Moving wheat increasingly problematic

- Last updated on GMT

Related tags: Wheat, Transport, Shipping, Cargo

Surging freight rates are causing an increasing number of problems
for food companies sourcing wheat. One example of this is that
Asian processors are now increasingly turning to Australian wheat
producers for help.

As a result of a bumper crop this year, Australian wheat producers have been able to market their wheat at competitive prices compared to the world market. The Australians' main advantage over rival US wheat producers has been freight rates, Australia's proximity to Asia, a major wheat consumer, obviously proving to be advantage.

As the global wheat market continues to suffer volatile pricing due to unreliable supplies, many food processors are resorting to spot deals.

For Asian processors, those spot deals are increasingly moving towards Australian wheat suppliers who have been undercutting other international wheat providers. Shorter shipping distances means that many wheat consignments can be shipped over for as much as $10 a tonne less than US suppliers.

This is because sailing times are shorter, with many Australian shipping companies able to reach key Asian markets up to two weeks quicker than US consignments can reach the same destinations.

Further exacerbating this problem is the rising cost of freight transport. Industry experts say that food processors are having to face a lack of freight capacity. As a commodity, wheat is a high volume cargo, which, combined with increasing export volumes, is leading to increasing pressure on cargo resources, which in turn are becoming more expensive.

With global demand for wheat continuing it seems that its transport will play an increasingly pivotal role in the future.

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