The U.S. is a soybean surplus country that is dependent on exports. Due to Asia being an extremely long distance from the U.S., ocean freight rates play a major role in the price a farmer ultimately receives. After ocean rates bottomed out in March 2016, grain rates more than doubled until November 2018. As can be seen below, ocean rates were at historically low rates in March 2016, but the freight rate increase was eating into profit margins. According to the U.S. Department of Agriculture (USDA), as of April 18, 2019, the rate for shipping a metric ton (MT) of grain from the U.S. Gulf to Japan was $42, while from the Pacific Northwest to Japan was $23 per MT or down 11 percent and 8 percent from the beginning of the year and 5 percent and 4 percent below the same period a year ago, respectively.
The good news is the ocean rates are expected to decline until mid-June, bringing welcome support for U.S. soybean prices. According to Drewry, the ocean freight rates are still under pressure from the impacts of mine closures in Brazil and a cyclone that reduced iron ore exports from Australia. Coal imports in China and other northern hemisphere countries are generally low during April and May because of the off-peak consumption season. Ocean freight rates will not face upward pressure until the summer heat increases air conditioning electricity consumption and in turn, ultimately increases coal movements.