Ocean freight rates remain at fairly low levels.

"In 2007, 2008 and 2009 we saw really wild swings in the market, but over the past six months it's been not flat, but soft and drifting lower," says David Przednowek, manager of ocean freight and terminal operations with the Canadian Wheat Board, explaining its a function of decreased demand and increasing supply. "It just seems like there's a real lull in demand. On top of that, there are more and more vessels being built and entering the market, so there's a larger supply of dry bulk ships available."

Przednowek says he's not expecting any major changes in the market until at least early 2011. "We'll have to see what the new year brings for the global economy, and then we'll have to find out what that means for global trade and demand for shipping," he says.

In the meantime, the lower rates mean the board is competitive in more markets. "When someone is buying grain, they're looking at the landed price. So they're looking at what's the cost of the grain plus what's the cost of getting it there. The lower ocean freight rates are, the less of a freight disadvantage we're up against." As an example, he explains Australia traditionally has a significant freight advantage when selling to customers in southeast Asia. "When the freight market is really soft, the gap between us and them narrows, so returns are greater for us or we're at less of a disadvantage than we would be."

~ Wednesday, November 17, 2010 ~