According to the U.S. Department of Agriculture's October 30 Grain Transportation Report (.pdf), ocean shipping rates for bulk grain have sunk to their lowest level in 5 years.
Driving the decline is the fear of a global economic downturn - as fears and uncertainties expressed themselves in the world markets, causing reduced demand for bulk shipments. Although not mentioned in the article, perhaps lower fuel surcharges are also reducing costs.
As of October 24, the cost of shipping grain from the Mississippi Gulf to Japan was $31 per metric ton, the lowest since June 2003. The rate from the Pacific Northwest to Japan was $17, the lowest since November 2002.
The report's author said he expects that rates will remain low as long as the economic slump persists.
These lower costs - and current lower commodity prices - make it less expensive for countries to buy U.S. grain. A weak dollar helps, too. USDA expects corn exports to reach 1.95 billion bushels this marketing year - down from last year's 2.44 billion. It will be interesting to see if lower freight rates/commodity costs alter this picture.
Playing into foreign demand is global grain and oilseed production - figures that have rebounded this year after weather problems in some areas a year ago. Plus global growers had an improved financial incentive this year.
The result: Global wheat production for 2008-09 is projected to be a record 680.2 million tons, global rice production a record 433.2 million tons, global oilseed production 420.4 (up 7.4 percent) and global course grain production 1.1 billion tons (up 11 percent). These are all big numbers and for all but course grains, global ending stocks are expected to rise.
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