FAO/GIEWS - Food Outlook No.1 - February 2002 p. 8

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Freight Costs in the Grains Trade During the 1990s 1/


Freight charges accounted for a significant share of the value of international trade in wheat and coarse grains during the previous decade. Although nominal freight rates of grains tended to decline during the decade, they still accounted for a large share of the import costs in most countries reviewed. For many countries, freight charges can add one-fifth to the cost of their grain import bills. In the competitive grain market that has existed since the mid-1990s, freight costs can also play a pivotal role in the volume and direction of grain trade.

Developing countries paid among the highest per unit freight rates during the 1990s. South Asian importers paid US$25-30 per tonne for both wheat and coarse grains, whereas in the Far East Asia grains freight costs averaged US$20-25 per tonne. Among African countries, Sudan paid the highest freight costs for wheat during the previous decade, an average of US$31 per tonne. North African countries paid, on average, US$19-20 per tonne for the delivery of their grain imports in the 1990s. In Latin America, grain-importing countries were generally favoured in terms of freight costs by geographic proximity to three of the major grain exporters, i.e. Argentina, Canada and the United States. For example, Mexico paid, an average, US$9-10 per tonne for delivery of wheat and coarse grain imports, while South American importers paid US$14-19 per tonne. The major reason for the high costs for some developing countries is due in part to geography (distance from exporting port, overland shipping, transhipments, etc.), but also to the use of smaller vessels stemming from limited port capacity and lack of efficient port storage and handling facilities that result in higher demurrage (layover) costs. Among the developed countries, in Europe, the EC paid $US10-12 per tonne for the delivery of wheat and coarse grain imports from outside the Community, while freight rates in Poland averaged US$15-17 per tonne during the previous decade. South Africa, Japan and the Russian Federation, being more distant markets from most major grain exporters, were charged the highest rates among this group, US$19, US$22-26 and $US25-26 per tonne, respectively.

The importance of international freight charges to the total cost of importing grains can be seen from the average share of the import unit values (IUV) attributed to these costs in the 1990s. Of the 15 developing countries for which data were available, most paid between 10-19 percent of their total grain per unit import costs in freight charges, while a group of 4 countries paid over 20 percent. Among the five low-income, food deficit countries included in the review, relative freight costs where among the highest of all the countries reviewed. In Bangladesh and Sudan, for example, the share of their wheat import unit values attributed to freight charges were 25 percent and 19 percent, respectively. In contrast, the average freight cost of importing wheat into the EC was only 6 percent of the IUV.



1/ The information in this note is based on freight rates for wheat and coarse grains from the five major exporting countries (Argentina, Australia, Canada, the EC and the United States) during a ten-year period from 1990/1991 to 1999/2000, using the July/June trade year. Freight rates, weighted by exporter shipments, were calculated for 21 countries. Individual country freight rates were then used to calculate representative regional freight costs for developing countries in Africa, Asia, and Latin America, and for developed countries, including Europe (the EC and Poland), the Russian Federation, Japan and South Africa.

Source: IGC, World Grain Statistics, annual reports; FAO, Cereal Exports by Source and Destination, FAOSTAT


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