US shippers of grain, food and other products expect logistics to improve this year, following legislative action that averted a nationwide strike by railway workers and the easing of some COVID-induced restrictions, World Grain wrote.
“Logistics, as we know it, have been spun out of rhythm over the past two years, with supply and demand discrepancies, low reliability, global port congestion, labour shortages, capacity constraints and more all coming together to put pressure on rates,” shipping giant AP Moller-Maersk was quoted as saying in a report.
“While the circle of inflation affecting freight rates, and freight rates affecting inflation, is set to continue in the short term, the outlook is positive for pressure coming down in the not-too-distant future — albeit not to the levels seen before COVID due to inflation’s impact on operational costs.”
Truck, rail, barge and ocean freight rates do not always react to broad economic changes simultaneously, according to the 27 December World Grain report, and while the entire transportation industry was disrupted during the COVID pandemic, generally a range of factors could affect each mode independently, regionally and in other ways.
According to the Council of Supply Chain Management Professionals’ latest Supply Chain Quarterly, freight volumes for sea, air and trucks are expected to decline this year, and freight rates for all three “are on track to drop from their pandemic high points,” while noting a “severe rate of contraction in transportation prices measured in November.”
The US Department of Agriculture (USDA) said in a recent Grains Transportation Report that third-quarter transportation costs in 2022 for shipping soyabeans to China and Europe from both the USA and Brazil declined from the second quarter. During that period, ocean freight rates dropped due to weaker demand for bulk commodities (in part related to COVID lockdowns in China). In the USA, barge freight rates rose as lower water levels restricted movement on the Mississippi River, and rail freight rates also increased. The cost of shipping corn and soyabeans from the USA to Japan also declined from the second quarter.
In the USA, lower grain and soyabean exports would influence freight demand and rates. The USDA forecasts 2022/23 US wheat exports to be 3.1% lower compared to 2021/22 and 22% lower than in 2021; corn exports to be down 16% and 24% respectively; and soyabean exports to be 5% and 10% lower.
“Quarter-to-quarter and year-to-year ocean freight rates decreased mainly because of falling global trade and shrinking demand from Asia for bulk grain products,” the USDA said.
Trade sources had also noted an oversupply of bulk freight capacity, World Grain wrote.
For ocean freight, alongside a drop in bulk commodity volumes, containers are also in oversupply, potentially leading to “an all-out price war” in 2023, according to one industry expert.
