By Karl Plume
(Reuters) – Bulk grain shippers hauling crops from the U.S. Gulf Coast export hub to Asia are crusing longer routes and paying larger freight prices to keep away from vessel congestion and record-high transit charges within the drought-hit Panama Canal, merchants and analysts mentioned.
The transport snarl by one of many world’s essential maritime commerce routes comes on the peak season for U.S. crop exports, and the upper prices are threatening to dent demand for U.S. corn and soy suppliers which have already ceded market share to Brazil in recent times.
Ships shifting crops have confronted wait instances of as much as three weeks to cross by the canal as container vessels and others that sail on extra common schedules are scooping up the few transit slots accessible.
The restrictions may proceed to impede grain shipments nicely into 2024 when the area’s moist season might start to recharge reservoirs and normalize transport in April or Could, analysts mentioned.
“It is inflicting fairly a disruption each in expense and delay,” mentioned Jay O’Neil, proprietor of HJ O’Neil Commodity Consulting, including that the disruption is not like any he is seen in his 50 years of monitoring world transport.
The Panama Canal Authority restricted vessel transits this autumn as a extreme drought restricted provides of water wanted to function its lock system. The Authority didn’t reply to request for touch upon grain cargo delays.
Solely 22 each day transits are presently allowed, down from round 35 in regular situations. By February, transits will shrink additional to 18 a day.
Grain ships are sometimes in the back of the road as they normally search transit slots only some days earlier than arriving, whereas others like cruise and container ships e-book months prematurely.
The Authority additionally presents the uncommon accessible slots to its prime clients first, none of that are bulk grain haulers, O’Neil mentioned.
Any scheduled slots that come accessible are auctioned off, however demand is exceptionally excessive. Some slots have gone for $1 million or extra, untenable prices for the historically thin-margin grain buying and selling enterprise.
“The grain trades and the majority provider phase are going to be the final clients to undergo the Panama Canal. I’d not depend on the Panama Canal any time quickly,” mentioned Mark Thompson, senior dealer at Olam Agri.
Wait instances for bulk grain vessels ballooned from round 5 to seven days in October to round 20 days by late November, O’Neil mentioned, prompting extra grain carriers to reroute.
Choices embody crusing south round South America or Africa, or transiting the Suez Canal. However these longer routes can add as much as two weeks to transport instances, elevating prices for gasoline, crews and freight leases.
The benchmark , thought of a benchmark for bulk grain freight, spiked to a 1-1/2 yr peak on Dec. 4, greater than doubling from a month earlier.
Whereas grain costs have fallen from 2020 peaks, larger freight prices might be handed on to grain and oilseed importers who purchase for human meals and livestock feed.
“Industrial corporations have been discovering methods to navigate round the issue. However undoubtedly it prices the end-user extra money,” mentioned Dan Basse, president of Chicago-based consultancy AgResource Co.
Within the second half of October, solely 5 U.S. Gulf grain vessels certain for east Asia transited the Panama Canal, whereas 33 sailed east to make use of the Suez Canal as a substitute, based on a U.S. Division of Agriculture (USDA) report. In the identical interval final yr, 34 vessels used the Panama Canal whereas solely seven used the Suez.
Some U.S. exporters have additionally been rerouting crop shipments to Asia to load from Pacific Northwest ports as a substitute.
However that, too, comes at the next price as these amenities supply grain largely by way of rail versus the cheaper barge-delivered hundreds supplying Gulf Coast exporters.
Solely 56.8% of all U.S. corn exports in October had been shipped from Gulf Coast ports this yr, down from 64.9% in October 2022 and 72.1% in October 2021, based on USDA weekly export inspections knowledge.