World Grain - February 2024 - 6

FROM THE EDITOR
Grain shipping
obstacles abound
I
n the modern era of global trade, has
there been a period when transporting
agricultural products from Point A to
Point B was more challenging? With
supply chains still struggling to return
to pre-COVID levels of efficiency, the
grain industry also is grappling with
troubling developments on some of the
world's most important shipping routes.
Some of the logistical problems are
weather-related, such as the droughtinduced,
abnormally low water levels
on the Panama Canal that are limiting
grain shipments through that critical passageway.
Companies shipping grain on
the Mississippi River, the United States'
most critical waterway for transporting
agricultural products, encountered similar
problems in recent months.
Although the weather, which obviously
is beyond human control, always has
played a major factor in the grain industry's
ability to produce and transport its
products, some of today's most troubling
transportation issues are man-made.
The recent hostilities in Eastern Europe
and the Middle East are hindering
sea trade. Leading grain producer and
exporter Ukraine, at war with Russia the
past two years, continues to have difficulty
shipping grain from its Black Sea
ports, with export volumes remaining
well below pre-invasion levels.
More recently, commercial ships on
the Red Sea have been attacked by Yemen-based
Houthi rebels who claim their
actions are in response to Israel's counterattacks
in Gaza after Hamas attacked
Israel on Oct. 7. As a result, several of the
world's largest shipping firms - including
Maersk, Hapag-Lloyd, and the Mediterranean
Shipping Co. - have suspended
shipping through the the Suez Canal,
a passageway that connects the Red Sea
and the Mediterranean Sea. Some carriers
are diverting their shipments to Europe
and the United States via the Cape
6
of Good Hope, adding weeks to the journey
and increasing costs, according to a
report from Michael King, who covers
the shipping industry for World Grain.
For a low-margin business like the
grain industry, this perfect storm of obstacles
makes achieving financial goals
an even greater challenge.
Political and regulatory issues also are
causing problems for grain exporters. For
example, the US government recently unveiled
a $1 billion plan that would study
the potential breaching of the Columbia
and Snake River dam system in the Pacific
Northwest to address salmon declines. If
this plan is enacted, it would effectively
shut down the world's third largest export
corridor for grains and oilseeds.
Grain traders forced to find more expensive,
alternative export routes will
have no choice but to pass on the added
cost to their customers. The IGC Grains
and Oilseeds Freight Index was up 19%
year-on-year in December. The Argentina,
Australia, Europe, United States, Black
Sea and Brazil sub-indices also reported
large increases. These gains mostly came
in the fourth quarter and likely will
continue into 2024. One reason for this
increase includes bulk carrier demand
outstripping supply, but drought and
military conflicts impeding seaborne
grain trade are also part of the equation.
Studies have found that food insecurity
is more of a political
issue than a supply
issue. That is certainly
true in 2024, as conflicts
and misguided
policy are hampering
the fight against hunger,
including the ability to ship grain
in a timely, efficient, and ultimately less
expensive manner.
Arvin Donley
Editor
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World Grain - February 2024

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