Ocean, Barge Rates Affected By Ukraine Invasion

Russia’s invasion of Ukraine and the resulting disruption to oil and grain markets have raised ocean shipping rates and rates for barged grains. Over the past two weeks, ocean vessel traffic (including for agricultural and energy commodities) has been largely halted through the Black Sea.

In its March 17 grain barge report, the U.S. Department of Agriculture noted that ocean freight rates for shipping bulk grains have risen for five consecutive weeks. As of March 10, the rate for shipping a metric ton (mt) of grain from the U.S. Gulf to Japan was $79—12 percent more than the beginning of the year, 37 percent more than the same period last year and 70 percent above the four-year average. Rates are already higher than at the peak of harvest season last year.

The rate from the Pacific Northwest to Japan was $44.25 per mt—14 percent more than the beginning of the year, 36 percent more than the same period last year and 72 percent above the 4-year average.

At $29.50 per mt, the U.S-to-Europe rate was up 12 percent from the beginning of the year, up 39 percent from the same period last year and up 75 percent from the four-year average. According to the March 10 issue of the Transportation and Export Report by O’Neil Commodity Consulting, the rate hike is driven by rising crude oil prices caused by the war in Ukraine, affecting trade throughout the Black Sea region. According to the Energy Information Administration’s Short-Term Energy Outlook, Brent crude oil spot prices averaged $97 per barrel (b) in February—an $11/b increase from January—and are expected to average $117/b in March.

Spot Rates Rise
Although U.S. barged grain volumes have not yet significantly risen, there may be signs global consumers are turning to U.S. grain (and other products) to substitute for imports from the Black Sea region that have become inaccessible. 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. Over the past three weeks, the spot rate for St. Louis rose from 470 percent of the benchmark tariff ($18.8 per ton) to 871 percent ($34.75 per ton)—220 percent higher than last year and 204 percent higher than the three-year average.

Similarly, the upper Ohio River freight rate jumped from 505 percent of the benchmark tariff ($23.6 per ton) to 1,060 percent ($49.7 per ton)—262 percent higher than last year and 225 percent higher than the three-year average.

For more information, visit usda.gov.