Third Quarter Wheat Transportation Costs Up; Landed Costs Down

This article has been reprinted from USDA's Nov. 7 Grain Transportation Report.

Transportation costs for shipping wheat from Kansas and North Dakota to Japan through the Pacific Northwest (PNW) and U.S. Gulf increased during the third quarter 2019.

Transportation costs for shipping wheat from each of these States increased from the second quarter, primarily because of higher rail and ocean rates (tables 1 and 2).

Wheat farm values for each State continued to fall during the third quarter, forcing total landed costs down from second quarter 2019 (quarter to quarter) and from third quarter 2018 (year to year).

Quarter to quarter, the transportation costs for shipping wheat via PNW to Japan increased 3 percent originating from Kansas and 2 percent originating from North Dakota, primarily because of higher ocean rates (table 1).

Year to year, these same costs increased 1 percent starting from Kansas and 3 percent from North Dakota, partly because of higher ocean rates. Quarter to quarter, the transportation costs for shipping wheat via the U.S. Gulf to Japan increased 6 percent starting from Kansas and 5 percent starting from North Dakota (table 2).

Year to year, these same costs increased 4 percent for both origins, Kansas and North Dakota, mainly because of higher ocean freight rates.

Overall, third-quarter wheat transportation costs represented 37 to 42 percent of the landed costs (farm value plus transportation costs), which was above the previous quarter and last year.

The total landed costs for shipping wheat to Japan ranged from $248 to $282 per metric ton (mt) and were below the previous quarter and last year for each route (tables 1 and 2).

Quarter to quarter, Kansas and North Dakota total landed costs decreased for each route because of lower trucking rates and farm values.

Year to year, total landed costs for these same routes were down as well because of lower rail rates and farm values.

Quarter to quarter, total landed costs for shipping wheat via PNW to Japan decreased 6 percent starting from Kansas and 4 percent from North Dakota.

Year to year, landed costs for the same routes decreased 13 percent starting from Kansas and 9 percent from North Dakota.

Quarter to quarter, landed costs to ship wheat via the U.S. Gulf to Japan decreased 5 percent starting from Kansas and 3 percent from North Dakota.

Year to year, landed costs for the same routes decreased 12 percent starting from Kansas and 7 percent from North Dakota mainly because of to lower trucking rates and farm values (see table 2).

Third-quarter farm values for Kansas wheat represented 60 percent of the landed cost for shipping via PNW, and 59 percent for shipping via the Gulf—down both quarter to quarter and year to year for each route (see tables and figure).

Third-quarter farm values for North Dakota wheat represented 63 percent of the landed cost for shipping via PNW and 58 percent for shipping via the Gulf— likewise, down both quarter to quarter and year to year for each route (tables and figure).

Quarter to quarter, ocean freight rates for shipping wheat from PNW to Japan increased 18 percent and, from the U.S. Gulf to Japan, increased 17 percent.

Year to year ocean freight rates in PNW and the U.S. Gulf increased 12 percent and 11 percent, respectively.

Rates increased mainly because of strong bulk trade and high exports of iron ore from Brazil (October 31, 2019 Grain Transportation Report).

Quarter to quarter, rail rates for shipping wheat from Kansas to PNW increased 1 percent, but rates from North Dakota to PNW decreased 1 percent.

Year to year, rail rates from Kansas to PNW decreased 1 percent, but increased more than 1 percent from North Dakota to PNW.

Quarter to quarter, rail rates for shipping wheat both from Kansas and from North Dakota to the U.S. Gulf increased 1 percent.

Year to year, rail rates for shipping wheat to the Gulf from Kansas increased 2 percent and increased over 1 percent from North Dakota (table 2).

The cost of moving wheat from each State by truck to a rail-served grain elevator decreased 16 percent from quarter to quarter and decreased 13 percent from year to year, partly because of lower third-quarter diesel prices.

According to the Federal Grain Inspection Service, total inspections of wheat destined for export to Japan reached .578 million metric tons (mmt) during the third quarter, down 25 percent from last year.

Wheat inspections destined to Japan represented 9 percent of total third-quarter wheat inspections.

During the third quarter, total inspections of U.S. wheat reached 6.5 mmt, up 20 percent from last year.

For the 2019/20 marketing year, year-to-date cumulative (shipped) export sales of all wheat are up 26 percent from the past year (GTR Table 12).