US corn and soybean shipments to Asia are being switched to West Coast export terminals from loading stations at the Gulf of Mexico as soaring freight rates play havoc with grain transportation, traders said on Wednesday.
The US Gulf is the predominant export point for bulk corn and soybean shipments from the United States, while the Pacific Northwest handles some 35 percent to 40 percent of wheat exports.
The shorter journey of about 18 days from the Pacific Northwest to Asian destinations, compared with 35 days from the US Gulf, has made the West Coast a hot export point, especially with ocean freight climbing to record levels.
"There is no capacity left at the PNW for February and for March. Well, you might be able to squeeze something in for late March if you pay up," an exporter said, adding that some corn shipments from the Gulf have now been switched to the PNW.
Traders said freight from the PNW to Asia was about $25 to $30 per tonne less than from the US Gulf, where a trip to Japan costs about $75 a tonne, up from just $28 a year ago.
Fuelling the sharp rise in ocean freight the past six months has been China's strong demand for iron ore and coal.
The freight price differential between the West Coast and the US Gulf was wide enough to compensate for the higher prices for corn and soybeans at the Pacific Northwest, which gets the bulk of its supplies from the Midwest.
One trader said PNW corn for last-half March shipment was quoted at 79 cents a bushel over the CBOT March, compared with just 36 cents over at the US Gulf.
But with the PNW freight rate about $20 to $25 per tonne cheaper to Japan than from the Gulf, corn shipments would still be $3 to $8 per tonne cheaper from the West Coast. Shipments usually range between 55,000 and 60,000 tonnes each.
"A lot of the business is going to the Pacific Northwest due to the ocean freight spread," another trader said, referring to demand from Asia, home to major importers of US corn like Japan and Taiwan.
He said exporters were also switching some of their shipments to the Pacific Northwest from the Gulf.
"Sellers usually have the option to ship it from the Gulf or PNW," he said.
"The spread is over $20 to $30 (a tonne) depending on the destination. You can't buy anything for February shipment from the PNW," an exporter said.
He said there were three export terminals in the Pacific Northwest handling feedgrain shipments, with one other station limiting itself to exports of wheat.
Another trader said the freight market was volatile.
"If you go out and try to fix four or five cargoes in the PNW, the offers are going to rise $10. I was told that freight to Japan traded as high as $80 a tonne," he added.
There were some concerns that the demand for US corn and soybeans could be hit by a deadly bird flu virus sweeping across 10 countries in Asia, striking down millions of chickens in the path and spreading to China.
"China is a big importer of beans. If they kill all their chickens, what's going to happen to soybean demand," a trader said. China is the world's top soybean importer.