September 19, 2008


Asia Grain Outlook on Friday: Freight rates fall to lower import costs


Asian grain buyers may get additional cost savings apart from falling global grain prices, as ocean freight costs have also started to fall.


According to analyst Jay O'Neil of O'Neil Consulting, ocean freight costs between the U.S. and Asia fell sharply in the week ended Sept. 11.


"The spot and 30-day U.S. Gulf to Asian panamax market is approximately US$90 to US$91 a metric tonne - down US$14 from the previous week," O'Neil said in a recent report quoted by Wheat Letter, issued weekly by U.S. Wheat Associates.


Panamax rates from the Pacific Northwest to Asia are US$50-US$51/tonne, down about US$3 from the previous week. Pacific Northwest to Japan rates peaked at about US$150/tonne in March this year.


Panamax-sized vessels, which can carry a dry bulk cargo of 55,000 tonnes, are the most frequently used carriers for hauling wheat, corn and soybeans from the U.S. to Asian countries.


O'Neil said freight values are falling for a number of reasons. One is the general economic slowdown now spreading around the world as fallout from the U.S. credit crisis.


In addition, iron ore shipments from Brazil to China are down in part because supply agreements are being renegotiated. The world bulk carrier fleet is also growing, as demand for these carriers is rising.


In other news, Standard Chartered said in a recent report that wheat prices will remain under pressure on bumper crop expectations globally.


It said prices for new crop wheat will consolidate around the 'fair value' of US$8.25 a bushel.


However, it added that the threat of frost for the U.S. corn crop in the next several weeks is likely to keep prices well-supported.


In deals this week, Japan's Ministry of Agriculture canceled its weekly wheat tender Thursday, without providing any reasons.


"We are still considering the next tender date," said an official at the ministry.


In Japan, meanwhile, Agriculture Minister Seiichi Ota resigned Friday amid a food scare over pesticide-laden rice that found its way into the food chain after being used in alcohol and snacks.


The rice was part of imports by the Japanese government from China, Vietnam and other countries under its international commitment to open its rice market.

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