• Facebook
  • Twitter
  • Vimeo
  • LinkedIn
  • SUBSCRIBE
  • MEMBER LOGIN
U.S. Wheat Associates
  • Our Story
    • About USW
    • Dependable People. Reliable Wheat.
    • Board of Directors
    • Staff Directory
    • Office Locations
  • Market Information
    • Market Information
    • Price Reports
    • Price Charting Tools
    • Supply and Demand
    • Commercial Sales
  • Crop Quality
    • Crop Quality
    • Harvest Reports
    • Hard Red Winter
    • Hard Red Spring
    • Hard White
    • Soft White
    • Soft Red Winter
    • Durum
  • Working With Buyers
    • Working With Buyers
    • Customer Conferences
    • Wheat Classes
    • Wheat Glossary
    • Wheat Grade Factors
    • How to Buy
    • Ask the Expert
    • Resources
  • Who We Represent
    • Who We Represent
    • Board Meetings
    • State Wheat Commissions
    • Partners
    • Trade Activities
  • Policy
    • Policy
    • Trade Negotiations
    • Trade Barriers
    • Innovation and Sustainability
    • Food Security and Assistance
    • Public–Private Partnership
  • News
    • Newsroom
    • Wheat Letter Blog
    • News Releases
    • Videos
  • Search
  • Menu Menu
You are here: Wheat Letter Blog 1
Market and Crop Analysis

A Deep Dive into Ocean Freight Market Factors

Photo taken of Jay O'Neil presenting Ocean Freight Market Update

The recent run-up in ocean market freight rates is causing heartburn for the world’s grain importers. Vessel rates bounced up on Nov. 22, but a shipbroker quoted in a Reuters report expects dry bulk spot rates to stabilize in November and December “before a seasonally soft first quarter of 2022.”

That would be some good news for wheat importers, but rates remain very high. That is one reason why U.S. Wheat Associates (USW) asked Jay O’Neil, HJ O’Neil Commodity Consulting, to record an in-depth analysis of the ocean freight market as part of its 2021 Crop Quality Report. His presentation is posted online at https://cropquality.uswheat.org with all by-class written and video reports and other special topic presentations translated into several languages.

Demand and Inefficiency

In his report, recorded in mid-October, O’Neil discussed the physical make-up of the global ocean freight fleet. He noted that grain carrying vessels make up about 13% of global seaborne cargo, so its rates “follow the lead” of larger coal and iron ore vessel rates in the Capesize category. Those rates have spiked in recent months due to higher demand, primarily from China, pulling grain rates up with then. O’Neil also described how China’s high demand for grain and oilseed imports has lifted freight rates.

The pandemic is adding cost because it is taking longer to load and unload vessels.

“We have about 16% of the world global dry bulk fleet tied up waiting to unload at various ports,” O’Neil said in October. “That creates inefficiency that requires more ships to carry the same amount of cargo.”

Freight Markets Image

The 13-year high in dry bulk freight rates is partially tied to vessel turn-around slowed by the COVID-19 pandemic, said ocean freight consultant Jay O’Neil.

Vessel Capacity Lagging

For many years following a much more significant price spike around 2008, rates remained somewhat stable at relatively low levels. As a result, “we have not been building many vessels for the last 13 years,” O’Neil said. “Now we don’t have enough ships to carry all the new cargo demand, so we have this spike.” The ship-building process takes years, he noted.

Yet there is what O’Neil described as a “huge inverse between the nearby market and the forward market. Those who need to purchase vessels are paying whatever they have to pay in the nearby market but are not much interested in paying those high rates for freight several months in the future.”

O’Neil sees bulk ocean freight demand growing faster than fleet growth into at least 2023. He noted a two-year backlog in container and tanker vessel production that limits capacity to build bulk vessels. Risk management through a hedge on rates in the Freight Forward Agreement markets is an opportunity for buyers, he said.

Volatility Ahead

There are other unseen factors affecting future bulk ocean rates, O’Neil noted, including global economic conditions and management of vessel emission standards. He also offered a look at container market factors.

“One constant is volatility in the freight markets will continue to plague us,” he said. “If you are a cargo buyer, timing (of purchases and risk management) is going to be very important.”

USW reports ocean freight market rates and weekly changes in the Baltic Index each Friday in its Price Report.

November 22, 2021/by Steve Mercer
Share this
  • Share on Facebook
  • Share on Twitter
  • Share on WhatsApp
  • Share on LinkedIn
  • Share by Mail
https://www.uswheat.org/wp-content/uploads/Jay-ONeil-scaled-e1638213916557.jpg 1203 2432 Steve Mercer https://www.uswheat.org/wp-content/uploads/USW-Logo-Full-Color.png Steve Mercer2021-11-22 14:14:472022-03-29 16:11:46A Deep Dive into Ocean Freight Market Factors

Wheatletter Sidebar

Quick Links

  • Newsroom
  • Wheat Letter Blog
  • News Releases
  • Videos

Wheat Letter Related Blogs

Variable yield potential shown in comparison of field from the Kansas wheat crop
Hard Red Winter, Hard White, Market and Crop Analysis

Scenes From A Variable but Smaller Kansas Wheat Crop

The anxiously awaited Hard Winter Wheat Tour sponsored by the Wheat Quality Council that ended…
MORE
May 20, 2022
https://www.uswheat.org/wp-content/uploads/052022-wheat-tour-story-header.png 570 1104 Steve Mercer https://www.uswheat.org/wp-content/uploads/USW-Logo-Full-Color.png Steve Mercer2022-05-20 15:18:062022-05-20 15:29:31Scenes From A Variable but Smaller Kansas Wheat Crop
U.S. wheat loading on a bulk vessel for export to illustrate export market development concept.
Exports, Technical Service Activities, Trade Service Activities, Wheat Export Supply System

New Study: Agricultural Export Market Development Has Wide-Ranging Benefits

A recently released econometric study confirmed that two export market development programs…
MORE
May 19, 2022
https://www.uswheat.org/wp-content/uploads/Export-Elevator-Header-Photo-1.jpg 570 1104 Steve Mercer https://www.uswheat.org/wp-content/uploads/USW-Logo-Full-Color.png Steve Mercer2022-05-19 13:07:262022-05-19 16:12:25New Study: Agricultural Export Market Development Has Wide-Ranging Benefits

Stay up to date on wheat industry news!

SUBSCRIBE

Think Farm Export Programs Don’t Matter? Think Again.

GET THE REST OF THE STORY

Our Story

  • About USW
  • Dependable People. Reliable Wheat.
  • Board of Directors
  • Staff Directory
  • Office Locations

Market Information

  • Market Information
  • Price Reports
  • Price Charting Tools
  • Supply and Demand
  • Commercial Sales

Crop Quality

  • Crop Quality
  • Harvest Reports
  • Hard Red Winter
  • Hard Red Spring
  • Hard White
  • Soft White
  • Soft Red Winter
  • Durum

Working with Buyers

  • Working With Buyers
  • Customer Conferences
  • Wheat Classes
  • Wheat Glossary
  • Wheat Grade Factors
  • How to Buy
  • Ask the Expert
  • Resources

Who We Represent

  • Who We Represent
  • Board Meetings
  • State Wheat Commissions
  • Partners
  • Trade Activities

Policy

  • Policy
  • Trade Negotiations
  • Trade Barriers
  • Innovation and Sustainability
  • Food Security and Assistance
  • Public-Private Partnership

News

  • Newsroom
  • Wheat Letter Blog
  • News Releases
  • Videos

DTN Wheat Detail
DTN Corn Detail

2008-2013 U.S. Wheat Associates. All Rights Reserved
Privacy Policy | Non-Discrimination Statement

Scroll to top