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1Q Wheat Transportation and Landed Costs Down

Date Posted: May 15, 2014

This article is reprinted from the USDA's May 15 Grain Transportation Report.

First quarter 2014 transportation costs for shipping wheat from Kansas and North Dakota to Japan were down slightly from the previous quarter because of lower ocean rates.

Year-to-year transportation costs for shipping wheat through the PNW and Gulf increased for each State, pushed up by rising truck and ocean rates.

First quarter total landed costs for shipping wheat through the Pacific Northwest (PNW) and Gulf decreased from the previous quarter as ocean rates and farm values dropped, and decreased from the first quarter last year because of lower farm values.

Quarter-to-quarter transportation costs for shipping wheat through the PNW to Japan decreased 1 percent from Kansas and North Dakota. Lower quarter-to-quarter ocean rates offset the increase in truck rates, causing PNW transportation costs to drop.

Year-to-year costs for shipping wheat to Japan through the PNW were up over 8 percent from each State because of higher truck and ocean rates.

The quarter-toquarter transportation costs to ship wheat from Kansas and North Dakota through the Gulf decreased slightly because of lower ocean rates.

Higher truck and ocean rates also helped push year-to-year transportation costs for shipping through the Gulf up 12 percent from Kansas and 8 percent from North Dakota.

First quarter 2014 total landed costs (farm value plus transportation costs) to ship wheat from each State were lower for each route than last year.

Lower ocean rates and slightly lower farm values contributed to the drop in total landed costs during the first quarter.

The landed costs for wheat ranged from $331 to $367 per metric ton (mt).

First quarter total landed costs averaged $339 per mt in the PNW and $361 per mt in the Gulf.

First quarter transportation costs represented 28 to 30 percent of the total landed costs through the PNW, the same as the previous quarter for each State.

In the PNW, transportation’s share of the total landed costs was higher than last year for each State.

Transportation’s share of the total landed costs were 30 to 37 percent for shipping wheat through the Gulf, up from the previous quarter and last year for each State.

Farm values for Kansas wheat were down 4 percent from quarter to quarter, but down 11 percent from last year.

Farm values for North Dakota wheat decreased 1 percent quarter to quarter, and fell 21 percent year to year.

First quarter wheat farm values dropped as wheat supplies remained high for most classes. Kansas and North Dakota farm values have been mostly down since the first quarter of 2013.

However, wheat farm values are expected to increase this marketing year due to lower U.S. wheat supplies, according to USDA’s initial assessment of U.S. and world crop supply and demand prospects in the May World Agricultural Supply and Demand Estimates report.

Continued drought and April freeze events have sharply reduced yield prospects for hard red winter wheat in addition to lower planted area and decreased yield potential in the soft red winter wheat region.

The cost of moving wheat by truck to a railhead increased 11 percent quarter to quarter as trucking activity increased. Rising demand for grain increased truck rates 26 percent from last year.

Quarter-to-quarter ocean freight rates for shipping wheat to Japan decreased over 7 percent in the PNW and 3 percent in the Gulf during the first quarter.

Ocean rates continued to drop because of slower vessel activity and weaker Chinese demand for soybeans (see GTR dated 5/01/14).

However, ocean rates for shipping wheat to Japan increased 14 percent through the PNW and 16 percent through the Gulf from last year as weather conditions improved around the world and the entry of new vessels slowed.

Quarter-to-quarter rail tariff rates for shipping wheat to the PNW remained steady from Kansas and North Dakota.

Compared to last year, however, wheat rail rates from Kansas and North Dakota to the PNW increased just over 2 percent, raised by higher fuel surcharges.

Quarter-to-quarter rail rates for shipping wheat from Kansas and North Dakota to the Gulf remained about the same.

Year-to-year rail rates to the Gulf increased 4 percent from Kansas and decreased 1 percent from North Dakota.

According to the Grain Inspection, Packers, and Stockyards Administration, first quarter 2014 inspections of wheat for export to Japan totaled .650 million metric tons (mmt), down 36 percent from last year and 90 percent lower than the fourth quarter of 2013.

First quarter wheat exports to Japan dropped drastically in part because of lower demand for shipments of hard red winter and soft white wheat compared to last year.

Total first-quarter wheat exports to Japan accounted for about 12 percent of total U.S. wheat exports, which reached 5.6 mmt.

Total first quarter wheat exports decreased 23 percent from last year and 11 percent from the fourth quarter of 2013.

According to USDA, the May 2014/15 forecast for U.S. wheat exports is down 20 percent from the 2013/14 estimate, as large supplies in other major exporting countries and tight domestic supplies of HRW wheat limit U.S. shipments.

Johnny.Hill@ams.usda.gov

For more information, call Surajudeen (Deen) Olowolayemo, USDA, at 202-694-3050.

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