4 Minute Read by (Reuters) – SINGAPORE (Reuters) – Growing concerns about food inflation, which is already at decade highs, are being exacerbated by rising shipping costs, which are impacting cost-sensitive customers in import-dependent nations. FILE PHOTO: Corn is stacked in the back of a car in a field outside Jiayuguan, Gansu province, China, on September 28, 2020. Carlos Garcia Rawlins/File Photo/REUTERS According to grain and shipping sources, the cost of bulk carriers that transport grains and oilseeds from production hubs in the Americas and the Black Sea to key consumers has roughly doubled from last year due to rising fuel costs, tighter vessel supply, and longer port turnaround times amid COVID-19 curbs. “When we see large increases in grain prices, freight cost has become a real concern,” said Phin Ziebell, agriculture economist at National Australia Bank in Melbourne. “Grain and freight prices have been low for years, which has benefited buyers. I don’t think the high freight costs will go away very soon.” Crop shipping costs are rising on major routes due to higher fuel prices and longer turnaround times. According to shipping sources, the cost of transporting grains from Australia to Southeast Asia has increased to $30 per tonne from $15 last year, while from the Pacific Northwest of the United States to Asia has increased to $55 from $25. Wheat ships from the Black Sea to Asia now cost roughly $65 per tonne, up from $35 last year. “The cost of bunker fuel and bulk ships is driving up the cost of transporting grains,” said one trader at a major Singapore brokerage. “We also have COVID-19 quarantine rules, which are impeding freight transit.” The jump in crop freight costs comes as several key economies reopen following coronavirus lockdowns, posing a new challenge to food importers and authorities aiming to keep inflation levels under check. After strong increases in key crop prices, the global food price index has reached 10-year highs. As harvests mature, the price of key crops like maize and soybeans is expected to stay elevated and unpredictable for the remainder of the northern hemisphere growing season. The FAO Food Price Indexes, particularly for edible oils and cereals, have reached multi-year highs. Corn futures in Chicago are up about 90% from a year ago, owing to high global demand and stressed crops in the United States, while soybean prices are up more than 50% after drought cut output in Brazil’s largest grower. Following last season’s growth challenges, wheat is up roughly 30% from a year earlier. BUYERS GET A DOUBLE WHAMMY Higher crop and freight prices are straining purchasers in Asia, the world’s biggest crop-consuming area and home to China, which buys more than half of the world’s soybeans. Japan is one of the largest corn purchasers in the world. As a result of COVID restrictions, key food and produce shipping rates have risen. The cost of a 50,000-tonne cargo of food-grade wheat from the Black Sea has risen by $4 million from a year ago to about $15 million for a typical wheat buyer in Indonesia, the world’s second-largest wheat importer, with freight alone rising by $1.5 million. Another issue is crop price instability. As weather expectations affected market mood, benchmark corn futures jumped more than 10% in the last week of June before plummeting 10% the following week. Buyers are confused how to acquire a trading position due to crop price volatility. “With these high pricing, we’ve witnessed a decline in consumption,” said a procurement manager of a flour milling company with operations across Southeast Asia. “In a market like this, taking a position is tricky. Millers are cutting back on their purchases.” Naveen Thukral contributed reporting, and Himani Sarkar edited the piece./n
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