Harking back to the early days of forward freight agreements (FFAs) in the 1990s, the UK’s Freight Investor Services is developing new grain routes to Asia.
Grain routes were critical to the development of early liquidity and volumes in FFA trading. In the mid-1990s, the grain majors needed a hedge for US Gulf-Japan HSS 52,000t – at that time Japan imported about 15m tonnes per annum of corn.
A lot has changed since then – not least the global soyabean market, which has annual global trade volume of 150m tonnes – close to 100m tonnes of which are destined for China on a 66,000 t 10% HSS basis. FIS is developing new trading opportunities for its clients, broking Gulf and Brazil-China soyabean routes currently under trial by the Baltic Exchange.
The two new routes are as follows: P7 – Mississippi river to Qingdao and P8 – Santos to Qingdao.
Freight Investor Services managing director, John Banaszkiewicz, commented: “We think this is going to be a very interesting time to be in FFA trading; the new routes combine all the elements of a liquid and successful market… The C&F China market is the global benchmark for soyabean trading. With the US Gulf fob price at $325 a tonne, freight is $44 a tonne or 13.5% of the C&F price. Freight remains an important and volatile cost that needs to be managed.”
