| Grain
Grain & oilseed margins at risk due to higher freight
costs
Higher global freight rates are expected to have an increasing influence on grains & oilseed trade
dynamics and trade flows in 2018 as the cost of dry-bulk sea freight increases. Rabobank anticipates the
margins of grain & oilseed importers and exporters are at risk.
n its latest report “A Bigger
World to Sail: Impact of Rising
Freight Rates on Global Grains
& Oilseed Trade,” Rabobank
anticipates that increasing time
charter rates as well as high
bunker fuel costs will lead to higher freight
costs in the coming years. As a result,
Rabobank expects a shift in the movement of
commodities worldwide with higher freight rates
eroding the competitiveness of exports which
come from farther afield.
Global dry bulk time charter rates and
bunker fuel costs are expected to continue to
stay strong in 2018 and 2019
The Baltic Dry Index – an indicator of global
commodity freight costs – has increased almost
60% since January 2017 as additional supply of
new bulk freight capacity has slowed. With
demand growth for dry bulk capacity forecast
to surpass supply growth of dry bulk capacity
in the next two years, dry bulk time charter
rates are forecasted to increase between 10%
and 20% YOY in 2018 and 2019.
At the same time, crude oil prices have
increased to their highest level in two years in
2017, appreciating to over USD 60/bbl (Brent
Oil), making bunker fuel for vessels more
I
expensive and adding to the rise in freight
rates.
With more than 85 percent of global G&O
trade (more specifically corn, wheat, soybeans,
and soymeal) transported by dry bulk carriers,
the higher freight costs will have increasing
influence on G&O trade dynamics and trade
flows in 2018-2019.
G&O exports from Australia to Asia to
benefit, while more distant G&O exporters will
face pressure
With Asian countries being net importers of
grains and oilseeds and relying heavily on dry
bulk carriers to supply G&O products, G&O
exporting countries closer to Asia, like Australia,
stand to benefit while more distant G&O
exporting regions like South America, US and
Black Sea will see their competitiveness
impacted as freight rates increase. To stay
competitive, G&O exporters at a greater
distance from their destination will need to
reduce their G&O purchasing costs, supply
chain costs and margins to trim their FOB price
in order to remain competitive.
Asia to face higher G&O import costs
With Asian countries importing a total of
242.5 million metric tons in grains and oilseeds
in 2016, Asian countries rely heavily on dry bulk
carriers to supply their G&O products from
South America, US, and Black Sea.
Increased freight rates will drive up the
landed costs of G&O imports such as wheat
and soybean to Asia, resulting in higher ‘cost of
goods sold’.
Faced with higher freight rates, both G&O
exporters and importers should position
themselves to preserve their margins. There are
a number of strategic options for them to do
this, such as choosing an appropriate shipping
strategy, improving supply chain efficiency and
choosing an appropriate origination and
procurement strategy.
Consumers should be ready to face
increasing food prices.
Importers may also opt to pass the rising
freight costs to customers, which will result in
increased food prices. According to FAO’s
latest “Food Outlook – Biannual Report on
Global Food Markets, November 2017” report,
the cost of importing food is set to rise in 2017
to USD 1.213 trillion, a 6 percent increase from
the previous year and the second highest tally
on record. Consumers should be ready to face
increasing food prices.
Wembley continues its consistent , high yielding performance
on the new AHDB Recommended Lists with Mentor still the only
clubroot resistant recommended Variety
The new 2017-18 AHDB winter oilseed rape Recommended Lists show LSPB’s hybrid variety Wembley maintaining its
consistent performance in the East-West region. While specially-recommended Mentor continues on both North and
East-West lists as the only clubroot-resistant variety.
embley has once again
performed extremely well in
Recommended List trials,
proving its continuing high
gross output over the four trial
years between 2014 and 2017
as shown on the latest RL. In addition to this, it
has low gross output variability both in the UK
figures shown and in the detailed East-West
data where its low variability is even more
marked. Many growers now look to consistency
as measure of performance that is as equally
important as outright yield.
The variety also brings good agronomic
W
16 | Farming Monthly | December 2017
characters to growers with stem stiffness and
high resistance to lodging - good autumn
vigour, spring vigour and early flowering time -
plus resistance to light leaf spot and stem
canker.
Mentor is the only winter oilseed rape variety
with a specific recommendation for clubroot on
the North and the East-West regions of the
AHDB Recommended List. It is recommended
for growing on land infected with clubroot and
is resistant to common strains of clubroot,
although not all.
Clubroot is an increasing problem in oilseed
rape crops and one that had been intensified
by too-close rotations. Once land is infected
with clubroot spores, it could be up to 15 years
before it is likely to be clean again. Preventative
action is built round rotations that alternate
oilseed rape with cereals and break crops such
as pulses.
Looking beyond the current year, LSPB’s
upcoming varieties Crome and Walker are now
starting their journey through the official trials
system and showing promise. In the longer
term, there are further improved oilseed rape
varieties progressing now in private trials and
planned for official trials in due course.
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