Ocean Freight Rates at Nine Month Low

 

Due to Asia’s extremely long distance from the U.S., ocean freight rates play a major role in the price a farmer ultimately receives. Over the long-term, the most dependable way to lower ocean freight rates is to increase the depth of the waterways system to enable the vessels to load heavier because shippers charter the vessel. In other words, the shipper is paying the charter rate regardless of the volume. Of course, draft restrictions increase rates. In the short-term, ocean freight is highly elastic, meaning that demand for ships does not have to go down or up very much relative to available ships to produce a significant increase or decline in prices. The good news for farmers is the global ocean freight rates fell to the lowest level in nine months on sluggish trade. West Coast to Asia has fallen 42% from $31.76 at the end of August to $18.39 in January, the lowest rate since June 2016.