Glacier FarmMedia COVID-19 & the Farm

Ocean freight rates at decade highs

port of vancouver grain
Loading grain on a vessel at a Burrard Inlet terminal. (Maxvis/iStock/Getty Images)

MarketsFarm — Ocean freight rates have climbed steadily higher over the past year, recovering from the lows hit at the start of the pandemic in early 2020 to see their highest levels in over a decade.

The Baltic Dry Index (BDI), a major indicator of shipping rates, hit a high of 3,266 points on Wednesday. That marked its strongest level since June 2010, and compares with the multi-year lows just under 400 points hit at the same point a year ago.

Strong worldwide shipments of coarse grains contributed to the recent strength in the BDI, according to a report from shipping association BIMCO (the Baltic and International Maritime Council).

“The dry bulk market continues its strong performance this year, supported in part by strong demand from grains trade, with the U.S. providing plenty of support,” Peter Sand, chief analyst for BIMCO, said in the report.

While U.S. soybean exports have moved off of their highs to more seasonal levels, he noted increased coarse grain exports were contributing to steady demand for grain-carrying ships.

“In March alone, U.S. coarse grain exports required 123 panamax ships, almost two thirds of which sailed to the Far East, one of the world’s longest trades. At the peak of the U.S. soya bean export seasons in October, 147 ships were needed,” he said.

The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes sub-sectors for the different classes of ocean vessels – including capesize, panamax and supramax.

Canada is at a freight disadvantage compared to its competitors into some markets, and higher freight rates can heighten that disadvantage.

However, Canadian grain exports continue to move at a solid pace, with total bulk exports of the major grains and oilseeds through week 38 of the 2020-21 crop year of 39.9 million tonnes running 30 per cent ahead of the previous year’s pace, according to Canadian Grain Commission data.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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