Freight costs divide predictions

SEA FREIGHT costs have risen sharply over the past month, but grain trade opinion is split over the likely effect on ex-farm grain prices.

James Maw, wheat trader at Glencore, said freight rates between the East of England and Spain had rocketed 55% over the last month to about £17-19/t

“It is widening the spread between buyers and sellers. Either the sale price goes up or the purchase rate goes down, or both,” said Mr Maw.

But Grainfarmers said that despite logistical problems, the strong euro had made British exports more competitive, with November‘s feed wheat price was up slightly at £61/t.

The UK is on target to ship 1.6m tonnes by Christmas, about 45% of the exportable surplus, it added, although wheat export manager David Doyle warned the order books for Jan-June were lighter than usual.

Julian Bell, a senior economist with the Home-Grown Cereals Authority, said ex-farm prices would not necessarily suffer from freight rates.

“World trade is still expected to be fairly good this year, with the IGC estimating 100m tonnes of trade,” he said.

“The biggest impact will be on the end-user, because wherever they source their grain from, they’ll still have to pay for transportation.”

Rates for large vessels over 25,000t have risen more slowly than small ships, by about 20% to $28/t (£15/t).

Oil price inflation is blamed for the increases, as well as poor weather and a shortage of vessels.