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Canadian Wheat Board Gains From Soft Freight Costs

Areduction in ocean freight rates has made the Canadian Wheat Board more competitive in shipping grain to distant markets such as Southeast Asia, a CWB official said Feb. 16.

Dry bulk freight rates have weakened in recent weeks due in part to slower demand for commodities. The Baltic Exchange’s main sea freight index, which tracks rates to ship dry commodities, has remained subdued due to quiet activity compounded by China’s Lunar New Year holiday this week.

With softer freight rates, Canadian grain can better compete with Australian shipments to Southeast Asian markets such as Indonesia and Malaysia, said David Przednowek, CWB senior manager of ocean freight.

“There’s just generally been less (shipping) activity in the past couple of weeks,” Przednowek said. “That’s meant there’s more tonnage open and that’s meant that the market’s been softer.”

Freight rates for the Pacific Ocean have typically been softer than Atlantic rates, but that spread has narrowed in recent weeks, he said.

An Atlantic voyage from the U. S. to Europe by a handy vessel that cost up to $29,000 per day in mid-January is now down to about $20,000 per day, he said. Pacific rates for a handy vessel have dropped to roughly $13,000 per day from $16,000, he said.

The wheat board has not changed its grain export target of 18.7 million tonnes for the 2009-10 crop year.

Piracy off the coast of Somalia has raised insurance costs to ship grain to eastern Africa or the Far East through the Suez Canal, but shippers from North America, Europe and the Black Sea region all face those costs, Przednowek said.

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