Second Quarter Wheat Transportation Costs Below Previous Quarter; Up From 2017

This article has been reprinted from the Aug. 16 USDA Grain Transportation Report.

Transportation costs during the second quarter of 2018, increased from last year for shipping U.S. wheat from Kansas and North Dakota to Japan through the Pacific Northwest (PNW) and U.S. Gulf.

Quarter-to-quarter transportation costs, however, were down slightly to the Pacific Northwest (PNW) and to the U.S. Gulf.

Quarter-to-quarter landed costs (farm value plus transportation costs) for shipping wheat to Japan, increased from Kansas and dropped slightly from North Dakota.

Year-to-year total landed costs for shipping wheat were up for Kansas and North Dakota (see Tables 1 and 2).

Quarter-to-quarter transportation costs for shipping wheat through the PNW decreased over 1 percent from Kansas and 2 percent from North Dakota.

Quarter-to-quarter transportation costs for shipping wheat from Kansas and North Dakota through the U.S. Gulf, decreased 2 percent.

Year-to-year transportation costs for shipping wheat from Kansas and North Dakota through the PNW were up 8 and 5 percent, respectively, and up 7 and 5 percent to the U.S. Gulf.

Quarter-to-quarter total landed costs for shipping wheat from Kansas through the PNW and the U.S. Gulf increased primarily due to higher farm values, but landed costs from North Dakota through each region decreased slightly.

Year-to-year landed costs for shipping wheat from Kansas through the PNW and U.S. Gulf, increased due to higher ocean rates and farm values.

Total landed costs to ship from North Dakota, through each region, increased as well.

PNW Cost Analysis: During the second quarter, the total landed cost to ship wheat from each State—through the PNW—ranged from $272 per metric ton (mt) to $298 (see table 1).

Quarter-toquarter landed costs for shipping wheat to Japan from the PNW increased 7 percent from Kansas, but decreased 2 percent from North Dakota (see table 1).

Year-to-year landed costs to ship wheat from the PNW, increased 21 percent from Kansas and 10 percent from North Dakota.

This increase is due mainly to higher transportation costs and farm values. Rail’s share of total landed costs to the PNW—from Kansas and North Dakota—decreased from last year.

Second quarter farm values were 64 percent of the landed cost for shipping from Kansas and 69 percent from North Dakota; both above the same time last year (see Figure 1 & Table 1).

Quarter-to-quarter ocean rates for shipping grain from the PNW to Japan increased about 1 percent.

Year-to-year PNW ocean rates increased 22 percent, due to high demand for coal during the second quarter (July 26, 2018 Grain Transportation Report (GTR)).

Quarter-to-quarter rail rates for shipping wheat from Kansas to the PNW increased 1 percent.

However, North Dakota rail rates to the PNW remained unchanged.

Year-to-year rail rates to ship wheat to the PNW increased over 4 percent from Kansas, but remained unchanged from North Dakota.

Trucking rates decreased 13 percent quarterto–quarter, as demand for U.S. wheat remained low.

Year-to-year trucking rates were down 2 percent. Transportation costs in the PNW in the second quarter represented 31 to 36 percent of the total landed costs.

U.S. Gulf Cost Analysis: Quarter-to-quarter total landed costs to ship wheat through the U.S. Gulf from Kansas increased 7 percent, but decreased 2 percent from North Dakota.

Year-to-year landed costs for shipping wheat to Japan increased 21 percent from Kansas and 9 percent from North Dakota (see table 2).

The total landed cost to ship from each State through the U.S. Gulf ranged from $273/mt to $320/mt.

Second quarter farm values were 64 percent of the U.S. Gulf’s landed cost from Kansas and North Dakota, also above the same time last year (see Figure 2 & Table 2).

Bulk ocean rates for shipping wheat to Japan from the U.S. Gulf decreased 1 percent from quarter to quarter, but increased 15 percent year to year, as demand for coal increased and demand for grain reached a record high (July 26, 2018 GTR).

Quarter-to-quarter rail rates for shipping wheat to the U.S. Gulf increased 1 percent from Kansas, but rail rates remained unchanged from North Dakota.

Year-to-year rail rates for shipping wheat from Kansas to the U.S. Gulf, increased 2 percent, but rail rates remained unchanged from North Dakota.

Second quarter transportation costs from both Kansas and North Dakota to the U.S. Gulf represented 36 percent of the total landed costs and was below the previous quarter and last year (see table 2).

PNW vs. U.S. Gulf Cost Comparison: Quarter-to-quarter rail rates increased slightly to ship wheat from Kansas, but remained mostly unchanged to North Dakota.

Year-to-year rail rates for shipping wheat from Kansas increased.

Rail rates for North Dakota were unchanged (see tables 1 and 2).

Quarter-to-quarter ocean rates increased slightly to ship wheat from the PNW, while rates decreased slightly from the U.S. Gulf.

Year-to-year ocean rates, however, were up notably for the PNW and U.S. Gulf, due in part to increased demand for coal (July 26, 2018 GTR).

Quarter-to-quarter transportation costs for shipping wheat to Japan, were down from each State.

Total landed costs for shipping wheat increased for Kansas, but decreased for North Dakota (see tables 1, 2).

According to USDA’s Grain Inspection, Packers and Stockyards Administration, second quarter wheat inspected for export to Japan totaled .701 million metric tons (mmt), down 18 percent from last year and up 2 percent from the first quarter of 2018.

Second-quarter wheat exports to Japan accounted for 13 percent of total second quarter wheat exports, which reached 5.4 mmt and is down 39 percent from last year (July 12, 2018 GTR).

Japan continued as the second leading importer of U.S. wheat.

During the second quarter, U.S. wheat exports were down due to a significant drop in production last year and increasing export competition.

According to the USDA’s World Agricultural Supply and Demand Estimates report in July, U.S. wheat exports for the 2018/19 marketing year are expected to increase 8 percent from the previous year