November 2007  
 Food Outlook
  Global Market Analysis

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MARKET SUMMARIES

CEREALS

WHEAT

COARSE GRAINS

RICE

OILSEEDS, OILS AND MEALS

SUGAR

MEAT AND MEAT PRODUCTS

MILK AND MILK PRODUCTS

FISH AND FISHERY PRODUCTS

FERTILIZERS

OCEAN FREIGHT RATES

Special features

Statistical appendix

Market indicators and food import bills

Announcement

OCEAN FREIGHT RATES

* Contributed by the International Grains Council (http://www.igc.org.uk )

Ocean freight market (June 2007 – October 2007)

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After the usual seasonal drop in activity, the dry bulk freight market moved higher in July on strong demand for iron ore, coal and grains as well as worsening port congestion in the Pacific. In addition, the number of newly-built ships entering the market was lower than expected. A temporary dip in August was attributed to a slide in freight futures prompted by global financial problems. However, from September onwards, unprecedented demand for minerals and grains, particularly for larger ships in tight supply, boosted the dry bulk freight market further, with indices breaking previous records. Period chartering continued to dominate over spot business. In the Atlantic, recent additional support came from shipments of new crop grains and soyabeans from North America. The Baltic Dry Index (BDI) set a new record of 10 513 on 11 October, an increase of 57 percent since June. During the same period, the IGC Grain Freight Index (GFI),1/ which does not include Capesize vessels, rose by 37 percent, to 10 347.

In the Panamax sector, a jump in short- and medium-term chartering activity boosted rates in both basins. By October, short period contracts for three to four months were traded at about US$83 500 daily, double the rates registered at the end of May. Longer-term period charters saw similar increases, a two-year contract recently concluded at US$51 000 (US$30 500) daily. Pacific rates were boosted by large volumes of iron ore and coal shipments to China, with port congestion in Australia, China and India continuing to tie up tonnage. Atlantic rates remained at very high levels, with more cargoes being exported from the United States Gulf this year. The grain rate from the United States Gulf to Japan surged by more than half, from US$64.00/tonne to US$101.00/tonne. Atlantic round voyages were being fixed at around US$75 500 daily, compared with about US$50 000 last May.

The Capesize sector saw the steepest advances in rates, attributed to heavy mineral demand, limited new building deliveries and port congestion in Australia, Brazil and China. Between May and early October, the Baltic Exchange’s average of four time charter rates increased by 56 percent, to US$172 187. The benchmark iron ore rate from Brazil to China climbed to about US$82.50/tonne (US$51.00/tonne).

In the Handysize sector, good demand for new crop grains, soyabeans and sugar, as well as a tight supply of tonnage, pushed voyage rates higher, though to a lesser degree compared with other sectors. By October, the grain rate from Brazil to the European Union (Antwerp-Hamburg) increased by 19 percent, to US$82.00/tonne. Round voyages were up by about 50 percent from their May values, at US$59 000 daily in the Atlantic and at US$60 000/day in the Pacific.


1. The GFI distinguishes grain routes from mineral and other dry bulk routes also included in more general dry bulk indices such as the Baltic Dry Index (BDI). It is composed of 15 major grain routes, representing the main grain trade flows, with five rates from the United States, and two each from Argentina, Australia, Canada, the European Union and the Black Sea. Vessel sizes are adequately represented, with ten Panamax rates and five in the Handysize sector. The GFI is calculated weekly, with the average for the four weeks to 18 May 2005 taken as its base of 6 000.

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