This article has been reprinted from the March 7 USDA Grain Transportation Report.
During the fourth quarter of 2018, the costs for shipping wheat to Japan increased from quarter to quarter and from year to year.
The wheat shipped to Japan originated from Kansas and North Dakota and was shipped through the Pacific Northwest (PNW) and the U.S. Gulf.
Quarter-to-quarter wheat transportation costs for Kansas increased in each region.
The increase was mainly due to higher ocean freight rates, while year-to-year shipping costs increased due to both higher rail and ocean freight rates (Tables 1 and 2).
Likewise, due to higher rail and ocean freight costs, transportation costs for wheat from North Dakota increased from quarter to quarter and from year to year.
Ocean rates increased because coal trade increased and the shipment of minor bulk products (steel, iron ore, wood chips, etc.) improved (Grain Transportation Report (GTR), February 14, 2019).
Trucking rates for transporting wheat were up significantly from quarter to quarter, due in part to increasing demand for wheat during the quarter.
Fourth quarter inspections of wheat for export increased 25 percent from last year and 7 percent from the third quarter 2018 (GTR), February 7, 2019).
Fourth quarter transportation costs for shipping wheat through the PNW to Japan totaled $96 per metric ton (mt) from Kansas and $101 per mt from North Dakota.
Respectively, this is an increase of 3 and 4 percent from the third quarter.
The increase is due primarily to increased ocean rates (Table 1).
The transportation costs for shipping wheat from year to year through the PNW increased 3 percent for Kansas and 1 percent for North Dakota, due mainly to higher rail and ocean rates.
The cost of shipping from Kansas and North Dakota to Japan through the Gulf increased 5 percent from quarter to quarter (Table 2).
Year-to-year Gulf transportation costs for shipping wheat were up 4 percent from Kansas and 3 percent from North Dakota.
The increases are also due to higher rail and ocean freight rates. Fourth quarter wheat transportation costs represented 34 to 39 percent of the landed cost.
The total landed cost (TLC) for shipping wheat to Japan ranged from $277 to $309 per mt (see figure).
Quarter-to-quarter TLCs for shipping wheat from Kansas and North Dakota to Japan were down slightly for each route.
Year-to-year landed costs increased 22 percent for Kansas, due mainly to higher ocean rates and farm values.
Landed costs for shipping wheat from North Dakota dropped 7 percent in the PNW and 6 percent in the Gulf from year to year.
Fourth quarter ocean rates for shipping wheat from the PNW to Japan increased 7 percent from the third quarter and 9 percent from the fourth quarter 2017 (Table 1).
Ocean rates for wheat shipped from the Gulf to Japan increased 7 percent quarter to quarter and 11 percent from year to year.
During the fourth quarter 2018, rail rates for shipping wheat from Kansas to the PNW decreased 1 percent from quarter to quarter, while North Dakota rail rates increased 1 percent.
Year-to-year, rail rates to the PNW increased 5 percent from Kansas and 2 percent from North Dakota.
Quarter-to-quarter rail rates to the Gulf for wheat moving from Kansas remained unchanged, while North Dakota rail rates increased 1 percent.
From year-to-year, Gulf rail rates increased 3 percent from Kansas and 2 percent from North Dakota.
Fourth quarter trucking rates for moving wheat from each State to a rail-served grain elevator increased 15 percent from the third quarter, due to higher demand for wheat.
However, year-to-year trucking rates decreased 16 percent from the same time last year, due partly to lower diesel prices.
Wheat Market Outlook
Fourth quarter exports of wheat destined to Japan reached .649 million metric tons (mmt), according to the USDA’s Federal Grain Inspection Service (FGIS).
Fourth quarter wheat exports to Japan were 20 percent above 2017, accounting for 11 percent of total U.S. fourth quarter wheat exports.
For calendar year 2018, exports of U.S. wheat to Japan totaled 2.8 mmt.
This is a 27 percent increase from the previous year, accounting for 13 percent of total U.S. wheat exports in 2018. In calendar year 2018, total U.S. wheat exports reached 21.8 mmt.
This is an 18 percent decrease from 2017.
According to FGIS, the decrease was due to lower shipments to Asia, Latin America, and Africa.
According to USDA’s February World Agricultural Supply and Demand Estimates, wheat exports for the 2018/19 marketing year are projected to increase 11 percent from last year. Year-to-date cumulative export sales (shipped) of all wheat in 2018/19 are down 10 percent from the previous year (GTR Table 12).