Grain-shipping costs that have tumbled 54 percent this year will help boost demand and prices for U.S. corn, soybeans and wheat, according to commodity broker Futures International LLC.
The Baltic Dry index, a gauge of costs to transport grain and minerals by sea, reached a 26-year low in February and remains 72 percent below the five-year average. The slump was fueled by expanded capacity in the dry-bulk fleet, which has increased by 44 percent since Jan. 1, 2010, according to IHS Inc., an Englewood, Colorado, data provider.
“Falling freight costs will be a significant help for boosting U.S. grain exports and maintain strong soybean shipments,” said Terry Reilly, the senior commodity analyst for Chicago-based Futures International. “Grain prices will rise into the February-to-May period as world demand shifts to the U.S.”
Bolstering demand prospects are the reduced supplies of corn and wheat available for export in Russia, Ukraine, Argentina and Brazil, Reilly said. Global production of the two grains will drop 4.7 percent in the year before the 2013 North American harvests, exceeding the expected 0.4 percent drop in consumption, the U.S. Department of Agriculture said Dec. 11.
Russia, the world’s third-biggest wheat exporter after the U.S. and Australia last season, cut grain exports by 20 percent this year and is expected to import 2 million to 3 million metric tons in the first half of 2013, the Agriculture Ministry said Dec. 11.
Ukraine shipped 12.2 million metric tons of grain from this year’s harvest, including 5.6 million tons of wheat and 4.7 million tons of corn, Acting Agriculture Minister Mykola Prysyazhnyuk said Dec. 6. Prysyazhnyuk will meet this month with exporters to discuss contracts as supplies decline.
Argentina’s wheat harvest will drop 30 percent to 9.89 million tons, the Buenos Aires Cereals Exchange said Dec. 13. Oscar Solis, an undersecretary at the agriculture ministry, said yesterday that some wheat-export contracts will be renegotiated because excessive rain in some areas hurt yields and reduced the quality of the grain. About 42 percent of the crop was harvested as of this week, the exchange said.
Wheat prices may rise as much as 24 percent to $10 a bushel on the Chicago Board of Trade by May, from $8.085 yesterday, Futures International’s Reilly said.
Corn prices in Chicago have fallen 15 percent since reaching a record $8.49 a bushel on Aug. 10.
“Corn should retest the record high,” Reilly said. “Cheaper freight rates, tight global supplies and the sharp decline in corn prices could prompt major importers to turn to the U.S. for additional coverage.”