The BDI, a major indicator of bulk shipping rates, settled at 2,058 points on Tuesday, marking the first close above 2,000 points since July 2022.

The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes sub-sectors for the different classes of ocean vessels — including capesize, panamax and supramax. It is often seen as a leading indicator of global economic activity.

While bulk rates have trended higher, container rates have softened in recent months. As of Oct. 12, Drewry’s World Container Index (WCI), which tracks container rates, was at US$1,369 per 40-foot container (about C$1,878). That marks a 60.7 per cent drop from the same week a year ago and comes in at four per cent below the 2019 pre-pandemic average.

Canada is at a freight disadvantage compared to its competitors exporting grains and oilseeds into many markets, with lower freight rates helping counter that disadvantage.

— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.

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Bill C-47, the government’s budget implementation bill — which was first read April 20 in the House of Commons and got third reading in the Senate and royal assent on June 22 — includes amendments to section 127 of the Canada Transportation Act, extending rail interswitching radius within the Prairies to 160 km, up from 30 currently.

Interswitching rules commit one rail carrier to pick up cars from a shipper, then deliver them to another railway for the line haul — that is, if the point of origin or destination of a “continuous movement of traffic” within the Prairie provinces is also within the given radius of an interchange between two companies’ rail lines.

In other words, as the Western Grain Elevator Association — which declared its support for the provision in a release Tuesday — said, it “gives shippers in all sectors who are physically located on a single rail line, the ability to automatically seek competing service and rates from an alternate carrier.”

The 18-month pilot expansion “is expected to bring about an increased level of competition among railway service providers, and represents an incremental gain for supply chains and the Canadian economy more broadly,” the WGEA said.

The budget bill calls for the interswitching pilot to come into effect on the 90th day after the bill received royal assent — that is, Sept. 20.

The previous Conservative government had set up a temporary extension of the interswitching radius to 160 km in 2014, but that extension was sunsetted in 2016.

The Railway Association of Canada, which represents almost 60 railways including Canadian National Railway and CPKC, in March ripped the current Liberal government’s plan as a resurrection of a “failed policy” that was “misguided and harmful to Canada’s supply chains.”

A number of farmer groups disagreed, launching a campaign this spring called “Flip The Switch,” calling for the budget provision to be boosted even further to a five-year pilot and a 500-km interswitching distance.

The Flip The Switch campaign partners, in a separate statement Thursday, said they “look forward to working with the government over the next 18 months to develop a path that leads to the extension of the distance and the permanent integration of this policy into Canada’s transportation framework.”

For its part, the WGEA said Tuesday that when the 18-month pilot is done, it plans to ask the federal government to make the expansion permanent, “regardless of how often physical interchanges occur.”

The association said it would also ask for an increase to the radius, so as “to give all shippers at least one other competitive shipping option.”

The interswitching provision “recognizes that competitive tension is one of the basic tenets of a well-functioning marketplace,” WGEA executive director Wade Sobkowich said.

“Shippers prefer to use the rail carrier that services their facility first and foremost, however, the provision offers an alternative when service or freight rates are less than adequate.” –– Glacier FarmMedia Network

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Turkey, Ukraine, Russia and the United Nations have been holding talks on ways to extend the deal brokered in July allowing the safe export of Ukrainian grain via the Black Sea. The deal is due to expire Thursday.

Of about 20 senior Ukrainian and international traders and analysts polled by Reuters at the GrainCom conference in Geneva, a vast majority said they expected a renewal of the deal, though possibly with some delay.

Nearly all the delegates polled said a much lower harvest expected this year had alleviated the pressure to export through Black Sea ports, and that alternative routes including rail, truck and exports via the Danube river would be able compensate.

Those routes are, however, generally much more expensive than shipping via the Black Sea.

Nikolay Gorbachov, head of the Ukrainian Grain Association, warned that without the corridor export logistic prices would surge and cut farmers’ margins so much that they would stop producing wheat and corn in big volumes.

Ukraine’s corn crop is forecast to total just 21 million tonnes this year, around half the 42.1 million it harvested two years before the conflict began, according to the International Grains Council.

Moscow has threatened to quit the deal over obstacles to its grain and fertilizer exports.

The Kremlin said on Tuesday that questions remained about Russia’s part in the agreement, and that it would have to make a decision on whether to renew it.

Dan Basse, president of Chicago-based consultancy AgResource, said on the sidelines of the gathering that there wouldn’t be a big impact on global supplies this year if the agreement wasn’t renewed.

“With a lower crop this year, it can all go out west through eastern Europe. The problem is that it will cost 15 per cent to 20 per cent more,” he said.

Under the pact to create a safe shipping channel, Ukraine has been able to export some 30.25 million tonnes of agricultural products, of which 50 per cent was corn and 28 per cent wheat. Other commodities shipped include rapeseed, sunflower oil, sunflower meal and barley.

“Do we need the corridor? I would say yes,” Stefan Florescu, global head of wheat trading at CHS, the largest U.S agricultural cooperative, told the conference. “But if we aren’t going to have it, are we going to find a solution to export everything via the EU export corridor? I would say yes as well.”

— Sybille de La Hamaide is a Reuters commodities correspondent in Paris; additional reporting by Nigel Hunt.

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Finance Minister Chrystia Freeland’s budget, released Tuesday, laid out a list of investments to “further strengthen Canada’s transportation systems and supply chain infrastructure.”

A non-financial line item in that envelope calls for the government to introduce amendments to the Canada Transportation Act for a “temporary extension, on a pilot basis” of the interswitching limit in the Prairie provinces, to “strengthen rail competition.”

Interswitching rules commit one rail carrier to pick up cars from a shipper, then deliver them to another railway for the line haul. Federal rules generally allow grain elevators and other shippers to use interswitching for up to a 30-km radius.

Expanding that maximum radius, the feds said Tuesday, “would support competition among rail carriers by enabling rail companies to access tracks owned by another rail provider within the limit, under rates regulated by the Canadian Transportation Agency.”

The previous Conservative government set up a temporary extension of the interswitching radius, to 160 km, in 2014, to the acclaim of several crop commodity groups — but that extension was sunsetted in 2016.

The Railway Association of Canada said Wednesday the 2014 extension was allowed to lapse “based on results from a previous pilot and recommendations contained in an independent study” — a reference to a 2015 review of the Canada Transportation Act.

The RAC, which represents almost 60 railways in Canada including Canadian National and Canadian Pacific railways (CN, CP), ripped the current Liberal government’s proposal as a resurrection of a “failed policy” that was “misguided and harmful to Canada’s supply chains.”

“This policy will cause Canadians to pay more for virtually everything that moves by rail,” RAC CEO Marc Brazeau said Wednesday in a release, warning the policy “will incentivize congestion in our supply chains while disincentivizing private investment.”

“This pilot has been done before,” the RAC said, listing the impacts of “switching cargo multiple times” as slowing the movement of goods by one to two days, adding to greenhouse gas emissions and adding costs.

“The measures announced today will not improve the efficiency, capacity or reliability of Canada’s supply chains. They will do the exact opposite, as we saw under extended regulated interswitching that was in place from 2014 to 2016,” Brazeau said.

However, supporters of the 2014 extension estimated in 2016 that about 150 grain elevators on the Prairies were able to make use of interswitching with the 160-km radius, up from just 14 elevators previously.

One such supporter, Pulse Canada, in 2016 said freight rates were reduced on some routings, and that grain shippers were afforded more leverage in getting rail car capacity where needed, both as a result of the extended interswitching radius.

Gordon Bacon, Pulse Canada’s then-CEO, speaking in favour of extended interswitching in 2016, said that “in cases where railways have lost business due to competition, they are actively campaigning to get it back by offering rate reductions and improved levels of service.”

‘Down payment’

The RAC on Wednesday also panned another non-financial proposal from Tuesday’s budget — namely, for legislation that would ban the use of temporary replacement workers in federally regulated workplaces affected by work stoppages.

The RAC said a ban on replacement workers would mean rail service “will be disrupted more frequently,” strikes “will be more common and will last longer” and federal back-to-work legislation “will be required more often.”

Tuesday’s budget also earmarks $27.2 million over five years starting in 2023-24 for Transport Canada to establish a “Transportation Supply Chain Office.”

That office, the budget said, would “work with industry and other orders of government to respond to disruptions and better co-ordinate action to increase the capacity, efficiency, and reliability of Canada’s transportation supply chain infrastructure.”

The budget noted the measures announced Tuesday “are a down payment on Canada’s National Supply Chain Strategy,” which the government said “will be released in the coming months and will be informed by the recommendations of the National Supply Chain Task Force report.” — Glacier FarmMedia Network

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Truckers agreed late last week to end a strike that had paralyzed grains transport in the South American nation and seen the number of trucks arriving at port hit almost zero, right in the middle of the busy soy and corn harvest.

Agricultural logistics firm AgroEntregas said on Monday morning 4,295 grains trucks had arrived at port terminals. Trucks are the main transport method to bring grains from the farm belt to river and sea ports for export.

“The flow of trucks is back to normal,” Guillermo Wade, head of the Chamber of Port and Maritime Activities, told Reuters.

AgroEntregas said on Twitter that grains transportation was “beginning to stabilize” after the four-day strike last week.

The striking truck owners had been demanding a hike in freight rates to offset rising fuel prices. Some 85 per cent of Argentine grains are transported domestically by truck, mostly to inland ports on the Parana River.

Exporters had warned that the hike in rates could paralyze grains exports once stockpiles at ports had run dry.

According to the Buenos Aires grains exchange, farmers have harvested some 14.4 per cent of the soybean planted area and 19.4 per cent of the area planted with corn. The exchange forecasts a 2021-22 soybean harvest of 42 million tonnes and 49 million tonnes for corn.

— Maximilian Heath is a Reuters correspondent in Buenos Aires.

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The Baltic Dry Index (BDI), a major indicator of shipping rates, settled Friday at 4,275 points, marking its highest level since November 2009. The index hit a low of 393 points in the spring of 2020 when the COVID-19 pandemic first started disrupting global movement.

The panamax index was up for its seventh-straight session, hitting 3,904 points. Average daily earnings for the 60,000- to 70,000-tonne vessels that commonly carry grain or coal were pegged at US$35,138.

The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes subsectors for the different classes of ocean vessels, including capesize, panamax and supramax.

Canada is at a freight disadvantage compared to its competitors into many markets, with higher freight rates heightening that disadvantage.

Canadian grain exports through the first six weeks of the 2021-22 crop year are running well behind the previous year’s pace — although tight supplies of most major crops due to the Prairie drought likely have more to do with the current slowdown than the high rates.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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The Baltic Dry Index (BDI), a major indicator of shipping rates, hit a high of 3,266 points on Wednesday. That marked its strongest level since June 2010, and compares with the multi-year lows just under 400 points hit at the same point a year ago.

Strong worldwide shipments of coarse grains contributed to the recent strength in the BDI, according to a report from shipping association BIMCO (the Baltic and International Maritime Council).

“The dry bulk market continues its strong performance this year, supported in part by strong demand from grains trade, with the U.S. providing plenty of support,” Peter Sand, chief analyst for BIMCO, said in the report.

While U.S. soybean exports have moved off of their highs to more seasonal levels, he noted increased coarse grain exports were contributing to steady demand for grain-carrying ships.

“In March alone, U.S. coarse grain exports required 123 panamax ships, almost two thirds of which sailed to the Far East, one of the world’s longest trades. At the peak of the U.S. soya bean export seasons in October, 147 ships were needed,” he said.

The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes sub-sectors for the different classes of ocean vessels – including capesize, panamax and supramax.

Canada is at a freight disadvantage compared to its competitors into some markets, and higher freight rates can heighten that disadvantage.

However, Canadian grain exports continue to move at a solid pace, with total bulk exports of the major grains and oilseeds through week 38 of the 2020-21 crop year of 39.9 million tonnes running 30 per cent ahead of the previous year’s pace, according to Canadian Grain Commission data.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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The Baltic Dry Index (BDI), a major indicator of shipping rates, has moved lower for most of October and into November, hitting 1,194 points on Thursday. That compares with the yearly high of 2,097 points on Oct. 6 and the low of 393 points hit in mid-May.

The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes sub-sectors for the different classes of ocean vessels — including capesize, panamax and supramax.

Freight analysts cited declining demand from China as the main reason behind the softer freight rates.

Canada is at a freight disadvantage compared to its competitors into some markets, and lower rates help lessen that disadvantage.

Grain exports continue to move at a solid pace, with total exports of the major grains and oilseeds during the first 12 weeks of the 2020-21 crop year of 12.2 million tonnes running well ahead of the 9.5 million tonnes shipped during the same time frame the previous year, according to Canadian Grain Commission data.

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The Baltic Dry Index (BDI), a major indicator of shipping rates, has moved higher for 12 straight sessions, hitting 973 points on Monday. That compares with the four-year low of 393 points in mid-May.

The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes sub-sectors for the different classes of ocean vessels including capesize, panamax and supramax.

The panamax index tracks the 60,000- to 70,000 tonne-capacity vessels that often carry grain or coal. It was pegged Monday at 884 points, roughly double its lows of a month ago.

While rising freight rates may be a sign increased optimism in the global financial markets, they can also put pressure on Canadian grain exports. Canada is at a freight disadvantage compared to its competitors into some markets, and higher rates make that disadvantage more pronounced.

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“I don’t think there’s a lot of potential to push this thing much higher, and I don’t think the bottom will fall out either. What you see is what you get,” Matt Froehlich, a trader with JGL Commodities in Moose Jaw, said of the current feed barley market.

End users are relatively full for the time being and may be looking to lower their bids, but Froehlich noted declining truck freight rates would limit price movement from the farmer’s standpoint.

“Truck freight rates should be loosening up, as fertilizer backhauls start up again,” he said.

Values also usually stay stable through the road ban season, as end-users need to pay up to keep product showing up at their door.

Blockades slowing rail movement across Canada may not have a direct influence on domestic feed grains, but Froehlich noted some grain intended for export may be backing up in the countryside and could move to domestic feed channels instead.

The larger-than-normal amount of grain left to overwinter across the Prairies this year will also be harvested soon.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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