WASHINGTON, DC, US — Rising crude oil prices and the ongoing war in Ukraine is significantly driving up ocean freight rates and US barge freight rates, according to the March 17 Grain Transportation Report from the US Department of Agriculture (USDA).
Ocean freight rates for shipping bulk grains have risen for five consecutive weeks. As of March 10, the rate for shipping a tonne of grain from the US Gulf to Japan was $79, a 12% increase from the start of 2022, 37% more than a year ago, and 70% higher than the four-year average.
The rate from the Pacific Northwest to Japan was $44.25 per tonne, a 14% increase from the start of the year, 36% more than last year and 72% more than the four-year average.
US to Europe rate was $29.50, up 12% from the start of 2022, 39% more than a year ago and 75% higher than the four-year average.
The rate hike is driven by rising crude oil prices caused by the war in Ukraine, according to the Transportation and Export Report by O’Neil Commodity Consulting.
Brent crude oil spot prices averaged $97 per barrel in February, an increase of $11 from January, and are expected to average $117 per barrel in March, according to the Energy Information Administration’s Short-Term Energy Outlook.
Although US barged grain volumes have not significantly risen since Russia’s invasion of Ukraine, there are signs global consumers are turning to US grain and other products to substitute for imports from the Black Sea, USDA said.
U.S. barge freight rates have skyrocketed as both immediate (spot) demand and April freight demand have surged.
Likewise, an already limited supply of empty barges has grown even tighter. Also, sharply rising fuel prices will likely pressure barge operators to transfer some costs to customers by raising rates, USDA said.
The spot rate for St. Louis increased from 470% of the benchmark tariff ($18.8 per ton) to 871% ($34.75 per ton) over the last three weeks.
Similarly, the Upper Ohio River freight rate jumped from 505% of the benchmark tariff ($23.6 per ton) to 1,060% ($49.7 per ton).