US Government canvasses views for freight rate index for agri-exports

THE US Federal Maritime Commission (FMC) is seeking views from carriers, freight forwarders and exporters linked to the US agricultural sector on whether or not the United States government should develop a freight rate index similar to established rate benchmarks such as the Shanghai Containerised Freight Index (SCFI) or the World Container Index (WCI).

The index being touted would be along the lines of established indices which mainly cover Chinese exports, but would only target certain agricultural commodities emanating from the US and could be based on contracts of carriage filed with the government.

"Following requests from large agricultural exporters and others, commission staff have conducted some initial testing of the technical feasibility of using service contract data filed with the commission to develop a container rate index for a few targeted major US export commodities such as grains, cotton, hay, and frozen meat," said FMC secretary Karen Gregory.

"To fully protect the identity of individual shippers and ocean carriers, data extracted from service contracts would be aggregated at an appropriate level prior to making public an average rate or index. The commission wishes to stress that this concept is still in its formative stages and wants to hear the views of all parties before deciding whether or not to produce it."

Ms Gregory also said that exporters would be quick to adopt index-based contracting because many already hedge risk in the bulk shipping markets and because freight rates represent a larger portion of the delivered value of agricultural products than they do for goods in other sectors.

"Some US agricultural exporters have told commission staff that a properly constructed index would help them increase exports by allowing them to use contracting and hedging strategies to increase the certainty of their transportation costs.

"These US agricultural exporters have said that ocean carriers generally are reluctant to offer them service contract rates that are valid for more than 30 to 60 days, and that this inability to lock in a rate hinders their ability to sell agricultural exports for delivery more than 60 days into the future out of fear that changing transportation costs will make the sale uneconomic."