December 19, 2007

High freight rates limiting Canadian wheat sales to Mexico

Rising ocean freight rates and a lack of rail cars have made it uneconomical for the Canadian Wheat Board to make sales to Mexico, according to a CWB spokesperson.

While the CWB sold just over 1 million tonnes of wheat to Mexico during the 2006-07 (Aug-Jly) crop year, that level will likely only be half that large for the current year, said CWB media relations manager Maureen Fitzhenry.

According to the latest Canadian Grain Commission data, Canadian wheat exports to Mexico during the first three months of the current crop year came in at 168,600 tonnes, down from 369,300 tonnes at the same time the previous year.

Ocean freight rates to ship wheat from Canada to Mexico have increased dramatically in the past few months, rising from US$17 per tonne in September to current levels near US$60 per tonne, said Fitzhenry. With US wheat moving easily by rail into Mexico it has become prohibitive for Canadian sales, she said noting that "the relative return just isn't worth it for us."

Mexico is a close market for Canadian wheat, and the CWB is sending as much as it can by rail, said Fitzhenry. However, she added that there are only a limited amount of rail cars available to move Canadian wheat down through the US and into Mexico.

"If we can put the grain in a different market where we can get a higher return for it, we will. And that's what we've been doing," said Fitzhenry.