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Shipping and Freight Rates in the Overseas Grain Trade

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Shipping and Freight Rates in the Overseas Grain Trade SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE V. D. Wickizer Shipping-together with railway transpor­ such commodities, freight charges constitute tation-created the world grain market and a much larger fraction of the import price, has been largely responsible for its vast ex­ and changes in the level of rates have larger pansion during the past century. Enormous effects. improvements in ships, with corresponding Even fairly substantial changes in ocean changes in port facilities, cargo handling, and freight costs may be little noticed by ultimate shipping organization, brought freight rates consumers-grain prices, for example, fluctu­ down to a small fraction of their former size. ate widely for other reasons. Both tempo- Great reductions in trans- rarily and over a period of portation costs stimulated years, however, shipping the agricultural develop­ CONTENTS freights play a significant PAGE role in determining the ment of newer countries, The Shipping Industry . ..... 50 promoted international di­ The Freight Market and character, volume, and di­ vision of labor, enlarged Freight Rates ............ 63 rection of the world's in­ the productive capacity of Grains in Seaborne Trade . ... 76 terchange of bulk goods. the world, greatly reduced Grain Routes and Ports. .. 84 Large advances in rates, Ocean Freight Rates on Grain 93 the hazards to world food such as occurred during Elements in the Outlook . ... 106 supplies from crop failures Appendix Notes .......... 110 the World War, may im­ in particular countries, and Appendix Tables .......... 115 pair the economic position helped to cre~te new land of exporting countries or values in some places and create problems of food at least temporarily to depreciate land values supply in consuming centers dependent upon in others. imports from overseas. Sustained reductions Demand for shipping services is exerted by in ocean freight rates may affect the fortunes thousands of individual articles that move by of countries performing the world's overseas sea. But the large number of high-value man­ transportation services and significantly alter ufactured and semimanufactured articles the pattern of the economic life of nations, take up only relatively little space. The de­ even though revolutionary effects on the dis­ mand for cargo space exerted by such goods tribution of world agriculture are not in pros­ may vary widely, but this variation seldom pect. causes a change in the level of ocean freights. The past two years witnessed the most im­ Conversely, ordinary fluctuations in the level portant advance in ocean freight rates since of ocean freight rates, and even marked the World War. The rise that began in the changes over a period of years, are of minor middle of 1936 culminated in August-October import to such articles because freight charges 1937, and was followed by a notable decline. are small in relation to prices. Such large changes in shipping costs over a By far the greatest part of the volume of short time materially affected the interna­ seaborne commerce consists of a small num­ tional grain market. This recent experience ber of commodities of low value per unit of renders timely an examination of relations bulk or weight. Within this group of bulk between maritime shipping and the world cargoes are foodstuffs. Of these the most im­ grain trade, with special reference to the portant in international trade are grains, par­ world wheat situation and to the postwar ticularly wheat, imports of which are essential period. In particular, it is pertinent to illumi­ in the food supply of many countries. With nate the complex subject of shipping freights, WHEAT STUDIES of the Food Research Institute, Vol. XV, No.2, October 1938 [ 49 ) 50 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE to examine the factors that are responsible to consider the effects of such levels and for the changing levels of rates on grain, and changes on shipping and the grain trade. I. CHARACTERISTICS OF THE SHIPPING INDUSTRY Shipping as a carrying industry is essen­ of today are more intelligible if one recalls that tially a modern development. Only when mar­ shipping was long an integral part of the mer­ itime commerce had expanded to the point chant's business, and also that for centuries where regular trade relationships had grown commercial and governmental interests were up between nations did shipping become a closely identified. National governments still common-carrier business. Earlier, owning strive to support their own shipping against and operating of ships was largely incidental foreign competition, particularly during pe­ to buying and selling goods. As trading ven­ riods of growing nationalism. Technological tures became sufficiently numerous, there was developments in ships and shipping, there­ a demand for ships operating as tramps do fore, do not occur solely in response to de­ today, following no fixed routes but sailing mands for improved shipping services,l and wherever directed by merchant traders. With the services provided over every sea lane do further growth in foreign commerce, liner not represent simply the response to economic services were eventually provided. The earlier demand. A multitude of factors, both eco­ sailing packet-boats were gradually supple­ nomic and noneconomic, determines the char­ mented by steamer lines. Just 100 years ago, acter of the tonnage used in carrying the in 1838, two British commercial steamships world's goods-the number, type, services, arrived in New York from England; one of ownership, and flag of merchant ships. these, the "Great Western," inaugurated the first transatlantic steam liner service. THE WORLD'S OCEAN CARRIERS Certain aspects of the shipping industry Of the numberless craft navigating the sea's, lakes, and rivers of the world today, some 1 This is especially true with respect to ships that might be used as naval auxiliaries in time of war­ 31,000 are commercial vessels of 100 gross cargo liners, tankers, and certain classes of combina­ tons2 and over, large enough to be recorded tion cargo and passenger ships. by Lloyd's Register, the foremost authority 2 Commonly used as the unit in general statistics on ship statistics.s Numerous barges, tugs on ships, a gross ton is not a measure of weight, but represents 100 cubic feet of space within a ship. and towboats, tenders, canal, river, and lake Spaces exempt from inclusion in the measurement boats, pleasure craft, and naval vessels are vary somewhat between countries. excluded from the Register either because 3 This is published by Lloyd's Register of Shipping, they are not used for commercial purposes a "classification society" whose leading competitors are the Bureau Vel'itas of France and the American or because they are under 100 tons gross. Bureau of Shipping. Its affairs are conducted sepa­ Over half the 31,000 vessels on register are rately from those of Lloyd's, the great association of under 1,000 gross tons. Another 5,000 or underwriters. The classification societies render indis­ 6,000 ships range from 1,000 to 3,000 gross pensable services to marine insurance underwriters. Lloyd's Register, easily the most comprehensive, shows tons. Such vessels are usually employed in for each vessel listed its "class" rating, its date and coasting trade between domestic ports or in place of construction, dimensions, owners, kinds of foreign trade between countries not distantly engines, port of registration, and other details. separated, as, for example, in the coal trade 4 Some confudon results from varying definitions of coastal trade. A voyage from San Francisco to New between Great Britain and ports of Northern York, even if around the Horn, is coastal trade from Europe. These ships may be perfectly sea­ the United States point of view. So also is a trip to worthy, but few are engaged in transoceanic Hawaii. Vessels engaged solely in these services are "enrolled," as distinguished from vessels "registered" transportation. In the main, they are part of for United States foreign commerce. Sea routes be­ national systems of internal transport and tween European and Asiatic Russia are also long, for hence of little interest here.4 example, between Odessa or Leningrad and Vladivos­ tok. For practically all other maritime countries, dis­ Only about 8,000 ships are over 3,000 tons. tances between domestic ports are short. Some of these are specially constructed bulk CHARACTERISTICS OF THE SHIPPING INDUSTRY 51 carriers suited to Great Lakes traffic1 but not CHART l.-WORLD MERCHANT SHIPPING, JUNE 30, designed for oceanic trade involving voyages 1905-16 AND 1919-38* of several thousand miles or more. The bulk (Million gro .• s tons, except as noted) of the world's grain is carried by vessels of 7 0 70 Total 3,000 gross tons and over, built for overseas ..A~~ -# ;;.-::: _.-'. and Motor . voyages involving distances of 3,000 miles e 0 ." ..... ; .... 60 Steam, ............... and upward. rl total ...... Some 1,600 of all commercial vessels are .... _... 5 0 ~ 50 sailing ships. Though mostly under 3,000 l"'-.. f gross tons, these are used primarily on sea Coalburnine T~ W/ ~~!!amers voyages. Since 1893, when their tonnage was 40 40 V ...," ,.' ""'- first exceeded by that of steam-powered craft, , Steam "~"," , ,/ and Motor· ........ sailing ships have declined in importance until 30 30 now they account for only about 1.5 per cent Steamers of the world's tonnage.2 In the international titted for oi I 20 20 grain trade sailers are nowadays of negligible ~ /,,-- , importance, though each year a few compete ", Motor _ ,.. in a "race" from Australia to Europe with 10 1o -1ail6c ",," cargoes of wheat. ",' I- Sail That part of the merchant shipping in­ o -- 1-.,.-- -- o dustry which provides an economically im­ 1905 1910 1915 1920 1925 1930 )935 1940 portant means of communication and trade * Lloyd's Register of ShippiII{J data for tonnage on register, of 100 gross tons and upwards: for 1920-38 among the nations of the world is of small mainly as given in Table I, and prior to 1920 mainly from relative importance in terms of capital in­ Chamber of Shipping of the United Kingdom, Annual Re­ ports.
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