GRAIN SHIPPING OBSTACLES ABOUND
The grain industry is grappling with troubling developments on some of the world’s most important shipping routes. Some of the logistical problems are weather-related, such as the drought-induced, abnormally low water levels on the Panama Canal that are limiting grain shipments through that critical passageway. Companies shipping grain on the Mississippi River, the United States’ most critical waterway for transporting agricultural products, encountered similar problems in recent months.
Although the weather, which obviously is beyond human control, always has played a major factor in the grain industry’s ability to produce and transport its products, some of today’s most troubling transportation issues are man-made. The recent hostilities in Eastern Europe and the Middle East are hindering sea trade. Leading grain producer and exporter Ukraine, at war with Russia the past two years, continues to have difficulty shipping grain from its Black Sea ports, with export volumes remaining well below pre-invasion levels. More recently, commercial ships on the Red Sea have been attacked by Yemen-based Houthi rebels. As a result, several of the world’s largest shipping firms — including Maersk, Hapag-Lloyd, and the Mediterranean Shipping Co. — have suspended shipping through the Suez Canal, a passageway that connects the Red Sea and the Mediterranean Sea.
Political and regulatory issues also are causing problems for grain exporters. For example, the US government recently unveiled a $1 billion plan that would study the potential breaching of the Columbia and Snake River dam system in the Pacific Northwest to address salmon declines. If this plan is enacted, it would effectively shut down the world’s third largest export corridor for grains and oilseeds. Grain traders forced to find more expensive, alternative export routes will have no choice but to pass on the added cost to their customers. The IGC Grains and Oilseeds Freight Index was up 19% year-on-year in December. The Argentina, Australia, Europe, United States, Black Sea and Brazil sub-indices also reported large increases.
(Link: WorldGrain)
