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Ocean freight rates for shipping grain from the US Gulf and Pacific Northwest dropped in the third quarter compared to the previous quarter and the previous year, according to a report by the United States Department of Agriculture (USDA)) reported by World Grain.

Compared to the previous four-year average, rates for routes from the Gulf and Pacific Northwest to Japan decreased while rates for routes from the US Gulf to Europe increased, the USDA’s 26 October Grain Transportation Report said.

“Both quarter-to-quarter and year-to-year, ocean freight rates were volatile because of extreme weather, the closure of the Ukraine Black Sea grain corridor and the market’s pessimism about China’s economic recovery,” the USDA said.

On average, ocean freight rates for shipping bulk grain from the Gulf to Japan averaged US$50.76/tonne in the third quarter, a drop of 2% from the previous quarter and a 22% drop from the previous year. It was also down 15% from the four-year average.

From the Pacific Northwest to Japan, rates averaged US$27.43/tonne for the third quarter, a drop of 3% from the previous quarter and a decrease of 28% from the previous year. Rates were down 18% compared to the four-year average.

Rates from the Gulf to Europe were US$25.87/tonne in the third quarter, down 8% from the previous quarter and down 19% compared to the previous year.

However, rates were up 4% compared to the four-year average.

Current rates, while below the yearly peaks reached in the week ended 21 September, were strong compared to most of the third quarter.

Although not certain to continue, the rates had fallen over the two weeks prior to the report, the USDA said.

“The country’s imports of competitively priced Brazilian corn – as well as large quantities of Ukrainian corn that started to ship in October — are boosting demand for Panamax vessels,” the USDA said.

From 1 January 2024, a carbon tax would be charged for all port calls within the European Economic Area (the European Union (EU), Iceland, Liechtenstein, and Norway), World Grain wrote.

Research had shown a carbon tax could raise shipping costs by either raising freight rates or increasing transit times, the USDA said.

In addition, the start of the North American harvest season could boost demand for vessels and push up rates.

“The market is still hesitant about the global economy’s slow recovery amid high inflation,” the USDA added. “The dry bulk market still has an ample supply of vessels. These factors could soften rates.”