World Grain - January 2011 - 57

FEATURE

Shipping costs
likely to fall further
B

ack in 2008, the high cost of freight and a spike in commodity prices made exports on some traditional grain
routes prohibitive. By contrast, despite rising commodity prices in late 2010, the landed cost of soybeans and corn
(maize) from the U.S. in Japan and China was far lower than
two years earlier. With the dollar less than bullish and ocean
shipping costs looking more likely to fall further in 2011 than
recover, the market looks bright for those with crops available
for overseas shipment.
Overall grain demand is set to soar in 2011, but the supply situation will look very different to previous years. Total
seaborne exports of major grains are forecast to rise to 247.1
million tonnes in 2010 and increase again in 2011 to 265.5
million tonnes, according to Drewry's third quarter Dry Bulk
Forecaster. This compares to volumes of just 209.2 million
tonnes in 2009.
NEW TRADE FLOWS
The impact of severe weather patterns in various producer
countries looks set to vastly alter grain trade flows in 2011,
according to leading analysts. Soaring temperatures in Russia
and the Ukraine over the northern hemisphere summer and a
sustained drought are expected to see significantly less grains
make it to market from the Former Soviet Union (FSU) countries, for example.
"The wheat trade among the Former Soviet Union countries
is forecast to be down 21.3 million tonnes, or nearly 60%,
from last year's trade levels to 14.5 million in 2010-11," said
Ken Eriksen, senior vice-president for Transportation Services at Informa Economics.
58

by Michael King

Exporters look set to remain
competitive for at least the first
half of 2011
Other exporters - primarily the U.S., given that producers in Canada and Australia have suffered droughts or floods
recently - are expected to step in.
"Picking up the smaller trade level among the major trading
countries from the FSU will be the U.S., sending 9.4 million
tonnes more than last year, Australia 2.4 million and Argentina 2.1 million. Other countries will drawn down stocks or
substitute with other grains," said Eriksen.
"The shift in trade patterns will be most noticeable among
the North African countries that traditionally source wheat
supplies from Russia and the Ukraine, and will instead seek
supplies from the U.S., Argentina and Australia."
David Bull, senior market analyst at Lloyd's List Intelligence, said the impact of the ban could have unforeseen impacts on trade. "While Russia has banned grain exports, it
hasn't banned the export of wheat or rye flour. Could we see
exports of flour from Russia increase?" he asked.
And Bull was quick to point out that flooding in Pakistan
earlier in the year could impact rice exports significantly.
"The International Grains Council has suggested that rice
exports from Pakistan could be down by as much as 35%
January 2011 / World Grain / www.World-Grain.com

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World Grain - January 2011

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