Grainnet

High Commodity, Energy, and Transport Costs Influence Trade With Southeast Asia

This article is reprinted from the USDA's May 8 Grain Transportation Report.

The American Soybean Association and the U.S. Grain Council recently held 2 conferences in Southeast Asia – the 2nd Annual Agricultural Updates in Manila, Philippines, on April 22 and the 2nd Asia Grain Transportation Conference in Kuala Lumpur, Malaysia, on April 24-26.

Attendees of these conferences expressed concern about high commodity prices, rising energy prices, and surging ocean shipping costs and their affect on import decision making.

Both of the conferences featured topics on bulk freight movements, biofuels outlook and sustainability, outlook for global oilseeds and feed grain sectors, U.S. grain transportation fundamentals, and containerized movements of grain.

Highlights of the presentations include:

World Trade

• China has been a major force driving world economic activity and trade during the last 5 years.

• China and India represented 50 percent of world GDP growth in 2007.

• World seaborne trade increased 8 percent in 2007.

Dry Bulk Movements

• Demand for dry bulk grain shipment has increased, and increased shipment of soybeans to China accounted for a large share of the growth.

• Bulk cargo rates increased in the last few years because of sharp increases in global imports of iron ore and coal.

• Recent high returns from bulk shipping have encouraged owners to order many new bulk ships, and to delay the scrapping of older vessels.

• Current order book for bulk carriers represents 55 percent of existing fleet

• Newly built dry bulk vessels are scheduled for delivery between now and 2010.

Ocean shipping rates/Containerized shipments

• High ocean shipping rates combined with high commodity prices have increased the delivered costs of feed ingredients and food commodities to importers in Southeast Asia.

• Containerized shipment of grain and related products has surged since 2004 due to high bulk ocean freight rates.

• Containerized shipments of grain provide special needs such as quality preservation and traceability.

• Major inland container yards are located in Chicago, IL, Kansas City, MO, Columbus, OH, Memphis, TN, Minneapolis, MN, and Cincinnati, OH.

• A weak U.S. dollar against other major currencies has contributed to an imbalance in container availability.

• The global container fleet is also set to grow significantly within the next few years; the order book for new container vessels is 60 percent of the current capacity.

• Ocean freight rates for bulk and containerized shipments are expected to decline as newly built vessels are delivered into the market.

• Given the high ocean rates and commodity prices, the highly developed and efficient U.S. transportation infrastructure system has kept U.S. grain and other commodities competitive overseas.

Southeast Asia importers are also concerned about the quality of the imported products, availability of containers to deliver the products, and the competitiveness of U.S. landed price compared to its competitors.

As more vessels are delivered from shipyards, and as the U.S. economy improves, more containers will be available for transpacific shipment, and ocean rates for both bulk and containerized shipments are expected to decline.

For more information, call Surajudeen (Deen) Olowolayemo, USDA, at 202-690-1328.