Reasonable Ocean Freight Rates May Help Seaway Fill Grain Market Demand
Thursday, August 19, 2010 at 03:24PM 
As our regular readers will know, especially in the past several weeks, Great Lakes-Seaway News has been supplying our global readership with regular updates on the ups and recent downs of the dry bulk freight market and the downs and recent ups of the currently turbulent global grain market (particularly as it relates to wheat prices).
One question that is likely to be on the minds of many of our readers is, "How are recent developments in these two important markets related to each other, if at all?"
In fact, while the cause of the dramatic drop in dry bulk freight rates in recent months is unrelated to the dramatic increase in wheat prices in recent weeks, the two market conditions may create a confluence of unrelated events that may spell very good news for the Great Lakes-St. Lawrence Seaway maritime industry this fall.
Dry bulk freight rates have taken a long tumble in recent months (especially since May) as slowing iron ore demand in China principally and elsewhere and a still strong supply of recent new ship deliveries have kept dry bulk freight demand well behind the growing supply curve.
The global wheat market has taken an unusual turn in recent weeks as significant players on the supply side of the wheat market have seen their crops damaged by wildfires in Russia and wet weather in Canada and assorted problems in many of the usual wheat exporting other than the U.S. and Australia. In those two countries the wheat crops are expected to be at or near records so the demand for wheat is likely to be met, but the pull on ocean transportation demand is likely to be significant.
The 2010 wheat export ban announced by the Russian Federation earlier this month is likely to create a roughly 3 million metric ton hole where Russian wheat exports would usually be between now and the end of the year. Further, the EU which was planning on buying about a third of that total will have to find other suppliers to make up the difference. Most analysts expect that U.S. wheat will make up about 500,000 tons of that difference. It will also be interesting to see how much of the wheat import market in the Middle East and eastern and southern Africa will need to be serviced by U.S. wheat exporters. Currently Nigeria is the world's biggest wheat importer, but where will that nation be getting its wheat from in the months ahead?
Earlier today in the Grain Trasportation Report published by the U.S. Department of Agriculture (USDA) some revealing grain transportation data was revealed in their survey of freight rates for selected grain shipments. USDA reported a shipment of 25,000 deadweight tons (dwt) of wheat shipped from the U.S. Gulf export region booked for load out to South Africa in the August 20-30 time period went at the rate of $59.50/ton. It also reported two wheat shipments out of the St. Lawrence export range bound for Morocco. The 21,000 dwt shipment booked for loading in the April 27-May 5 timeframe fetched $38.75/ton while a 25,000 dwt shipment loaded during the week of July 26-31 only cost $26.50/ton to ship to Morocco.
It just might be that exporting grain through the Great Lakes-St. Lawrence Seaway System in the coming months may be a transportation bargain that world grain transportation markets can't pass up. The St. Lawrence Seaway may yet again be part of the answer for the questions of a hungry world.