia reduced trade volumes and, consequently, rates.

In 2011, the rates for shipping bulk grain from the U.S. Gulf to Japan averaged $54.45 per metric ton (mt)—14 percent lower than the previous year and 24 percent less than the 4-year average.

 The rates from the Pacific Northwest (PNW) to Japan averaged $31.17 per mt—13 percent less than the previous year and 28 percent less than the 4-year average. The transatlantic rates from the U.S. Gulf to Rotterdam averaged $23.42 per mt, 12 percent less than the previous year and 41 percent less than the 4-year average. The first quarter of 2011 started with falling rates after modest increases in 2009-2010, following the improvement in the global economy after reaching the record lows in the fourth quarter of 2008 at the peak of the global financial crisis (see figure). In addition to the excess supply of vessels, there were flooding and cyclones in some regions of Australia, disrupting coal and iron shipments, which reduced the demand for bulk shipping. Also, during the early part of the first quarter, some states in India had put a ban on iron ore exports. Furthermore, China started the year with huge iron stockpiles. However, the rates started to rise later during the quarter as demand for bulk shipments picked up. The market was also supported by healthy South American grain volumes.

Operations at the coalterminals of Queensland, Australia returned to normal, increasing the

chartering activity in the dry bulk market. During the second and third quarters of 2011, ocean rates fell and remained relatively low because of many factors, including persistent disruptions and political and economic turmoil in some parts of the world that continued to hinder the dry bulk trade. There was continued unrest in the Middle East and economic problems in the Eurozone, posing risks to the dry bulk trade. There were also lingering effects of the natural disasters in Australia and the tsunami in Japan, dampening the bulk trade volumes and

keeping the bulk ocean freight rates low. Flooding in Australia forced miners to suspend production at several coal mines, resulting in lower coal exports. U.S. grain shipments declined as South American corn and soybean harvests competed with the U.S. grain shipping season. In addition to China’s restriction of iron imports, there were holidays in parts of Asia.

The ocean freight market rallied during the middle of the third quarter. However, rates were still lower than the previous year and the 4-year averages. Iron ore shipments from Western Australia to China, and India’s demand for iron ore boosted the demand for bulk carriers. Russia removed its ban on grain exports, which also increased dry bulk volumes.

At the beginning of the fourth quarter, the rate increase continued. However, the rate could not be

sustained because ship owners, optimistic about the freight market recovery, responded by placing orders for new vessels and delaying scrapping of the old ones. As vessel capacity increased, rates started to decline again during November and December, culminating in moderate average fourth quarter rates.

The cost of shipping bulk grain from the U.S. Gulf to Japan during the fourth quarter averaged $57.13 per metric ton (mt) (see figure)—8 percent more than the previous quarter and 2 percent higher than last year. The rates from the PNW to Japan averaged $31.96 per mt—5 percent higher than the previous year and 2 percent higher than last year.

A new record was set by the delivery of 1,094 (94.65 million deadweight) new bulk vessels in 2011, according to a report published by Hellenic Shipping News Worldwide on December 29. The previous record, set in 2010, was only 174 vessels delivered. The 388 bulkers that were scrapped in 2011, compared to 262 in 2010, were not enough to offset the growth in the bulk vessel fleet, which still grew 12 percent from a year earlier.

Now and A Look Beyond: As of January 27, the ocean freight rate for shipping bulk grain from the Gulf to Japan was $49 per mt, 4 percent less than the previous week. The cost of shipping from the PNW to Japan was $26 per mt—4 percent less than the previous week. As indicated by the Baltic Drybulk Index which has been falling recently, ocean freight rates may continue at these low levels. The Chinese Lunar Year Holidays also contribute to the depressed rates. Most industry analysts are projecting a bleak future for the freight market, at least in the near term, because bulk vessel supply continues to outpace demand due to slower than expected global economic recovery. Low or moderate ocean freight rates may bode well for U.S. grain shippers by moderating the landed costs of ocean-going U.S. grain exports."

Surajudeen.olowolayemo@ams.usda.gov