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. See also note a. vested or persons employed. Anyone of several a On June 30, 1914, steam and motor tonnage was di­ large railway, utility, and industrial enter­ vided as follows, in million gross tons: coalburning ~team­ ers, 43.9; steamers fitted for oil, 1. 3; motorships, 0.2. For prises employs more capital and labor than this and the later subdivision of steamer tonnage, see Bank all the ocean carriers of the world. of England, Statistical Summary, February 1934 and Au­ gust 1938. When specialized types of ships such as b Expressed in million net tons prior to 1919. tankers, refrigerator ships, and vessels em­ o Lloyd's Register includes sailing vessels with auxiliary power as stearn or motor tonnage according to the type of ployed exclusively in lake shipping are ex­ auxiliary engine. cluded, less than 5,000 steam and motor ves­ sels remain which could participate in the and composition of the world's merchant fleet. world's overseas grain trade. This round Today's ships are larger, faster, powered dif­ figure includes numerous passenger liners ferently, and more specialized in their func­ which actually do not carry grain. tions than those of a generation ago.4 Their Probably all of the seagoing ships suitable for transoceanic grain carrying are of steel 1 For a description of Great Lakes shipping condi­ tions, see H. S. Perry, Ship Management and Operation a construction. Some are steamships and some (New York, 1931), pp. 217-33. are motorships. Some are fast and some are 2 Some believe that sailing ships, or at least sailing slow. Some are liners and some are tramps. ships with auxiliary engines, have not seen their last They are owned or managed either by govern­ days. As internal-combustion engines become more adaptable, sailing ships with moderate-powered en­ ments, corporations, or individuals, and they gines may increase in number and compete success­ fly many different flags. Exclusive considera­ fully in certain trades due to their economy of opera­ tion of vessels engaged in the grain trade is tion, in spite of their lesser speed and reliability. See, however, note c under Chart 1. not feasible, but since relatively few distinc­ 3 All registered commercial vessels constructed of tions need to be established, Lloyd's Register materials other than steel, e.g., iron, or wood and statistics on ships engaged in all trades will composite, now account for only about 2 per cent of serve present purposes. the world's tonnage. 4 For a discussion of construction, types, and uses Chart 1, using some of these data, sum· of merchant vessels, see A. C. Hardy, Merchant Ship marizes certain broad changes in the size Types (London, 1924), and Robert Riegel, Merchant 52 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

total number is practically the same as just for oil have for several years totaled about before the World War, but their aggregate 20 million tons, and now constitute 39 per tonnage has increased by approximately a cent of all steam tonnage. third. Low freights for many years were undoubt­ Except for about a million gross tons of edly partly responsible for the increased build­ sailing vessels, the world's commercial tonnage ing of more economical and efficient types of is now of the self-propelled type. Steamers cargo carriers such as the motors hip. The ini­ continue to predominate, but Diesel-powered tial investment is higher for the motorship motorships, of negligible importance before than the steamer, but costs of operation are the war, now account for nearly 23 per cent lower and the paying cargo space is greater. of the combined steam and motor tonnage. Scandinavian countries have been particularly The chart reveals the extraordinarily rapid aggressive in its development, since they have increase in motorship tonnage from less than been subject to more pressure to find improved a million gross tons in 1919 (then only a third bases for competition with ships of other flags. as large as the sail tonnage) to 15.2 million in Although over a quarter of today's motor­ 1938, a net increase slightly greater than the ship tonnage is under the British flag, Norway statistical net gain for all tonnage during the ranks second with 18 per cent.l same period. From its peak of 60. 7 million In practically all vessel types the British gross tons in 1923, steam tonnage has declined continue to lead the world in merchant ship­ to 51.7 million in 1938. Of the 2.8 million ping, owning and operating over a quarter of tons under construction on June 30, 1938, the total tonnage. Britain's relative position motorships accounted for 1.8 million and is, however, less outstanding than before the steamers for only 1.0 million. war, when ships under the British flag con­ Just before the war, barely 3 per cent of stituted about 40 per cent of the commercial the world's merchant shipping used oil fuel. tonnage of the world.2 The United States Today 52 per cent of this tonnage, and an even shares leadership with Great Britain in tanker larger proportion of American vessels, use fleets, and together they have over half of the oil either directly in Diesel engines or for total tanker tonnage.3 In the aggregate, the generating steam. The net shrinkage in steam American oceangoing merchant marine ranks tonnage from its interim peak in 1931 has second, accounting for 15 per cent of the been entirely in coal burners; steamers fitted total commercial tonnage, contrasted with 6 per cent just prior to the war.

2 See also p. 54, footnote 4. Not all ships registered In age composition the various merchant in Great Britain, or any other country, are necessarily fleets differ considerably. A good many ves­ owned by nationals of such country. Ships owned by sels built before the war are still in service. American interests have been operated under the British flag and laws in order to gain certain advan­ Ignoring sailers, tonnage over 25 years old tages. But this practice has disadvantages as well, for on June 30,1938 constituted the following per­ in subsidies and mail contracts each country tends to centages of four leading fleets: British, 9.5; favor ships owned by its nationals, registered under its laws and flying its flag. American, 10.7; German, 13.5; and Japanese, a Oil tankers are sometimes considered as a special 16.7. Corresponding percentages for tonnage type of tramp ship; however, most of them are not over 20 years old are: 20.8, 28.2, 19.3, 32.5. common carriers, but belong to "industrial fleets" Of these four, Britain alone has over half of operated by corporations for their private use. her tonnage (56.8 per cent) in age groups seas. cent of the United States merchant fleet; while CHARACtERISTICS OF THE SlilPPING INlJuSTlry 53

Japan has the highest percentage (23.6) under traffic. Thus placed "on berth," they operate 5 years. virtually as cargo liners (sometimes termed Each nation has specialized to a certain "tramp liners") so long as the owner or char­ extent in the shipping services it provides, terer sees fit. Or a cargo liner may operate and this influences the composition of its as a tramp, though such diversion is infre­ fleet. Here the most important distinction to quent. Modern cargo liners, carrying man­ be made is between tramps and liners. ufactured goods as well as foodstuffs and raw materials, have speeds ranging between 10 SHIPPING SERVICES AND ORGANIZATION and 12 and even up to 15 knots-definitely The shipping employed in overseas trans­ higher since the war. The modern oceangoing portation of grains includes vessels ranging tramp's speed seldom exceeds 10 knots-not from ordinary tramps to huge ocean liners. much higher than formerly. These are not interchangeable units. Liner Some indication of the status of these types services are provided by vessels operating in 1925 is provided by the classification below over definite routes and on regular schedules; which emerged from a study made in the there are passenger liners, cargo liners, and cargo-passenger liners, according to their pre­ Thousand I Numher Numher Classification gross of of 011 dominating traffic. Tramp ships, on the other tons ships burners ------hand, are not limited to fixed routes or ports, ------but offer their services in any part of the world Liners of 12 knots and over 13,661 1,640 562 Liners under 12 knotS ...... 9,822 1,734 849 where cargo may be obtainable. General traders ...... 7,603 1,503 Liners tend to concentrate upon the han­ Tankers ...... 4,567 696 649 dling of small lots or "parcels" of manufac­ Total ...... 35,653 5,573 2,060 tured goods having a high value in relation to their weight or volume. Here, speed and reli­ ability of regular service are the important United States Department of Commerce.3 Here considerations. Tramps carry, often in full the "liners under 12 knots" are the cargo liners cargo lots, principally bulk goods of relatively and the "general traders" the tramps. In the low value in relation to volume, such as coal. grain. lumber, ore, and nitrate. Here, low cost 1 Years ago, liners were more dependent upon grain of transportation is of chief importance. or some other type of ballast. Improvements in ship­ building, including the general introduction of water Many liners also carry some bulk products, ballast, freed the newer ships from such dependence at rates competitive with those charged by on grain. See J. Russell Smith. The Ocean Carrier tramps. Such shipments are known as "berth (New York. 1908). pp. 329-30. cargoes" and their carriage represents a sup­ 2 "The most difficult distinction to make is that between the tramp ship and the cargo liner. It may plemental and more or less special freight ser­ be thought that a precise statutory distinction would vice. Liners often seek berth cargo to serve as be found in the British Shipping (Assistance) Act ballast or otherwise assist in filling the holds 1935, which provided a subsidy to help tramp ship­ of the ship. but it is not their main source of ping. The draughtsman gave the task up in despair." See L. Isserlis, "Tramp Shipping, Cargoes and revenue.1 Liner carriage of grains usually Freights," JOllriial of the Royal Statistical Society, develops between ports having a diversified Part I, 1938, CI, 60. Parliament preferred to define a traffic. where regularly established services are tramp voyage as one "in the course of which all the cargo carried is carried under charter party but does in demand. not include any voyage during any part of which more Liners, as a group. are distinguished from than twelve passengers are carried." Since the war tramp ships by their greater size and speed. some tramps have operated back and forth over the River Plate/U.K. route and have thus acquired some and by their carrying of passengers. though of the characteristics of the liner. tramps on certain routes may carry a few 3 E. T. Chamberlain, Liner Predominance in Trans­ passengers. Tramps and cargo liners. how­ oceanic Sllipping (U.S. Dept. Comm. Trade Informa­ ever, are not always readily distinguishable.2 tion Bull. 448, December 1926). p. 21. The world's seagoing shipping was considered vessel by vessel, To meet peak demands, liner companies some­ taking into the computation only ships of 4,000 gross times charter tramps during seasons of heavy tons and over and qualifying for transoceanic trade. 54 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE first postwar decade, on the whole, the cargo adaptable to varied types of cargo that may liner was tending to displace the general trader. be available wherever they operate. Tramps .... The carrying power of the lines under 12 engaged in the grain trade must usually find knots in 1914 was 19 per cent of the total, com­ off-season employment in the carriage of other pared with 29 per cent for the general trader or bulk cargoes-raw materials, ore, coal, and so tramp. In 1925 when the general traders had on. Apart from special equipment used in available only 19 per cent of the world's oversea stowing, ships carrying grain cannot be read­ transport facilities, the liners under 12 knots offered 25 per cent of such facilities. ily distinguished from the run of tramp ships, the general physical features of which have Thus the Department's study concluded.! changed little since before the war.O A later study reached very much the same conclusion: " .... it is doubtful whether 1 Chamberlain, Op'. cit., p. 22. E. S. Gregg, also of tramp ships in 1933 provided as much as the Department of Commerce, in an article on "The Decline of Tramp Shipping" (Quarterly Journal of one-fifth of the total potential carrying Economics, February 1926, XL, 338-46) calls attention power available to the shippers of the world."2 to the fact that in 1924 over 80 per cent of the grain According to Lohse, tramp tonnage accounted out of New York went in parcel lots by liners, and then adds (p. 342): " .... but the outstanding fact in 1933 for about 31 per cent of all merchant is that a large part of the grain and lumber in over­ tonnage-29 per cent of British, 56 per cent of sea commerce (two commodities formerly carried Japanese and Danish, 41 per cent of Norwe­ almost entirely in tramps) is now handled by liners." gian, 44 per cent of French, 60 per cent of Such statements may be misleading unless it is borne in mind that they apply primarily to United States 3 Italian, and 52 per cent of Swedish. For Atlantic ports, and not to shipments over practically Finland, Latvia, and Estonia the percentages all other important grain routes of the world. were above 80, and for Greece and Yugoslavia 2 M. O. Phillips, "Tramp Shipping: Its Changing above 90. Only the United States was credited Position in World Trade" (unpublished Ph.D. thesis, University of North Carolina, Chapel Hill, N.C., 1937), with no tramp tonnage; but for Germany the p. 525. Phillips' conclusion is based upon Lohse's percentage was merely 12 per cent of her total. analysis of the importance of tramps and other types Between 1929 and 1936 (much of it between of vessels, in the study next cited. 1933 and 1936), however, the important Brit­ a F. Lohse, "Die Entwicklung der Trampschiffahrt in del' Nachkriegszeit" (inaugural dissertation at the ish merchant fleet showed a material increase Christian Albrecht University, Kiel, Germany, 1934). in tramp tonnage, while liner tonnage of all Lohse concluded that tramps with 22.7 million gross three general types-except passenger liners tons in 1914 accounted for 46 per cent of total steam, motor, and sail tonnage, and with 21.27 million tons in 1929-33-diminished by substantial per­ in 1933 accounted for only 31 per cent. The small centages (see Table II). Indeed, comparing increase in tramp's speeds of about half a knot just 1936 with 1914, Britain's liner tonnage was about compensated for the decline in tramp tonnage, slightly smaller while her tramp tonnage was leaving potential carrying power approximately the same as before the war, but, relative to all shipping, a third larger. Depression conditions thus less important. brought about a significant break in the ear­ 4 Among the factors contributing to pre-eminence lier trend from tramps to liners. of the British shipping industry was the favorable As the liner's position in shipping generally combination of a large merchant fleet and navy (which makes low-cost shipbuilding feasible), out­ was strengthened, the shift from coal to oil bound coal cargoes, many coal-bunkering stations was accentuated.4 Liners rather than tramps throughout the world, and large needs for imported are responsible for the wide use of oil today. foodstuffs. With the pronounced shift away from coal, British shipping has partially lost one of its The Department of Commerce tabulation for former marked advantages. 1925 showed no tramps listed as oil burners. In 1935, British tramps carried 20.6 million tons of A few motorships were employed in tramp coal, but only three-fifths of this originated in the United Kingdom, and less than two-fifths was carried trades in 1925 and their number is larger to­ by vessels of 3,000 gross tons and over which are re­ day, but despite the remarkable development sponsible for the bulk of grain and raw material im­ in this type of propulsion, tramps remain pre­ ports into the British Isles. Isserlis, op. cit., pp. 84-85. dominantly coalburning steamships.5 5 See also p. 57 below. a For a more complete description of grain carriers, Unlike many other carriers, tramp steamers see Perry, Sllip Management and Operation, pp. 211- are not highly specialized. They must be 16. CHARACTERISTICS OF THE SHIPPING INDUSTRY 55

Tramp ships are still owned largely by in­ unused space or to secure return cargoes that dividuals or corporations of relatively small will assist in defraying operating expenses.2 capital, possessing little property in addition Present-day organization of the shipping to the vessels themselves. Catering to shippers industry shows a marked tendency toward requiring a large amount of vessel space at combination for many of the same reasons low cost and delivery of cargo at diverse ports, that have stimulated the growth of larger tramps obtain business through brokers acting business enterprises generally. Shore expense independently in all parts of the world. Their for a large liner company is not much larger shore expenses are ordinarily insignificant than for a small one operating only a few and their labor costs tend to remain low.! ships. Selling and advertising expenses per Today liners are usually owned and oper­ unit are proportionately smaller for the larger ated by large corporations with extensive concerns. They also enjoy all the advantages shipping interests, including in many in­ of superior financial resources-buying power stances the ownership and operation of port for capital equipment, supplies, and fuel-and and terminal facilities-the only counterpart added security from greater diversification of the railway's principal investment in right­ of employment in numerous trades. of-way, roadbed, and tracks. Although the These considerations apply much less to shipowner incurs no investment or expense tramp shipping, which faces smaller financial for maintenance of roadbed, ships themselves risks and enjoys greater flexibility of opera­ representing the principal capital assets, the tions. If business conditions are extremely business organization of a liner company may unfavorable, the tramp operator can lay up be quite as elaborate as that of a railroad his ships, or even go out of business tempo­ company. rarily, without necessarily jeopardizing his A comparatively recent development within future opportunities. Liner companies can­ the organization of the shipping industry is not afford readily to abandon the services, the growth of industrial fl·;ets. Industrial investments, and good-will they have built carriers are engaged chiefly in the carriage of up over a period of years. such freight as coal, ore, lumber, fruit, or In addition to the factors stimulating com­ petroleum, for the industrial or mercantile bination in industrial enterprises generally, firms which own them. Some of these act as the shipping industry has been subject to regular common carriers; others seek to fill governmental pressure to merge resources. Liner companies, in particular, have been 1 Tramp crews are commonly hired for a single counted upon to assure a nation's competitive voyage. Thus the tramp operator escapes some of the responsibility incurred by liner companies. During position. Financial and other types of en­ recent years the demands of organized labor have im­ couragement, as well as legislative mandates, paired the profitability of liner companies more than have been employed to this end. The frank tramps. objective of many a government has been to 2 The United Fruit Company is an example of a con­ cern operating a fleet which serves primarily as an eliminate competition between its own nation­ industrial carrier but also functions as a regular com­ als, so far as feasible, in order to strengthen mon carrier. its front against foreign merchant marines.3 8 The leading steamship lines of practically all the principal maritime countries except the United States ECONOMICS OF CARGO TRANSPORT have been brought together in government-sponsored or semiofficial consolidations or agreements. The Ham­ Regardless of size and extent of their in­ burg-American and North German Lloyd companies have a working arrangement to suit the German gov­ vestment, shipping companies incur relatively ernment. Great Britain has several large combinations heavy overhead charges from the initial cost and groups, such as the Peninsular and Oriental, of vessels and the expense of maintaining Hoyal Mail Steam Pac),et Company, the Cunard White Stur Company, and so on. The chief French lines have them in operation. The shipowner tries to divided their respective fields of operation or pooled charge rates that will cover not only the spe­ services, and reached agreements with smaller com­ cific costs attributable to each voyage or ship­ panies so that competition is kept well under control. Similar developments have occurred in Italy and ment, but will also contribute as much as Japan. possible toward the overhead. In the long run, SH1PPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE of course, the shipping company must do Desirable as balanced cargoes are from an more than cover variable and fixed costs, in­ operating standpoint, the distribution of the cluding depreciation, if it is to make profits. world's available bulk cargoes is such as to Since ships are the principal capital assets produce unbalanced traffi,c over most of the of their owners, they must be employed as principal trade routes,1 The exact amount of continuously as possible. If the flow of trade unbalance varies from year to year, but a ten­ is predominantly in one direction, liners dency prevails for traffic to flow more freely operating on fixed schedules between specific in one direction than another. Conditions ports run the risk of being profitably employed which create this situation, such as the geo­ only half of the time. A tendency thus devel­ graphical location of agricultural products or ops for shippers in the direction of the greater other raw materials, manufacturing centers, flow of traffic to bear most of the cost of a and markets, are subject to very gradual complete voyage, while exporters in the op­ change. In general, bulk commodities tend to posite direction are favored by low rates flow in one direction and manufactured and designed to promote business. semimanufactured articles in another. Similarly with tramp ships, if the direction The total tonnage of overseas cargo has of trade is very unbalanced this will be re­ never been computed, so great are the diffi­ flected in stifTer rates, for only a few vessels culties of measurement, but occasional esti­ will have cargo both ways and others must mates adequately demonstrate the predomi­ charge higher rates to compensate for the nance of the cargo movement in certain direc­ lack of revenue on one leg of the voyage. The tions. For the year 1922, estimates were longer the route, the more important this made of the weight of thirteen important factor becomes. While cost of service is af­ classes of bulk cargoes-grains, sugar, coal, fected by the distance to be covered and is a ores, lumber, fertilizer, cotton, etc.-trans­ consideration in rate making, it is no more of ported over the world's principal ocean trade a controlling factor than is the value of the routes and particularly significant in the service rendered to the shipper. operation of tramp ships.2 The aggregate Also important to shipping is an even flow movement was 137.4 million tons. No cor­ of traffic. It is quite as unsatisfactory to be responding estimates are available for recent employed on actual voyages only part of the years, but in respect to the direction of traffic year as to be running throughout the year but there is little reason to believe that the distri­ much of the time with light cargoes in one bution indicated by that stUdy has changed direction. Perishable or seasonal agricultural materially. products make for an uneven flow of traffic. Eastbound tramp trades accounted for a The grain movement, in particular, is at times flow, in terms of weight, roughly two and a responsible for rapid and substantial changes half to three times that of westbound traffic.3 in the demand for shipping tonnage. Liner The North Atlantic route shows the greatest companies, though compelled to maintain a unbalance in the easterly direction; the trans­ schedule, may find it advisable to decrease pacific route from North America is unbal­ the frequency of sailings during seasons of anced in a westerly direction, as is the major small overseas movement. Tramps, though route from Australia. Australia, Argentina, subject to the same influences with regard to 1 Many large and important ports, as well as smaller balanced hauls as liners, are sometimes in a single-commodity ports, have a one-sided commerce­ more favorable position because they can a disadvantage in port operation and development. traverse the ocean highways of the world at 2 E. T. Chamberlain of the Bureau of Foreign and will. They can delay their sailings and cut Domestic Commerce, "Tramp Ship Trades," Commerce Reports, .July 7, 1924, pp. 13-15. rates if necessary to get cargo. Even so, they 3 Chamberlain's distinctions between "eastbound" are frequently forced to make extensive trips and "westbound" traffic are perhaps not the best that in ballast (without cargo). Hence owners of could be made, particularly as the northerly or tramp ships also must figure on a round-trip southerly movement he tween hemispheres must be visualized in terms of net easterly or westerly prog­ basis. ress. CHARACTERISTICS OF THE SHIPPING INDUSTRY 57

Canada, and the United States all originate maintenance costs also increase dispropor­ more bulk cargo business destined chiefly tionately. More important, the more power­ for British and continental markets than is ful machinery requires larger capital in­ created within these areas for return trans­ vestment, and the increased space required port, while European transatlantic shipments for equipment, fuel, and staff reduces the consist largely of less bulky finished or semi­ carrying capacity for pay cargoes. finished manufactures. The efficiency of a ship's power plant bears Tramp owners can, in some ways, take upon both its freight-earning capacity and its more aggressive steps to assure continuous cost of operation. Reduction in engine weight employment of their capital than can liner and in space given over to fuel storage, as a re­ operators. Due to the peculiar distribution of suit of increased plant efficiency, as well as im­ available cargoes, however, the tramp owner provements in ship design and construction, cannot merely plan upon seeking certain permit greater size and cargo-carrying capa­ business because this in itself seems to offer city.! Before the war a tramp vessel of 4,000- opportunities for profit. He can consider 5,000 tons deadweightz was considered fairly such business only in relation to other pros­ large. Now, twice that tonnage, or 8,000- pective business. In the eyes of the tramp 10,000 tons deadweight, is regarded as good­ operator, cargo becomes more or less desirable sized. A modern cargo liner commonly has a as its transportation to a certain part of the total deadweight of 10,000 to 12,000 tons, and world will place his vessel in a position to some are nearer 15,000 tons. The more or less secure its next employment. He may even spectacular increase in the size of passenger have to plan upon where that employment, liners during the past few decades is well if obtained, might place his ship some months known. hence in relation to an advantageous seasonal Because of the predominance of tramp ships demand for tonnage due to materialize at in the grain trade, the tramp's need for out­ specified ports at that time. bound cargoes, the relatively more abundant One of the chief reasons why cheap, bulky supplies of coal on the routes in which they commodities are transported overseas in large are engaged, and the costliness of converting measure by tramp ships is that these com­ a coal-burning vessel into an oil-burner, most modities are normally limited in the amount of the vessels engaged in the grain trade are of ocean freight cost they can bear and still coal-burning steamers. But they are more move in international commerce. The tramp efficient than the prewar types. cannot perform a low-cost transportation serv­ A modern "economy type" vessel of about ice except as it is constructed for relatively 7,800 tons deadweight can steam at 9 knots low speed and large carrying capacity. These from a port in Great Britain to the River two factors are related. Plate and return on a daily fuel consumption Speed in ocean transportation is expensive. of approximately 16% tons of Welsh coal, an Costs for equipment and operation increase, excellent "selected voyage" result. At 10 not in proportion to increases in speed, but knots, fuel consumption would be increased more nearly as the cube of the speed. For­ to about 221j2 tons per day. A good prewar tunately for the services the tramp is called performance for a vessel of similar specifica- Upon to perform, speed is not nearly so im­ portant as low cost. With typical liner car­ 1 Generally, increased ship size and improved con­ struction have also permitted greater flexibility in goes, just the reverse is true. employment. Vessels appropriately designed for coast­ It might be thought that the faster tramp wise service, for example, may now sometimes be ship could earn more freight because it could shifted into overseas trades if there is a sustained increase in demand for tonnage in those trades. make more voyages per year. A slight under­ 2 "Deadweight tonnage" expresses, ill long tons of standing of the fundamentals of marine trans­ 2,240 pounds, the total weight of cargo, fuel, and stores portation soon dispels this notion. Fuel cost which a vessel is capable of carrying when loaded to per mile, for example, increases roughly as her "marks" or "load line" indicating the maximum draft for safe loading under the most favorable con­ the square of the speed, and labor and labor ditions. 58 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE tions, steaming at 10 knots, would be the con­ ured according to special rules in the case of sumption of around 28 tons of good Welsh canals). For the same dues-paying space, the coal a day. The economy 'Of roughly 20 per object is to increase the freight-earning ca­ cent in fuel consumption is believed to reflect pacity of the ship, typically by increasing its the advances made in ship propulsion since deadweight. prewar days.l That this has been accomplished for tramp In designing a modern cargo vessel, the gen­ ships but not for cargo liners is suggested by eral objective is to provide as much cubic special data on British shipping.o For each space as possible in relation to the carrier's 100 net tons, the deadweight tonnage of Brit­ deadweight tonnage. The use of oil as fuel ish foreign-going tramps has steadily risen assists in this, as 'Oil can be stored in parts of from 264 tons in June 1914 to 281 tons in June a ship unsuited to coal and in spaces not other­ 1936. For the same c'Omputed space available wise utilized. Greater space in relation to for freight, in other words, tramps can now deadweight permits the carrying of more light carry 6 per cent more weight of the same cargoes, or cargoes generally stowing over 50 cargo. cubic feet to the ton.2 Additional freight can Cargo liners engaged in British foreign be earned in this fashion because a vessel can trade, on the other hand, apparently have a afford to haul a wider variety 'Of commodities. smaller average capacity as measured by the This is especially important to the cargo liner. relation of deadweight to net tonnage. The A roomy vessel can profitably carry a number figures are 233 deadweight tons per 100 net of bulk cargoes measuring up to 50 cubic feet tons in June 1936 as against 247 tons in 1914. per ton, but it may also profitably carry light But as the carg'O liner's function begins to ap­ cargoes such as oats.3 A less roomy vessel is proach that of the express freighter, dead­ restricted to heavier cargoes such as iron ore weight tonnage has less meaning. Ships car­ and coal, and hence has fewer opportunities rying light high-value freight may perhaps for earning freight.4 utilize all available space capacity, but not all In the design of tramps particularly, naval their weight-carrying capacity. Cargo liners architects seek ways of increasing deadweight handling mixed cargoes have been subject to tonnage in relation to net tonnage." Port dues, special demands such as the necessity of pro­ and Suez and Panama Canal dues, are all viding refrigerated cargo space and additional based on a ship's net register tonnage (meas- machinery to provide faster speeds. These reduce net tonnage in relation to gross ton­ 1 Illustration taken from C. D. MacMurray and nage. Smaller space is available for freight, M. M. Cree, Shipping and Sllipbrolcing (London, 1934), which means that 5 'Or 6 per cent less weight p.75. of cargo can be carried. 2 No data are at hand to indicate whether changes have occurred in the composition of the world's car­ Tending to modify what may be termed the goes transported overseas in respect to weight-volume economics of overseas cargo transportation relationships. Over a period of years, should cargoes in the aggregate become lighter or heavier in relation are certain noneconomic factors. Of chief to the space occupied, the design of cargo ships would importance are the actions and attitudes of be influenced. governments toward their merchant marines. 3 Wheat stows about 47 cubic feet to the ton, oats If economic considerations alone were im­ 65 to 70. portant, merchant ships would be constructed 4 If a vessel is specifically designed for carrying exclusively a commodity like iron ore, large cubical and operated in response to the volume and capacity is, of course, less important. character of the international business being /) Net tonnage represents the total cubical capacity conducted or potentially available. Their type of a ship available for carrying cargo and passengers, arrived at by deducting from the gross tonnage spaces would be g'Overned solely by the nature of this used for housing machinery, the ship's crew, gear of business, and their disposition over the trade various kinds, etc. routes of the world would be determined by o Based on the Classification of Shipping Enquiries the buyers and sellers in foreign markets set­ undertaken by the Chamber of Shipping of the United Kingdom in 1933 and 1936, as analyzed by Isserlis, ting in motion the machinery of ocean trans­ op. cit., p. 63. portation. Actually, stimulation of foreign CHARACTERISTICS OF THE SIlIPPING INDUSTRY 59 trade may be a by-product of forced shipping LAID-UP TONNAGE AND NEW CONSTRUCTION development, either in building or the main­ tenance of ships in particular trades for "stra­ Ordinarily there is too small a demand for tegic" reasons. new tonnage at any particular time to make The problem of supplying tonnage of types large-scale construction feasible, and ship­ suitable for meeting commercial demands as building does not lend itself to mass-produc­ well as "defense" needs is more or less difficult tion methods. Only during the war emer­ depending upon the geographic distribution gency were fabricated ships built in large of the sources of such demands. Moreover, the volume, and the products were not such as distribution of needs for ocean transportation to encourage resort to this practice in time of services may vary not only because of changes peace. in the economic development of the countries Technological advances in shipping have concerned, but by reason of the imposition been stimulated in some directions by the gen­ of national regulations, tariffs, and various erally excessive supply of tonnage which has forms of restrictions tending to stifle trade. persisted since the war. Low freights make British leadership on the high seas has been operating economies imperative. One level of maintained for generations without extensive rates is necessary to permit one type of ship recourse to subsidies or other methods com­ to break even or operate profitably on a given monly employed by maritime nations to place route, while another level may apply to an­ their nationals in a favored competitive posi­ other type. Unless rates are abnormally low, tion. But even the British government re­ both types can exist in the trade, but under sorted to a subsidy for tramp shipping in 1935. depressed conditions the more efficient car­ After several years of drastic contraction in rier naturally has the advantage while the overseas trade, the supply of shipping was less efficient may be laid up. Expansion of so excessive that ocean freight rates were de­ tonnage in 1925-29 was largely in more effi­ pressed below the point at which many own­ cient types, which swelled the world's mer­ ers could continue to operate. Under the Brit­ chant marine in the face of low rates. ish Shipping (Assistance) Act, a subsidy of Idle shipping in the principal maritime £2,000,000 was provided for tramp ships, to­ countries, as shown in the upper section of gether with a fund of £10,000,000 for advances Chart 2 (p. 60), was nearly 11 million gross to shipowners for scrapping obsolete vessels tons early in 1922. This reflected both the and building new or modernizing existing low state of trade, at the worst of the postwar tonnage. Government favors were also con­ depression, and the large amount of uneco­ ditioned upon the improved organization of nomical tonnage hastily built under war-time tramp services and the initiation of negotia­ programs. Laid-up tonnage gradually fell tions with other maritime powers for the sta­ during the succeeding years of recovery and bilization of OCean freight rates.1 "prosperity," but on January 1, 1930 it was Government aid to merchant marines is still estimated at 3.2 million gross tons. Part now common, with a drift toward greater of this, including practically all of the Brit­ encouragement and financial help. Nowhere ish tonnage, represented what may be called is this more true than in the United States. normal unemployment; another part, includ­ Some merchant marines that are artifici­ ing most of the American, represented ships ally maintained, ostensibly for reasons of deserving only to be scrapped but on which national defense, would undoubtedly shrink the decision had not been taken. Particularly greatly without government subsidy. Com­ for the past decade, the quarterly data for petition is thus not merely between the indi­ idle tonnage in British ports (including some viduals or shipping companies of different foreign vessels) are illuminating. These are nations, but also between their governments. shown in the lower section of Chart 2. All of these influences are reflected, directly With the depression and drastic decline or indirectly, in the level of shipping freights. in world commerce, the number of ships laid

1 See also below, pp. 62-63 and 103-06. up rose rapidly until, at its peak, 14.2 mil- 60 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

lion gross tons were idle on July 1, 1932. As yards has been continually below the prewar recovery set in, trade increased and scrapping level. Building by nations other than Great of obsolete ships took place on a large scale, Britain has proceeded apace, while even in with and without aid from government scrap­ 1937 the British were not constructing new ping subsidies; consequently idle tonnage de­ vessels at the prewar rate.2 These statistics clined, reaching late in 1937 the lowest point do not accurately reflect the changes that have since shortly after the war. Before the end of 1937, however, a downward spiral in prices CHART 2.-IDLE MERCHANT SHIPPING, 1921-37* started, trade contracted, ocean freight rates (Mil/ion Ions: gross, for upper seclion; fell, and the volume of idle tonnage once more net, for lower section) began to rise. Expanding trade in the mid­ 16.0..------,16.0 dle 'thirties stimulated construction activity; and more substantial gains were made in ""Ja",n.'"-.I -----112.0 1937, when total world merchant shipping launched rose slightly above the 1909-13 aver­ 8.0 J"jy,""I __--j 8.0 Jen.1 age though not up to the 1913 peak. Signif­ icant changes in merchant tonnage launched 4.0HI1l--tl--U--ta--l?I--n-.... If--rr--lif---lilfm:!-~M__-n----I 4.0 are revealed by the summaries given here.1 O~~n-~~....a~~kJ~~m-~UL_~~~L....W o 2.4 2.4 World Output, In percentages of Period output, In 1909--13 averages If thousand I{\ f' "\. gross tons World British Foreign 1.6 I I 1.6 ------\ U.K. Ports a~iJrltl~'P Average .6 V\ r'"\ .6 190!}-13 ...... 2,489 100 100 100 ~ I'-v ~ ~~ 1"'-r"\ 1922-26 ...... 2,045 82 64 111 o ~ 0 1927-31 ...... 2,457 99 81 126 1921 1923 1925 1927"" 1929 1931 1933 1935 1937-- 1932-36 ...... 1,121 45 28 72 * Annual data for upper section, mainly as of January 1, in Table I; semiannual and quarterly data are not regularly 1933 (postwar low) .. 489 20 9 37 available, but figures are plotted for July 1, 1932 to show 1935 ...... 1,302 52 33 83 the peak then reached. See also Chart 7. 1936 ...... 2,118 85 56 131 Quarterly data for lower section from Chamber of Ship­ 1937 ...... 2,691 108 61 183 ping of the United Kingdom, Annual Report, 1932-33, pp. 140-41, and ibid., 1937-38, pp. 86-87. 1913 (prewar peak) .. 3,333 134 127 145 occurred in Great Britain's relative position in world shipping, already mentioned; but one United I Ger· Scandl· Nether· United I Other Year King· Japan many navia lands states"1 coun· implication may be noted. British leadership dom I tries in shipping has long been such that it has TONNAGE LAUNCHED (thousand gross tons) been possible to generalize upon the state of 1909--13 avo 1,522 50 1277 73 85 255 227 shipping by using the case of Great Britain. If present trends continue, this may no longer 1935 ...... 499 146 226 253 57 33 88 1936 ...... 856 295 I380 285 94 112 96 be safe. 1937 ...... 921 451 436 334 184 239 126 Furthermore, when shipping services repre­ I sent a nation's chief export, as they do for UNDER CONSTRUCTION, Dec. 31 (thousand gross tons)

1935 ...... 743 119 254 172 104 33 118 1 Data from Chamber of Shipping of the United 1936 ...... 964 203 408 220 151 110 196 Kingdom, Annual Report, 1933-34, p. 60; supple­ mented for years 1935.... 37 by Lloyd's Register figures 1937 ...... 1.125 305 369 272 289 204 1 335 I tabulated in "Commercial History of 1937," supple­ ment to the Economist, Feb. 12, 1938, p. 53, or Bank • Including a small amount of lake tonnage. of England, Statistical Summary, August 1938, p. 100. 2 Heavy construction of warships has permitted Since the war emergency passed, merchant many yards to continue operations during the past few years, and has sustained the British shipbuilding tonnage under construction in British ship- industry at a high level. CHARACTERISTICS OF THE SHIPPING INDUSTRY 61

Great Britain,1 changes in total ship tonnage construction fell off only after rates had sunk also have profound significance. When the to very low levels; in 1934, with costs very fact that shipping is a principal export is low, shipbuilding made a partial recovery coupled with the fact that the United Kingdom from deep depression before freights began is the leading international market for grains, their advance, and in 1936 and 1937 responded and wheat in particular, an interrelationship to the sharp rise in freights; extreme ad­ of considerable moment becomes apparent. vances in shipbuilding costs checked this rise Unit costs of new ships in general tend before freights reached their peak. to parallel the cyclical movement of tonnage Late in 1937 and early in 1938, costs of con­ under construction, and both run broadly par­ struction were higher than in any period in allel to the course of ocean freight rates if the history of shipping except during the war short-lived peaks are disregarded. This is boom ending in 1920. According to unofficial shown by the curves in Chart 3. Some impor- data on the cost of a new, ready 7,500 ton

CHART 3.-0CEAN FREIGHT RATES, TONNAGE UNDER CONSTRUCTION, AND COST OF NEW CARGO STEAMER, 1922-38*

130 I.t>I,fJfhnucv,rfle.lst;.lo • 120 " 110 ~ 20 0 -- 100 4 .0 / , 18 00 38 / , I A , 80 32 " ~onna2e under OUTER SC"'l£ :k\ I\,. / construchon I 14 .r I 7.-1 '-- 70 2 .8 , IIIOh I'OS5 IN/lEA SCALE 0'):£ 'OM) I )(- / VI' 120 ~L ~ t\ I -~-+\. Cost of 7,500-ton 24 -- vv "-80 cariO steamer // ~ I'v./ '-'-, ;\ In,,,,,,,,,,")'--' } 10 0 'kr II "V\ 50 2.0 --y Economist freight index rV ~r / r:- // ,. ~ (AverIl. 1898-/913'100) 45 t8 - ~ V 1\",-,,/ ~ WI! 0 40 I.. / ~, /' ,- 35 1.4 1\ '- /' /"~/ ( 30 1.2 \ I.0 \ ! / .. \ .8 ~ 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938

• Economist index of freight rates, as given in the issue of Feb. 26, 1938, p. 484; Lloyd's Register quarterly data on tonnage under construction, here taken chiefly from Chamber of Shipping of the United Kingdom, Annual Reports; and Fairplay data on the cost of a new 7,500-ton (deadweight) cargo steamer built in Great Britain.

tant exceptions must be noted. In 1927-30 (deadweight) cargo steamer built in Great merchant shipbuilding was well maintained Britain,2 the postwar low of £32,000 occurred though freights were not, and tonnage under in 1932; but in June 1937 such a ship cost £105,000, so great was the competition for materials and shipbuilding facilities in a boom 1 Shipping services to other nations by Great Britain represent a value even greater than British period marked by intensive rearmament. This exports of cotton textiles or iron and steel, and nearly figure compares with the all-time peak of three times as great HS exports of machinery or woolen £258,750 reached in March 1920. Prior to and worsted manufactures. "Invisible" shipping "ex­ ports" are estimated at about £94 million in 1913, 1914 no tramp steamer ever cost £14 per ton reached £130 million in 1929, were approximately £59 deadweight to build, and costs of £7 or £8 per million in 1933, but rose to £115 million in 1937. See deadweight ton were more common. Chamber of Shipping of the United Kingdom, Annual Reports for 1933-34 and 1937-38. Higher costs of new construction mean that higher freights are necessary to permit profit­ 2 Fairplay (a leading British shipping journal), Jan. 13, 1938. able operation. The farsighted shipowner 62 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

does not rush blindly to build unless higher the shipping industry enjoys great freedom of freights promise to be more or less permanent. action; but for the same reason and because Yet shipowners apparently are not particu­ of the lower initial investment required, nor­ larly good judges of the freight outlook.1 mally competition in shipping is extraordi­ A large part of the remaining tonnage con­ narily keen. Vulnerable though the railways structed during the war years and immedi­ have found their natural monopoly, nothing ately afterwards is now obsolete, twenty years approaching it exists in shipping. being the average useful life of merchant There are, however, significant differences ships. But the incentive to replace older and in investment and degree of flexibility within slower cargo ships has been strong during re­ the shipping industry, as already noted. It cent years, and because of the low level of was natural for the liner companies to devise freights the age distribution of such vessels the shipping "conference," which is simply is now much more favorable than that for a means of regulating rate competition. Con­ all kinds of ships as a group. Barring un­ ferences vary in type and scope, but all have usual circumstances, however, much tonnage as their fundamental purpose the avoidance now laid up for lack of employment will prob­ of disastrous rate wars and other competitive ably never be recommissioned. conditions which curtail earning power and jeopardize capital investment.2 Under the COMPETITION AND Co-OPERATION stress of too unfavorable traffic conditions, or Lack of anything corresponding to the rail­ if any important line withholds co-operation, road's fixed roadbed and trackage means that a conference breaks down. Until the last few years nothing comparable 1 In the same issue, Fairplay's editor wrote: "As a body, shipowners were always wrong before the war to liner conference agreements existed in the in their readings of the industry's prospects, and since tramp trades. Tramp owners have less at the Armistice they have been, to much the same ex­ stake financially, and both the large number tent, out in their estimates of the future." The quoted opinions of nUmerous leaders in the shipping industry of different owners and the nature of the serv­ confirm the generalization of "The Look-Out Man" ice they provide have rendered co-operation to the effect that "Twelve months ago everybody who impracticable. The keenness of the competi­ studied the matter saw that there was an improvement coming along, but few thought for a moment that tion among operators in all parts of the world freights would reach the height they did [in 1937] or for the available cargoes has been indicated would drop as they have done." by continuous fluctuations in charter rates. 2 Sometimes agreements regulate sailings and even Since February 1935, however, a scheme allocate fixed proportions of the available business or revenue. Conferences are usually limited to opera­ has been in operation, under British leader­ tions over specific routes. A single shipping company ship, for regulating the highly individualistic may belong to numerous conferences, depending upon tramp shipping industry. a Detailed scales of the number of areas in which its ships operate and on whether it is in the business of carrying passengers, minimum rates have been established over the freight, or both. most important routes and have been ob­ a As a condition of receiving aid under the British served, with few exceptions, by tramp fleets Shipping (Assistance) Act, 1935, British shipowners of all countries. The process may be called were forced to co-operate. They, in turn, successfully enlisted the co-operation of foreign owners in the "rationalization," but the imposition of con­ maintenance of minimum rates. British tradition is trol is plainly intended. To quote the fourth against governmental aid, even though this act was report to the President of the Board of Trade not designed to enable British shipping to obtain competitive advantages over foreign subsidized com­ on the Working of the Tramp Shipping Ad­ petition. There are those, however, who feel the need ministrative Committee (1937); for government intervention in British shipping when they reflect that twenty-five years ago Great Britain .... Soon after the institution of the mInImum owned half of the world's vessel tonnage and there freight schemes it became necessary to impose was practically no important competition. This posi­ restrictions on outward sailings in ballast of un­ tion has radically changed, as other nations have greatly added to and improved their merchant fleets. fixed tonnage in the Australian and River Plate Japanese tonnage, for example, has more thun doubled grain trades, and these were extended in 1936 to since 1914. Most of the ships built since 1922, and include the St. Lawrence trade. These restrictions those now under construction, are of types and quali­ are intended to avoid accumulation of unchar­ ties that provide the keenest competition. tered tonnage and consequent depression of the THE FREIGHT MARKET AND FREIGHT RATES 63 respective markets. . . . . Experience has shown tramps and their role in the making of ocean that this is the only satisfactory and effective freight rates. way of adjusting supply to demand ..... Conference agreements on liner rates, and their recent counterpart on tramp - charter Regulations of this sort have definitely af­ rates, nevertheless constitute only a limited fected what might be considered a normal approach to the relatively rigid system of rail­ supply of tonnage at particular ports for the way tariffs. Public regulation of ocean freight movement of crops and interfered with the rates, though not entirely absent, is negligible ordinary process of determining ocean rates.1 in comparison with the system under which The subsidy2 and rate - control develop­ railways operate in most countries of the ments, though perhaps necessary for the world. There is almost no regUlation of the preservation of merchant fleets during a criti­ business practices of shipping except that cal period, were something new in tramp ship­ which may be self-imposed. Even if liners ping. Should such measures be continued, it have largely withdrawn their rates from com­ may be necessary to revise long-established petition, they must still consider potential ideas with respect to the freely competitive nonconference and tramp competition.3

II. THE FREIGHT MARKET AND FREIGH T RATES Distribution of the world's shipping in ac­ quickly reflect variations in demand for ocean cordance with needs for ocean transportation transportation. Their level has been charac­ is normally accomplished through the opera­ teristically determined by free competition.4 tion of the freight market. Many bulk cargoes, limited in the transporta­ As already noted, liners meet the fairly tion cost they can bear, represent a marginal constant requirements for cargo carriage be­ demand for tonnage; and changing levels of tween one country and another, while tramp charter rates largely determine which cargoes steamers in large part meet the supplementary shall be carried and which left behind. To a requirements, including those arising from limited extent the same influences operate in the seasonal movement of agricultural prod­ the liner market. Here, however, rate changes ucts. Tramp or charter rates, therefore, most are less rapid and the relatively high-value goods transported on liners can bear more

1 Cf. Times of Argentina, Feb. 15, 1937, p. 13: "An­ substantial increases in rates without affect­ other impediment to chartering for April/May is the ing the volume of traffic. edict of the Tramp Committee which prevents tramps' coming out in ballast until fixed ahead..... " Ship operators may be free to send their vessels anywhere they choose without jeopard­ 2 The last payment under the British tramp subsidy was made in February 1937. The act had provided izing an investment in tracks or comparable that payments should cease when the average level equipment. In setting freight charges they of freights exceeded that of 1929. In 1937, a profitable may be free from governmental regulation year for shipping, rates over practically all routes rose above 1929 levels. See Charts 7 and 16, pp. 74 and the necessity for generally considering and 118. the cost of rendering a specific transportation a Deferred rebates are an example of another com­ service. They may ask and receive rates de­ petitive practice. Though outlawed in the United pending upon what the traffic will bear at any States (originally under the Shipping Act of 1916), the deferred-rebate system influences rates on some given time. But what the traffic will bear de­ commodities handled by liners between other coun­ pends not alone upon conditions in the ship­ tries. Shipowners employ this device to assure the ping industry and the volume of cargo avail­ exclusive use by a shipper of a certain line or lines; in return, after a specified waiting period, the shipper able for export at particular ports; it depends receives a refund, usually around 10 per cent, on the upon the diversity of desirable cargo. freight charge paid. The nature of the cargo available, usually 4 With stabilization schemes in effect, however, the product of the type of economic develop­ competition between tramps is no longer "free" when the prevailing rate level is the minimum, as during ment within the export country, also deter­ many months of 1938. mines the tramp's competition from liners and 64 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

the liner's tramp or non-conference compe­ and contracted for cargo space in advance, tition. Such influences are particularlyim­ which makes him a speculator in freights. A portant on bulk commodities which can be speculative shipper who puts wheat afloat handled either in full cargo lots or in parcel unsold necessarily must arrange for freight lots. When tramp ships find profitable bulk and also in effect speculate in the freight cargoes in a trade where a liner service ex­ market. The greater the distance overseas ists, the liner must fix very low rates if it that such wheat is to be moved, the greater desires to share in such business. If tramps his risk on freights. Compensating for this, cannot find suitable employment over the of course, is the additional time in which to liner's route but there exists a volume of bulk elfect the c.i.f. sale. Since there is no uni­ goods to be moved, the liner's position is formity of practice or conditions, one cannot strengthened; it may develop a profitable safely generalize as to how wheat is set in berth cargo business in parcel lots. motion and handled until sold. In the long run, however, both tramp and Moreover, there is a wide range and much liner rates are subject to the same general overlapping in functions of concerns engaged influences causing an increase or decline in in the grain trade. Firms or individuals en­ the volume of world trade-operation of the gaged in that phase of the trade which in­ business cycle, trade restrictions and discrim­ volves dealing in the freight market are, how­ inations, and other national policies. In their ever, relatively few compared with the thou­ effects, these forces seldom distinguish be­ sands of organizations or persons frequently tween raw materials carried by tramps and termed shippers. The bulk of the interna­ semifinished or manufactured goods trans­ tional grain movement is principally concen­ ported by liners. Hence, liner and tramp rates trated in a few large exporting or export­ may be grouped together in considering the import organizations; and the extent to which broad influences finding expression in ocean these are financially or otherwise involved in freights. the performance of related functions need not be considered here. OPERATION OF THE FHEIGHT MARKET It is customary in booking freights to work through a specialized type of broker. Brokers Demand and supply factors are reconciled constitute a vital and essential part of the in the freight market by a process usually as machinery of the ocean freight market. These nearly automatic as in commodity and finan­ intermediaries may perform a wide variety of cial markets. The wheat shipper, for example, functions in addition to chartering operations. is the buyer of freight service, and the ship­ The freight broker's service in the United owner is the seller. The actual movement of States is chiefly securing cargo for liner oper­ wheat overseas is assured when the shipper ators. Freight brokers are active in the pro­ has bought wheal-in the country or f.o.b. vision trade, where shippers are relatively few port of shipment-and engages space for ship­ but the volume of each shipment is compara­ ping it. The c.i.f. sale in most cases takes tively large. These brokers are not concerned place either before or after the contracts are with the details of papers and documents, made which actually produce the movements, since most foodstuffs from this country are but nowadays the time lag is usually brief.l destined for a few European countries where The shipper may make a sale of wheat the regulations are simple.2 Contracts for abroad, then promptly go into the market for parcel space on liners are usually made freight. Or he may have anticipated his needs through such brokers locally, or through local steamship agents performing essentially the

1 International shippers maliC considerable use of same services. futures markets to hedge unsold or oversold shipments. The term ship broker in the United States 2 Freight forwarders, on the other hand, serve the may mean anyone of several things. Almost small inland shipper by relieving him of the numerous details involved in parcel export shipments of manu­ all ship brokers arrange for chartering ships factured and other goods to all parts of the world. and preparation of the "charter party," the ! THE FREIGHT MARKET AND FREIGHT RATES 65 contract between shipowner and charterer ports not served by the liner, he will charter setting forth the responsibilities of each. But a tramp ship through a broker, generally some the ship broker in this country may also be a days, weeks, or months before his grain is to steamship agent, a dealer in the sale of ships, be shipped. When this practice is followed, a marine insurance agent, or a speculator in the shipowner can dispose of his fleet to ad­ freights on his own account. He may possess vantage over the world and the shipper can an organization suitable for loading, discharg­ make a forward sale at a price which includes ing, and operating ships, in addition to char­ freight. tering them. Every broker in freights has connections or Some ship brokers are equipped, further­ correspondents in a large number of ports more, to place a tramp ship "on berth"; they throughout the world. He may have branch may act as charterers themselves, being re­ offices or representatives in certain ports, as sponsible for providing a certain class of cargo is often the practice of British brokers. Since on which full cargo rates are paid, but accept his correspondents are usually other brokers, cargo from other shippers at rates mutually the broker's business can be conducted with agreed upon. This practice is sometimes fol­ a small staff. The principal expense in a lowed simply to fill unused space. At other chartering transaction is often the cable or times, particularly when liner rates are high, telegraph tolls involved. Because of this ex­ it becomes a speculative venture in competi­ tensive communication system, knowledge of tion with liners. developments affecting freights is rapidly In Great Britain, where the largest volume disseminated, greatly facilitating the smooth of business is transacted, there are brokers functioning of the markef.1 specializing in the sale of ships, in chartering, Since brokers are commonly associated and in loading. Because such a substantial with grain, produce, or maritime associations amount of detailed knowledge is required, or exchanges, such as the Baltic in London2 many chartering hrokers narrow their field or the New York Produce Exchange, the me­ further hy specializing in certain commodi­ chanics of market transactions in grains and ties or trades. arrangements for their shipment and deliv­ Wherever found, the chartering broker ery overseas are advantageously combined. must have a wide knowledge of matters relat­ 'Without leaving the floor of one of these ex­ ing to freight and commodity markets, sea­ changes, one may arrange for chartering a sonal and other aspects of the world's trade, ship or engaging space in a liner, and con­ and costs of loading and discharging sundry tracting marine insurance. A merchant re­ cargo at different ports, including port dues quiring cargo space merely gives orders to his and similar charges. He must know about agent, wherever he may be located, to bid for fueling stations on different trade routes, the a certain amount of tonnage at a certain port approximate cost of coal or oil at such sta­ on a certain date and at a specified rate. tions, operating costs of various sizes and Shipowners having vessels to charter like­ lypes of carriers, and many related matters. wise give instructions to brokers representing Small tramp-ship operators depend more them on the same exchanges as to the con­ than large companies upon the broker for ad­ ditions and rates they are willing to accept. vice and finding employment for their ships. The general practice is to use a form of "char­ Even the larger concerns and general steam­ ter party" worked out by some organization, ship companies with chartering departments of their own, however, frequently consult with 1 A readable account of how tramps are chartered and deal through brokers as a matter of may be found in .Joseph Leeming, Ships and Cargoes (New York, 1935), pp. 107-39. policy. Shippers or exporters, on the other 2 The Baltic Mercantile and Shipping Exchange is hand, do not attempt to arrange for space the world's chief center for tramp chartering as well except through established agencies. as one of the leading commodity exchanges in Europe. If an exporter's shipment is larger than Its membership includes shipowners, ship brokers, and buyers and sellers of bul1{ cargoes (such as grain, tim­ space available in a liner, or is destined for her, oil, oil seeds, and coal) which are traded there. 66 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE mostly the Chamber of Shipping of the United one with a volume of general traffic warrant­ Kingdom, for the particular route and partic­ ing regular liner services sufficient to handle ular goods or group of goods. These "charter a substantial proportion of the requirements parties" set out in great detail all particulars for transoceanic grain transportation. On all of the transaction except as to the quantity other routes the tramp ship and hence charter of the cargo, the freight rate, the time the ship rates of freight assume a dominant influence. will be ready to load, and so on, which are For this reason, national policies that en­ different in each transaction. The process of courage certain classes of shipping and hence bargaining is limited therefore to an agree­ modify simple economic relationships would ment on the form of charter party to be used, seem to be of small importance to the inter­ to points not determined in it, and to some national grain trade. Tramp shipping is the changes in the more general rules of the char­ least "encouraged" branch of the industry. ter party which may be thought desirable. Yet, though obscured, these artificial influ­ When the agreed document is signed, a "fix­ ences are nevertheless present. Subsidized ture" is said to have been made, and the rate liner services may carry a relatively small of freight agreed upon and other conditions part of the grain transported overseas, but of the voyage become the basis for charter­ they are often the determining factor in the rate quotations.1 rate level during the seasons of small move­ The beginning of a transaction involving ment, and hence affect tramp revenues. Over the shipment of a grain cargo by tramp the longer period this must be reflected in steamer may be with a local ship broker or charter rates. the direct representative of a London broker. It makes little diITerence, since all have THE RIVER PLATE TRADE their connections with London, center of the Not all trades or demands represented in world's ship-chartering activity; and these the operation of the freight market are of connections are extensively utilized in effecting equal importance. Normally the River Plate charters for grain destined to the United King­ trade is most important in influencing freight dom or the continent of Europe. rates on grain. It is primarily a market for Merchants in grain, coal, cotton, and other tramps; it absorbs a large amount of tonnage bulk commodities or raw materials are en­ in carrying Argentine grains some 6,000 miles gaged in appraising not only commodity mar­ to Europe; and it removes this tonnage from ket conditions but also conditions in the competition on other routes for a period of freight market. Together, they represent the several months. Other trades remove ton­ demand for low-cost bulk commodity ship­ nage from competition also, but ordinarily ping. Their individual bargaining with ship­ they cannot absorb so much for as long as owners results in the movement of those goods three months. for which there is a sufficiently strong de­ In the River Plate trade perhaps there is mand, and the elimination of goods represent­ ordinarily the freest interplay of supply and ing a submarginal demand at the moment. demand forces. Favorable rates attract a large Ports where the best charters are obtainable amount of tonnage until too much congregates attract the tramps. Inasmuch as liners must on the river and rates fall. Outbound tramp maintain schedules regardless of freight mar­ cargoes from Europe are few (coal is the chief ket conditions, a limited amount of space be­ one), and round-trip voyages must be planned tween specific points is usually available primarily upon the basis of the freight that where they operate. However, the North At­ may be earned homeward. Within certain lantic route to Europe is practically the only limits, any increase in rates from Argentina to Europe is promptly reflected in a decline

1 Liner-rate quotations, particularly for berth cargo, of outbound rates. are often "offering" rates, which do not necessarily When ships are dispatched to the River represent business actually transacted or the fixed Plate in anticipation of business that does not freight charge which would be incurred for business done at conference rates. materialize, the world freight market is af- THE FREIGHT MARKET AND FREIGHT RATES 67

fected. Late in 1937, for example, grain crop the better his chances of keeping his fleet prospects deteriorated in Argentina. For the operating at a profit. short exportable surpluses excessive tonnage If unsuccessful in securing a wheat cargo was concentrated in this part of the world. early in the year, the owner with his ship al­ One report late in January 1938 stated: ready on the River Plate may wait for the Present unaccomplished ocean freight chartersl maize crop. But here he is confronted with of 647,500 tons must be near the record low for other risks and uncertainties. Weather can this time of the year and compare unfavorably, alter the condition of that crop after harvest not only with the exceptional figure of 4,291,800 as well as its size before harvest, and moist tons at this time last year, but even with the weather may delay shipments for weeks. 1,060,600 tons two years ago, when the wheat crop was very small. It looks as though the regular For a time the rate level over one route may liners to foreign countries would be able to carry depart from its usual relationship with rates the greater part of this year's crops, so that tramp over another. A merchant dealing in a com­ shipping cannot depend very much on the River modity in which the freight item must gen­ 2 Plate trade during the next few months. erally be considered, and a commodity avail­ In consequence numerous vessels had to leave able in several parts of the world, may then in ballast for Australia, Africa, Chile, and find that it will pay to change sources of North America. supply. More wheat may be shipped from The tramp owner has alternatives, but he Canada or the United States and less from can hardly avoid a period in which his vessel Australia or Argentina. is earning no freight if it is in position on the In practice such tendencies never continue River Plate with no cargo available. If still in for long.4 The disadvantages created for ship­ Europe, the ship can be sent to the Far East, pers from one export nation tend to be offset perhaps pick up a coal cargo to Colombo, then by a lowering of prices there. A redistribution move in ballast to Rangoon or Java for a takes place in the proportion of return going homeward cargo of rice or sugar,S or to Dairen to the grower. Also, if demand shifts from the for soybeans or oilcake. Or it may find a coal more distant sources to the nearer because cargo to Italy or other Mediterranean ports, of freight differences, many tramp ships op­ and pick up a mixed load homeward. During erating in the long trades will shift to the late years, it could secure a cargo of scrap shorter ones, thus increasing the supply of iron from the United States for the Orient or tonnage and tending to lower rates and equal­ Europe. In any event, the shipowner must ize freight differences. weigh tht' alternatives and risks to be taken because of rate fluctuations. The more accu­ SUPPLY AND DEMAND FACTORS rately the probable fluctuations are estimated, Like the prices in any other market, ocean freight rates reflect the interplay of a variety 1 "Unaccomplished charters" are like orders booked but not filled. They represent the prospective business of demand and supply factors. The supply ahead for varying periods within coming days, weeks, of tonnage at any time may be viewed not or months. Like orders booked, there may be some cancellations, but unless estimates of the tonnage to merely in terms already discussed, but in an­ be moved are far off, total cancellations are usually other significant way. It includes vessels in small. active service, varying in age, condition, and 2 First National Bank of Boston, Buenos Aires efficiency as operating units; vessels under­ Branch, The Situation in Argentina, Jan. 25, 1938, pp. 1-2. going repairs, reconditioning, alteration, or

8 For many years the Indian Ocean has been an im­ conversion; and vessels laid up idle, in vari­ portant collecting area for empty tramps seeking cargo, ous conditions. Outside the supply proper, but this practice has diminished with the rise of Dutch, German, and Japanese lines serving the Orient. Be­ yet intimately related to it, are vessels that fore the war the Black Sea was another place for are being broken up-the normal end of ships tramps to gather, but with the postwar declines in that have lived out their economical life; and Russian grain exports and the British coal trade to the Mediterranean, that area has become relatively those in course of construction, all the way Unimportant. from planning through keel-laying to launch­ 4 See Chart 5, p. 71. ing and fitting out. 68 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

When freight rates decline below profitable less or little for two reasons: the tonnage re­ levels, the supply in active service declines: quired to move a given amount of grain from less efficient vessels are laid up, either for North America is smaller than from South work in the shipyards or to lie idle awaiting America or Australia to Europe; and the better times; more ships are sent from active storage facilities and holding ability in North service or idleness to be scrapped; shipbuild­ America are far greater than in the Southern ing proceeds at a slower pace; fewer' keels Hemisphere. Serious and protracted coal are laid, and the rate of launching falls off. strikes, within Great Britain or in the United The reverse occurs when freights rise to States, enlarge the demand for shipping and very profitable levels: reconditioning or alter­ disrupt its normal course. ation of active vessels is delayed; idle tonnage Some of the elements in demand are sea­ is put back into service; fewer ships are sonal, for in many particular trades there is scrapped; shipbuilding is speeded up; launch­ a fairly characteristic peak and trough within ings are accelerated and, if better rates seem a year. Even in these instances the timing is likely to persist, new keels are laid in larger not identical from year to year and the ampli­ numbers. tude of the fluctuation varies widely. To a The demand for ocean shipping may be considerable extent, however, seasonal peaks considered to include not only the active de­ and troughs in the different trades are com­ mand reflected in definite bids for space, but pensating rather than cumulative. the potential demand which could become Moderate ups and downs in demands upon active if the combined barriers to interna­ shipping are met with comparative ease, with­ tional trade, including ocean freight rates, out radical disturbance of rate levels. But a were moderately lower. Sometimes the level prolonged depression in ocean freight rates, of rates is the decisive factor as to whether accompanied by a large volume of idle ton­ or not trade will take place; more commonly, nage through several years, paves the way for other factors are decisive. a striking advance in rates when a sudden Sometimes an exporter is not able to com­ increase in demand occurs after heavy scrap­ pete in an overseas market with exporters of ping and light building have combined to other countries because of tariff differentials diminish the total supply. Moreover, often and similar influences, unless he can obtain considerable time is required to recondition concessions in ocean freight rates, one of the vessels that have long been idle, and owners elements in his marketing cost. A ship opera­ are reluctant to order this work done unless tor, purely on the basis of the cost of render­ rates promise to stay up. ing a transportation service, would not be The suddenness with which a change in inclined to make the necessary concessions. demand occurs has a pronounced bearing However, he does so for a number of reasons. on the course of rates. A 50 per cent increase His vessel may be short of cargo in one direc­ by small stages over a decade is easily met, tion, and he may be making the run over a without marked disturbance to rates. A 50 route whether cargo is obtainable on one leg per cent increase within a month or two will of it or not; hence he can figure that he is not permit a prompt adjustment of supply by losing nothing, and there is always the pos­ drawing upon existing reserves. Given a year, sibility of developing a larger volume of traf­ and if idle-tonnage reserves are large at the fic, once the exporter for whom he is render­ outset, greater tonnage requirements can be ing the service gains a foothold in the foreign supplied with a much more moderate rise in market. rates. Marked advances in rates occur, how­ Raising protective barriers tends to reduce ever, if reserves are small. Similarly, a slack­ the demand for shipping; lowering them ening of demand has far less influence on rates tends to expand it. Short harvests in import­ if it is spread over three years instead of over ing Europe, or abundance of Argentine and six months. Australian crops, usually increase demand. Wars affect both the supply of and demand Abundant harvests in North America affect it for shipping tonnage and completely change THE FREIGHT MARKET AND FREIGHT RATES 69 the character of trade, alter trade routes, and dexes of shipping freights are deficient in generally render inoperative the normal proc­ some respects, particularly in following short­ ess of freight-rate making through the ocean term movements, yet they will serve present freight market. In time of war, shipping purposes.l frequently becomes "the jugular vein, which, For at least forty years after the close of if severed, will destroy the life of the nation." the Civil War, ocean freight rates showed a This was the case during the World War. The definite downward trend. Though interrupted shortage of shipping for transporting needed for periods of a few years of increased ship­ war supplies, as well as foodstuffs for civilian ping activity, each succeeding depression saw populations, became more important than the freights at a lower level than prevailed in shortage of funds. Rates and costs ceased earlier depression years. Chart 4 shows the to be a primary consideration. Only under CHART 4.-INDExES OF TRAMP CHARTER RATES, such circumstances will freights reach 400 1869-1914* shillings a ton for grain from Argentina com­ 220 220 pared with usual rates ranging from 15 to 25 200 200 shillings, or 46 shillings per quarter from the 180 I I 80 North Atlantic compared with less than 3 shil­ 160 1'\ I 60 lings. Wars of more limited scope, such as '1""\ Isserhs the present conflicts in Spain and China, in­ 140 40 AI fluence the shipping supply and demand, with 120 \ r ~ I 20 special effects on certain routes. \ B ... _~ 100 ~ 1\1' I 00 V '-'r FREIGHT RATES UP TO THE WAR Limitations of ocean freight rate data, tip\ M 7 M changes in type of vessels, methods of propul­ 1869 1874 1879 1884 1889 IB94 1899 1904 1909 1914 sion, importance of trade routes and character * Isserlis index as given in Journal of the Royal Statis­ tical Society, Part I, 1938, CI, 122, here converted to the of cargoes carried, and the significance of 1898-1913 base; Economist annual indexes from issue of monetary units, all offer obstacles to direct Feb. 26, 1938, p. 484. historical comparisons of rates over a long indexes of shipping freights constructed by period of years. Dr. L. Isserlis2 from 1869 to 1914 and by the Index numbers, however, provide a useful London Economist from 1898 on. The former device for considering ocean freight rates in index is converted to the same base period as general, whether they apply to grains, coal, the latter, 1898-1913. From a high in 1873 or other bulk cargoes, and regardless of routes of over 200, only a few years after the open­ over which transported. The level of rates ing of the Suez Canal in 1869, rates maintained during one period may be compared with a more or less continuously declining tend­ that prevailing at another. All available in- ency until 1908.3 The all-time low of under 80 then reached was not even approached 1 See Appendix Note B. again until 1933. Although wholesale com­ 20p. cit., p. 122. Dr. Isserlis has taken the mean of the highest and lowest rates as reported annually modity prices were declining throughout a by the Angier firm for many years (Fifty Years' large part of this period, the fall in freights Freighis, 1869-1919, compiled by E. A. V. Angier, Lon­ was greater than the fall in wholesale prices don, 1920, and Fairplay since 1920), and expressed each year's rates as a percentage of the mean rates for into the 'nineties and continued more than the year immediately preceding. a decade after prices displayed an upward 3 Grain freights from New York to Liverpool can trend.4 be compiled from annual reports of the New York Just before the outbreak of the war, freights Produce Exchange. This series shows trends similar ~o but far steeper than those of the indexes plotted rose to approximately the level prevailing at In Chart 4. Thus the peak in 1873 was 10.56d. per the turn of the century and prior to the drastic bushel and the average of 1870-79 was 7. 85d., while decline following the Spanish-American and ~he average in 1901-10 was only 1.475d. and the low III 1904 only 1.125d. South African wars. In 1912, due to a com­ 4 See chart in Isserlis, op. cit., p. 75. bination of favorable factors, rates averaged 70 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE higher than at any time since the early 1880's. ship," all of which practically gives them a power­ Commenting on developments during that ful and dangerous monopoly .... these monopo­ lies give rise to and maintain excessive and unjust year, Angier's Steam Shipping Report states: rates, and, by the use of "fighting ships" and by The past year will be memorable in that it has wit­ rebates to large shippers, tend also to bring forth nessed a "boom" in freights, which, having been other and dangerous monopolies, monopolies in for nearly a decade at an unremunerative level, buying and monopolies in selling. at last rose sufficiently to enable shipowners to make a real profit .....1 This proposal, at the close of a "trust­ busting" era, is of some historical interest; but The usual reaction to a temporary "boom" it attributes to shipping "trusts" a degree of in freights was a decline; this continued until influence upon ocean freight rates that, if it the outbreak of the war, but still rates were ever existed, is not borne out by the record left at a fairly high level. during most of the past two decades. Freight After such a long period of declining rates have been generally at such low levels freights it is not surprising that shippers as to precipitate little investigation or protest should have protested against the rise that by shippers or national governments. The culminated in 1912. Only shipowners and plight of shipowners as a result of decreased governments are concerned when freight rates freight revenues is the factor that has been are absurdly low. High rates, on the other emphasized. hand, usually generate complaints by shippers and attacks on shipowners. During the World RATES IN THE POSTWAR PERIOD War, when shipping was generally controlled Abnormal conditions in shipping caused by by governments, and in the early postwar the World War, while in themselves of pri­ period, when all prices were grossly inflated, mary interest to historians, help to explain there were more important matters; but not the course of ocean freight rates for a large just before the war. part of the subsequent period. The high freights in 1913 inspired David Signing of the Armistice was followed by Lubin, the United States delegate to the Inter­ a period of acute stringency in ship tonnage, national Institute of Agriculture at Rome, to accompanied by an exceedingly high level of submit a Proposal for an International Con­ freights. Huge losses occasioned by the Ger­ ference on the Regulation and Control of man submarine campaigns had not been Ocean Carriage by Means of an International compensated for, despite feverish building Commerce Commission for the Purpose of activity, particularly in American yards.2 Ship­ Steadying the World's Price of Staples (Rome, ping services and facilities had to be re­ 1914). Lubin's contention was that inasmuch organized and reoriented, while emergency as seven-ninths of world trade was in "bulk needs were such that every seaworthy bottom traffic" such as agricultural staples, as against was in demand. Ships were in greatest de­ two-ninths in "package traffic" (manufac­ mand in the North Atlantic, not only for tures), it was of utmost importance to reg­ bringing home American soldiers but for ulate freight rates on the former group having transporting foodstuffs and other supplies to characteristic day-to-day and hour-to-hour impoverished countries of Europe until their fluctuations. Rates on parcels were already disrupted economies could be put in order. subject to a form of regulation under the liner These temporary stimulants to maritime conferences. But the brief goes on to state: shipping were short-lived. With the cessation .... These [great shipping] trusts control not of army demands, approaching completion of only the lines directly owned by them, but also the United States shipbuilding program, and control, to a great extent, the traffic of the "tramp the onset of economic depression, 1920 saw a

1 E. A. V. Angier, op. cit., p. 136. plethora of tonnage. The United States alone 2 Relatively few United States government contracts had multiplied its steam oceangoing shipping with private shipbuilders were cancelled when the war sevenfold. Ocean freight rates tumbled as ended, and the colossal building program projec~ed during hostilities was largely carried to completIOn did commodity prices and values generally in after the Armistice. the first postwar deflation. THE FREIGHT MARKET AND FREIGHT RATES 71

The next several years constituted a period May 1 and continuing through November), of reorganization and readjustment. But the which caused an extensive reallocation of surplus of tonnage over current trade re­ shipping. British coal exports ceased and im­ quirements was much larger than in any pre­ ports became necessary. In May-November vious depression. Low ocean freight rates and charters were effected to carryover 10 mil­ lower earnings or losses from shipping were lion tons of coal across the Atlantic to Great the rule. Disruptions and realignments took place in shipping conferences. With approx­ CHART 5.-EcONOMIST INDEXES OF TRAMP CHARTER imately a third more ships than before the RATES, ANNUALLY, 1922-37* war, competing for 75-80 per cent of the (Average 1898-1913 = 100; logarithmic vertical scale) amount of cargo moved in 1913, shipbuilding 18 0 I 60

14 /f I40 naturally reacted, and many ships were laid ,North A[!lerlc, 'V,"~ up. A world survey by the United States ..... '" .... 12 0 ~~~. #/ I 20 Department of Commerce indicated that 10.9 ...... 1--. ~ ... Indi. W,I. I ~"'" , million gross tons of steam vessels were idle 10 0 ~. I 00 .~~ Total at the beginning of 1922, and 7.5 million as --'" .J: .... "'2- ...... ~~ late as the middle of 1923. 0'-----'-- ~-- - 60 Beginning in 1922-23 ocean freight rates 18 0 I eo ...... ""0, j 14 I40 were again down to prewar levels. Character­ . , " . ~ 'i" ..~u.tr.li. .~~"":" ~y istically, they were adjusted downward more 12 o - k f! I 20 rapidly than other prices. Chart 5 shows the Soulh'l America '~ III Economist index in total and by six groups 0 "'.. 100 ~~...... ~.ot'l of routes for the years since 1922. This .... -. ::;;... -.~2 graph, omitting the war period and the years 8 0 :./ 80 180 . I 80 immediately following,l satisfactorily reveals t', !i the major changes in level and course of rates.2 140 I 40 ~al./ ,. In the 16-year period from 1922 to 1937, the 120 ~ ~. 1 I 20 ..~' ...l, ...... ~uropean waters Economist index of ocean freights averaged .... ~. ~\.\ 7 100 I 00 11 per cent higher than in the 16-year base F.r East\" period 1898-1913. Postwar commodity prices, and, Pacific\ ~ "'~. ." --7.....~ ..•.. ,-- ~ 80 80 however, averaged about 44 per cent higher. 1922 1924 1926 1928 1930 1932 Ig34 IQ3& IQ3S If ocean freight rates are considered in re­ • Data compiled from the Economist. It will be observed lation to the general price level, they are that whlIe rates on individual routes frequently depart from the general average, most such departures are not prolonged, found to have continued their long-term de­ and the general trends on all routes have been similar. clining trend. When the average of the Econ­ omist shipping freights index is "deflated" Britain, and 2.5 million came from other by the Sauerbeck-Statist index of wholesale sources, including even India. Tonnage was prices for the same two periods, the freight­ also required to carry continental coal abroad, rate level of these postwar years appears and from South Africa and Australia coal about 21 per cent lower than during the 16 moved to South America and the Far East. years before the war (see Chart 15, p. 118). The dislocation of normal trade routes Between 1922 and 1929 the broad trend of entailed long voyages and deprived grain-ex­ rates was downward. The most important porting countries of their normal quota of interruption of this trend occurred in 1926 tonnage. Ship operators preferred coal car­ during the British coal strike (starting on goes from Hampton Roads to England. for example, to grain from the River Plate. Such 1 For information on freight rates during the war period see C. E. Fayle, The War and the Sltipping In­ employment was relatively more profitable, dUstry (Oxford Univ. Press, 1927); J. A. Salter, Allied considering the shorter time traveling in bal­ Shipping Control (Oxford, 1921); E. A. V. Angier, op. cit. last. Important tramp markets like the River Plate were left short of tonnage for grain. • 2 For monthly grain rates on important routes dur- Ing this period, see Chart 16, p. 118. There were marked effects on grain prices, 72 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE the distribution of stocks, and volume of inter­ on the North American route. There, rates national trade.1 were first to respond to the abnormal situa­ Ocean freight rates consequently rose for tion, and competition between coal and grain a time to exceptional heights, as shown in cargoes for vessel space was greatest. Aus­ Chart 6. The Economist route indexes show tralian rates rose by smaller percentages than Argentine and North American rates. The CHART 6.-TRAMP CHARTER RATES, MONTHLY, Australian general index does not reflect the 1925-26 TO 1927-28* rise in coal freights; and grain rates from 220r------r------,220 Australia early in 1925 had been unusually ECONOMIST INDEXES high, accompanying exceptionally heavy wheat 200 Avora ',1898-1913-100 200 shipments of the first few months of that year.2 North America 1601------+-_f!Jkt_1"-'-'-:..::..:..:'-"..:.'-'--=-=-+------1 160 By January 1927, however, rates had gen­ erally returned to their former level. On the 1601------1-- 160 , ..", Australia North Atlantic route they dropped even lower during the year. None of the benefits of the 1401------:>+----·-h!!'J~a----'r---+___._----__j\ \ 140 "boomlet" in freights were long retained. 120 Long voyages in ballast, and delays in loading and discharging coal cargoes as well as the 100 high prices of bunkering coal, meant that the

60 temporary rise in freights was by no means all gain to shipowners. 35 World economic conditions generally were 30 good during 1927-29. Trade expanded, and the amount of laid-up tonnage fell to a low level. 25 With the advent of depression in 1929-30,

20 however, idle tonnage rose rapidly (Chart 2, p. 60). Violent disturbances in international 15 credit relations, in commodity production and prices, and government measures to prevent 10 or cope with them, operated to curtail inter­ 5 national trade. Its physical volume fell more abruptly than perhaps in any previous period, 0 1925-26 1926-27 1927-28 presumably because this depression was excep­ tionally world wide. Large European grain * Route indexes compiled from the Economist, Grain rates In Table III. The shading Indicates the period of the crops in 1929, and subsequent increased use British coal strike. of tariffs and other national policies designed to economize foreign payments and promote most clearly the striking effect of high coal self-sufficiency, especially contributed toward freights. The advance in grain rates was less the shrinkage of trade. Industries producing spectacular, but still pronounced, especially foods and raw materials were hardest hit. Consequently ocean freight rates suffered a 1 Sce our world wheat surveys and review covering fUrther decline. From the 1928 level this was this period, in WHEAT STUDIES, III, 92-93, 152-56, 271- less marked than for most commodity prices, 72, and IV, 16-17, 56. but only because freights had previously 2 These high rates maintained the Australian aver­ age for 1925, while the indexes of rates fell on all slumped to a level not much above the variable other routes between 1924 and 1925. Hence the high costs of many old ships. During the depres­ rates in the latter half of 1926 failed to compensate for the low rates earlier in the year, which had sion, rates settled at almost the lowest level followed the appreciably stronger rates prevailing ever known, and there was little or no profit through all but a few months of the year 1925. For in shipping. The Economist index remained these reasons, the Economist index for Australia shown in Chart 5 (p. 71) was lower in 1926 than for six or seven years at a level below the in 1925. average for 1898-1913. The international THE FREIGHT MARKET AND FREIGHT RATES 73 movement of wheat, like that of many other merchant shipping was never fully utilized; commodities, was light. As the depression hence freights and shipping profits responded persisted, ship operators used up most of but slowly to improved conditions. their financial reserves. When they were re­ The shipbuilding industry, as distinguished duced to a precarious position, governmental from the business of operating ships, has measures were taken on their behalf. characteristic cycles which differ frequently During the second half of 1935 some im­ from both business in general and the shipping provement in freights became apparent. The cycle. The shipbuilding industry may show charter market was stabilized by the agree­ signs of activity when freights are still low, ment of tramp owners to establish minimum and construction activity may not necessarily rates in the more important trades. Within be indicative of the prosperity phase of the an industry long accustomed to unrestricted shipbuilding cycle. On the other hand, ship­ competition, this year was significant for the building may be temporarily depressed, par­ unprecedented co-operation. ticularly during the last phase of a boom in In 1936-37 the forces of recovery had so shipping, when freights and the price of made themselves felt that a striking rise in steamers available for immediate service are ocean rates took place. Contributing toward still high. the more active movement in international Conditions in both shipping and shipbuild­ trade in commodities were the intensive re­ ing are similar to those in any other industry armament programs of many countries. War during the various phases of their individual risks in the Mediterranean with the Spanish cycles. Since shipping is an international busi­ civil war, and preparations for hostilities in ness, booms and depressions in any part of China, were also factors in the rise in freights. the world leave their mark on the industry, Still more important, these developments oc­ but only 'shen economic conditions are gen­ curred after a number of years of light ship­ erally good or bad throughout the world are building and extensive scrapping of obsolete the effects especially pronounced. vessels which helped to bring the amount of It is particularly enlightening to examine idle tonnage to a new low since the war. developments during the decade beginning in After rates had risen to a level somewhat 1929, for the end of that year signalized a higher than prevailed at the peak just before change in direction of the majority of world the war, the rising trend begun in 1936 was economic indexes. Chart 7 (p. 74) permits sharply reversed in the autumn of 1937, and examination of some relationships between by the middle of 1938 practically all the gain freight rates and the more important factors of the previous year had been lost. This most bearing upon their behavior, as well as the recent cycle in rates merits fuller discussion responses characteristic of the shipping and in a broader perspective. the shipbuilding industries to developments outside and within each industry. CYCLICAL FLUCTUATIONS AND THE Any decline in the demand for shipping 1936-37 RISE services is immediately reflected in a dis­ Cycles of prosperity and depression have an proportionate fall in shipping freights. The important bearing upon the fortunes of the chart thus shows rates falling more rapidly shipping industry, but what may be termed than trade and even anticipating the turn the shipping cycle bears no fixed relationship in 1929. Had freights really joined in the to the general business cycle. A sustained in­ previous boom, their fall would have been crease in the volume of world trade tends more marked than it was. During the depres­ eventually to bring advances in ocean freight sion phase of the business cycle, tonnage be­ rates, but a substantial rise in the level of comes superabundant: witness the 20 per cent rates comes only with full utilization of avail­ of all tonnage idle in mid-1932 (over 14 mil­ ab.le carrying capacity. During the years of lion gross tons). Charter rates, which fall falI'ly general prosperity that preceded the first, largely determine the amount of ship­ great depression of the 1930's, the world's ping to be laid up and the amount to continue 74 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

in operation. Later, in the course of world allels the shipping freight index. At the peak trade contraction, liner rates reflect the same of major cycles, however, when shipyards are conditions. Services are reduced and ships crowded and material and labor costs have laid up or special types of employment are risen, such conditions are reflected in very found for them.l These changes in shipping high cost of new vessels, as in 1937. Even in 1938 costs of new tonnage remained relatively CHART 7.-THE 1936-37 ADVANCE IN TRAMP CHAR­ high despite the drop in freights, because of TER RATES AND RELATED FACTORS* building activity for naval purposes. 220 220 With the onset of depression, shipowners i /I curtail expenditures for new vessels, as shown II 2,00 " by the drop in the tonnage-under-construction II 200 II , 1 curve. They eliminate unessential improve­ II I 1 ments that may have been planned. Finally, 180 I 180 I 1 I 1 ships are laid up as the gross freight revenue I I earned will no longer cover the variable costs 180 , 160 I of operation. If something more than fixed charges cannot be earned, it becomes more 140 ! P I40 Cosl of 7,500- Ion economical to lay up tonnage than to continue cargo sleamer I (Jo.,/,1930-/00) / to operate. Vessels incurring the highest run­ 120 I I20 I ning costs are least able to pay their way and / I are laid up first. Removing part of the supply ~,~~ __ J ~ 100 r\ I00 tends to check the fall in freight rates for a •. \~WOrld Irade index / ..... / .1 r\ ''l:~ .' (19?9

III. GRAINS IN SEABORNE TRADE

In practically every part of the world some IMPOUTANCE OF THE GUAIN TRAFFIC form of cereal is an important element in the Satisfactory quantitative measures of the diet. In few countries is production nicely importance of all grains in seaborne trade balanced with consumption. Most nations cannot be obtained, for either current or past consistently export or import grains. A few years. Value of products is an entirely in~ are exporters during some periods and import­ adequate measure of international trade from ers at other times, depending largely upon the the standpoint of transportation service.s On sufficiency of domestic production or grain a weight basis, grains presumably would rank prices in the world markets. Grains are there­ higher than in terms of value, but their rel~ fore continuously moving over various trade ative importance to shipping would still not routes by both land and sea. be clearly reflected.4 Low-value products such Aggregate world consumption of most agri­ as ore, coal, and lumber are important on this cultural products is greater now than before basis, yet cannot carry freight charges as high the war. Supplies entering international trade, as grain. in most instances, increased very substantially In order to arrive at a suitable quantitative in the first postwar decade. Of the grains this measure, one would need to compute for some was especially true of wheat, rice, and maize, specified period the total volume of tonnage the three most important staples. More re­ employed full time in units of ton-days, and cently, international trade in wheat has been the number of ton~days employed in the move­ below the average for 1910-14. Maize, though ment of grain. Such an index of the utilization fairly important in the international grain of ocean shipping would be the nearest coun~ trade, is more vulnerable to changes in ocean freights than are wheat and rice, since it is 1 Millets, which include grain sorghums, are of con­ shipped mainly for animal feed for which the siderable importance in Russia and in most of Asia demand is more elastic than for foodstuffs. and Africa. In vast territories they constitute a staple The proportion of world production of the item in the diet of large population groups, serving six principal grains1 that enter into inter­ the same general purpose as do wheat or rice in other areas of the world. In Russia millet is important national trade is not large, as shown by the as material fol' porridge consumed along with bread. following rough comprehensive estimates for Recently grain sorghums have become of material 1927-30, a period of relatively heavy trade: 2 significance in the southwestern United States, but exclusively for feed use. No estimates of world pro­ duction of millets are available, but they may rank as high as or higher than rye or barley. Since the EstImated Quantity Percentage quantity moving across international borders is very world enterIng of world GraIn prorlu"tlon InternatIonal productIon small, they are disregarded in this study along with (million ton8) trade exported such minor grains as buckwheat and speIt. (million ton8) 2 Royal Institute of International Affairs, World Agriculture-An International Survey (London, 1932), Wheat ...... 142 22.20 16 p. 6. Rice data are expressed in terms of "cleaned rice." Maize ...... 117 8.84 8 Rice ...... 85 6.56 8 a During recent years, foodstuffs of all kinds have Oats ...... 69 1.34 2 accounted for only about one-fourth the total value Barley ...... 47 3.73 8 of international trade. Two other groups of approxi­ Rye ...... 45 1.38 3 mately equal importance-raw or partly manufac­ tured materials, and manufactured articles-account for the other three-fourths. See League of Nations, Economic Intelligence Service, Review of World Trade, For a few countries the proportion of home 19.36 (Geneva, 1937), p. 15. Within the foodstuffs production normally exported is very much classification, grains are the most important sub­ group; but even wheat is responsible for only two or larger. Argentina, Canada, and Australia, three per cent of the total gold value of world trade. for example, are heavily dependent upon ex­ 4 If data were available, they would doubtless show port markets, and ordinarily more than half that grains as a group, and wheat in particular, would of their total production of grains finds over­ rank considerably higher in seaborne trade than in total international trade, which includes goods moved seas outlets. by rail, truck, canal, river, and short coastal routes. GRAINS IN SEABORNE TRADE 77 terpart of the railroad unit, ton-miles. In this cent that of wheat, and the proportion enter­ case, however, the ton ought to mean not the ing into international trade is roughly only weight of the cargo but the ship ton-gross half as large.2 Since rice is of much greater or deadweight. Such calculations have not importance to eastern and southern Asia he en made; the basic data are not available than to western countries, the ocean routes and complex questions of method are in­ over which most rice moves in international volved,! If calculations of such measures of de­ trade are confined to that part of the world. mands on ocean shipping by different groups Tramp ships. pick up rice cargoes at Rangoon of commodities were feasible, they would for Europe or other parts of the world, but doubtless show the grains ranking much this business is small in comparison with the higher than in terms of value or weight. A trade in rice within the Far East. From the guess may be ventured that the percentage standpoint of shipping, all these routes are of would lie between 20 and 25. far less importance than those over which Of all the grains, wheat has the greatest export wheat moves. significance and is most international in char­ Barley is probably the fourth most impor­ acter. It is either grown and exported, or tant grain in its demands on ocean tonnage. imported for consumption, by a larger number World output is only about one-third that of of nations than any other cereal. Its impor­ wheat, and the volume entering into inter­ tance to the world's maritime carrier business, national trade is about one-sixth that of wheat. and hence its effect upon freight rates, easily Rye and oats make small demands on surpasses that of any other grain. On the ocean tonnage. Though the second most im­ average, the volume of international trade portant food grain in Europe, rye has fallen in wheat probably equals the volume of trade to sixth place in the world output of cereals. in all other grains combined, and its demand The small fraction that crosses national bor­ upon ocean shipping is proportionately greater ders largely moves by short sea voyages, still. or overland, mostly within Europe. Much Maize ranks second to wheat in volume of the same is true of the feed grain, oats, the world production, in the volume that enters outturn of which considerably exceeds that of into international trade, and in the demand rye. upon world shipping. The international move­ On a ton-mile basis, wheat and corn pos­ ment today is largely from Argentina to sibly make up over 80 per cent of the world Europe, though shipments to North America demand upon ocean tonnage for international were of significant dimensions in two recent shipment of grains, and wheat may account seasons when drought devastated the United for two-thirds to three-fourths of this subtotal. States corn crop. Minor export routes are few -to Europe from the United States, the Dan­ GRAIN AS CARGO FOR TRAMPS AND LINERS ube countries, and South Africa. Some indication of the part played by grains Rice is second to wheat among the cereals in the tramp shipping business is revealed by used for the world's food, but its importance statistics obtained in connection with the op­ for ocean shipping is relatively much less. eration of the British Shipping (Assistance) World rice production is only about 60 per Act, 1935.3 Grain was found to account for 13.7 per cent of the voyages made by British 1 For example, how to divide the ton-days on tri­ angular or multiangular routes, particularly when tramp ships eligible for a subsidy during cargo shipped on one leg of the route is of dominant 1935, for 20.5 per cent of the weight of cargo importance in making the voyage; or how to divide carried, and for 30.6 per cent of the freight the ton-days on direct routes when the cargo shipped outward is carried at low rates only because the main charges earned. If vessels under 3,000 gross cost of the voyage is borne by the return cargo. tons, which play only a minor part in overseas 2 These percentages, based on the tabulation above, trade, are excluded, grain accounted for nearly would be considerably higher if one used figures for "rough rice" instead of "cleaned rice." 35 per cent of the freight revenue earned as a As analyzed and reported by Isserlis, op. cit., against less than 22 per cent for coal and pp. 83-84. coke. These products are commonly trans- 78 SI-IlPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

ported over shorter distances, occupy less grain exports, and some such percentage of vessel space per ton and carry lower freight overseas shipments from Canadian and Gulf rates; hence they account for more voyages ports, are normally handled by tramps. By and a far greater weight of cargo hut yield less contrast, about the same percentage of the freight revenue. Though a smaller proportion United States Atlantic movement is by liners.1 of the grain trade may be in the hands of From New York to Europe, in particular, tramp shipping today than before the war, nearly all of the grain is handled by estab­ grain remains the most important cargo to lished liner services. Tramps nevertheless this branch of the industry. compete at times for this business. While Grain is also considered desirable cargo waiting for charters, they lie ofT Norfolk for liners, but the degree to which they par~ within easy call of New York or other North ticipate varies with the trade route and from Atlantic ports. In recent years quite a few year to year.! On one route only do they pre~ have loaded cargoes at Albany, some com~ dominate. Elsewhere they may handle a little pleting their loading at New York. grain regularly, or the business may material~ Most of the wheat and other grains moving ize only in poor seasons or after the major in international commerce is shipped in bulk movement has been completed and tramps rather than in bags. This has long been true, have largely withdrawn. though until after the war bagged shipments The great bulk of the overseas grain com~ predominated in several important trades, merce still moves by tramp steamer, mostly including the Pacific Northwest, Argentina, in full cargoes.2 Canadian shipments through and Australia, as well as India. From the Canadian ports, and Argentine and Australian carrier's standpoint, bulk handling has net exports, are predominantly so carried. On the advantages which are generally recognized average, more than 80 per cent of Australian in lower freight rates quoted on bulk grain.n wheat,a around 85 per cent of Argentina's Sacked grain can be stowed almost anywhere in the ship, but a given quantity takes up less 1 111ese variations, plus the absence of statistical information, account for discrepancies in statements space in bulle Moreover, except where no ma­ made from time to time on the propoI"tions handled chinery other than the ship's winches is used, by liners and tramps. hulk grain is loaded and unloaded more rap­ 2 Full cargoes, however, may he made up of diffcr­ idly, thus avoiding delays and expenses con­ ent lots of grain and be sold in portions known as part cargoes or even parcels. The identity of different nected with longer layovers in ports. lots of bull' grain is maintained by means of separa­ The shift from bag to bulk has gone farther tion cloths or mats. in ocean shipments than in the interior han­ a Sec Commonwealth of Australia, Hoyal Commis­ sion on the Wheat, Flour and Bread Industries, Sec­ dling of grain. In the Pacific Northwest of the ond Report, 1934--35 (Canberra, 1!JiJ5), p. 161. Accord­ United States, for example, bags still predomi­ ing to a letter from E. McCarthy of the Department of nate over bulk in interior handling, yet export Commerce, Commonwealth of Australia, May 30, 1!J38, "Only n smnll percentage of wheat from Austrnlia is shipments have been practically all in bulk shipped otherwise than on chartered vessels." M. O. since the early 1920's. Shipments of bagged Phlllips (op. cit., p. 561) obtained information in 1!J35 grain from Argentina and Australia have to the effect thnt cnrgo liners had Invaded the AUB­ tralinn wheat trade nnd were estimated to handle 25 dwindled while the trend of their total exports per cent of the business, the remainder going by has been upward. Argentina has only recently tramps. begun constructing a grain-elevator system, 4 Estimates secured by Phillips as of 1911:J suggest yet the percentage exported in bags was only that only 5 pel' cent of the grnin shipments from New York went by tramps (op. cit., p. 550). However, 1933 15 per cent in 1925 and is smaller today. was hardly a typical year, as the United States wheat Of the leading Australian wheat states, New exports were far below the nvernge of preceding years. South Wales inaugurated a bulk~handlil1g For the same year, according to his informant, about 90 per cent of wheat exports from Al·gentina moved system in the early 1920's, and this has been by tramp ship (op. cit., p. 556). considerably expanded; Victoria has one un­ G For example, under the minimum freight rate der construction; in Western Australia, Co­ scheme for tramp trades, the ocean freight rate be­ tween Australia and Europe Is 28. Gd. pel' ton less for operative Bulk-Handling, Ltd., has recently "bulk" wheat than for bagged -wheat. developed an extensive and inexpensive sys- GRAINS IN SEABORNE TRADE 79 tem for bulk handling at country points, shipped in bags or in bulk, be sufficiently dry though only Bunbury is yet supplied with a before loading, especially if it is to be carried terminal elevator; and South Australia alone long distances and through warm regions.8 has no system or proj ect for bulk handling. Disadvantages of grain as cargo are the Yet practically all the wheat shipped from seasonality in the grain movement and the New South Wales for several years and from marked changes in tonnage requirements at­ Victoria during the past few years, and most tributable to crop variations in the different of that from South and Western Australia exporting countries. Such fluctuations are of more recently, has been shipped overseas in particular importance to the tramp, but at bulle India, with very low wages, cheap jute times they affect the liner's business also. As bags, and adverse climatic factors to contend grain is harvested and sales overseas are with, is exceptional in having no elevator sys­ effected, a demand is created for cargo space. Lem at all and none projected; and Indian Ships are transporting grain from some part wheat exports move chiefly in bags. of the world to the principal markets every Grain is "clean" cargo. When shipped in month of the year. Variations from month bulk, it normally flows easily, can therefore to month in the total world demand are sub­ be rapidly loaded, stowed, and discharged,l stantial, but these fluctuations are less im­ and can be used by liners as ballast. Bulk portant than the length of time during which grain, however, may shift in rough weather grain cargo is available in anyone country without again seeking a level. Special de­ and the volume that needs to be shipped. mountable transverse bulkheads and longi­ Experience indicates approximately when tudinal shifting-boards, fittings, or bulkheads special demands for space will materialize therefore become necessary equipment for and cease. Much less easily predicted is the the cargo ship carrying grain. If a vessel is magnitUde of the demand. Peak demands not equipped in this manner, the owner may for space over a particular route are not al­ be put to considerable expense in supplying the ways readily met, and they generally cause requisite fittings. 2 When a ship's hold is not ocean freight rates to rise on that route. completely filled with grain, several layers The least predictable element is that of of sacked grain are laid over the loose grain weather. Affecting plant growth and maturity, to keep it in place. Other miscellaneous cargo, it can gradually or quickly produce a material if any, may then be stowed on top. The use change in the crop outlook and alter the of sacked grain as an additional precaution volume or proportion of grain available for against shifting depends upon the construc­ export. Also changing the demand for trans­ tion of the ship and its cargo-carrying spaces. portation from a particular area, unfavorable Grain, as a living seed, generates a certain harvesting weather may so affect the condition amount of heat in transit. Grain cargoes must of the grain as to delay shipment to the ports therefore be kept dry, and the vessel properly and overseas. Material variations in the out­ ventilated to prevent damage from sweating. put of grains in the principal importing coun­ It is of utmost importance that grain, whether tries of Europe may change total demand for space and not merely the distribution of 1 Soft or moist grain moves slowly, while grain tonnage. which has been overdricd may have to be brolten Large variations in crops are of special im­ down with a shovel to mnlte it run. Dusty grain, like dUsty coal, slows up operations beclluse of the dan­ portance if they occur in certain parts of the gel'S of suIToclltion and combustion. world. Unexpected adverse developments in 2 The British Board of Trade hilS laid down certain the wheat situation in Argentina or Australia regulations covering the use of shifting-boards, and the proportion of grain in bllgs and in bulk that must may result in leaving a large volume of ton­ he loaded, according to the size lind type of carrying nage concentrated in those areas in anticipa­ vesscl. tion of a normal movement, without prospect II This is particularly tme of l\1uize. In years for employment because other cargo is not When the autumn is l\1oist, little can be safely shipped (cspec!ully across the equator) until hellvy frosts have available in remunerative volume. So remote COlile to dry it out. are these regions from the chief grain-import- 80 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE ing areas, that such "out-of-position" tramps For no other major group of commodities must be held idle awaiting other cargo or are such variations in requirements for ship travel in ballast for thousands of miles to tonnage so important. Few are subject to the some other markeU In other parts of the same uncertainties, yet for equally few is it world, sudden and abnormal changes are as essential that they be transported from commonly of lesser import to shipping. If surplus-producing areas to areas deficient in they occur in Canada or the United States local production. These factors are, of course, but not in both, grain carriers suffer less be­ reflected in the behavior of grain freight rates. cause of the relative ease with which they can change their base of operations. COMMERCIAL ASPECTS OF GRAIN SHIPMENT Not only weather may be responsible for In exporting countries generally, for mani­ significant changes in demands for grain. fold reasons,2 growers and sellers tend to move War developments also create abnormal each new grain crop as rapidly as possible. movements. When ships are taken out of one The primary movement of grain in the east of trade for some special purpose, there are fre­ the United States and Canada is in general to quently no substitutes available and rates rise lake ports and interior terminal points where inordinately, creating hardships and affecting storage facilities are plentiful. The movement the volume of grain trade. to the Atlantic seaboard ports occurs in a more orderly way; usually the grain is moved to 1 See above, p. 67, and Times of Argentina, Apr. 4, 1938, p. 14. "Recently various carriers have been or­ ports only after it has been sold for export dered in ballast for Curacao, which gives the impres­ and tonnage space arranged. Elsewhere, sea­ sion that the owners want to get them in position to board ports simultaneously perform the func­ run through the Panama Canal for West Canadian or Australian cargoes or for a quick trip up to the St. tion of North American terminal points, and Lawrence." Even so, large amounts of tonnage re­ the grain moves directly into them. In most mained to meet further disappointment when the 1938 exporting countries, however, including Ar­ maize harvest was short and in poor condition for prompt shipment. Argentine grain shipments in Jan­ gentina and Australia, port storage space is in­ uary-June 1937 were high-around 10 million tons; sufficient for storing any large accumulation. in the same months of 1938 they were low-not quite Shippers must therefore make advance ar­ 3 million. rangements for having cargo steamers on 2 These include the desire to achieve handling econo­ mies and to reduce weather hazards; the farmers' need hand to load as grain arrives from inland for cash (though physical movement and commercial points.a Even so, congestion of port facilities sale are not necessarily simultaneous); the closing of occurs from time to time. the St. Lawrence and other waterways for the winter; and the fact that prospective seasonal price increases On the average, some 27-28 per cent of seem not to justify heavy expense for storage and wheat and flour shipments to Europe during interest. In recent years the movement has been ac­ the past decade have been shipped "for or­ celerated by extensive use of the combine harvester and automobile truck. ders." This means that when the grain carrier 3 So much time is required for vessels to go out to leaves the loading port, its port of discharge is Argentina and Australia that needs must be antici­ not settled; and that before it comes within pated well in advance. the range of intermediate ports specified in 4 The procedure to Le followed may be set forth the charter party, the charterer will designate in the charter party as, for example, in clauses 22 and 23 of the Chamber of Shipping River Plate Charter­ the port or ports of discharge desired.4 Party, 1914 ("Centrocon"). Clause 4 directs that the Grain shipped for orders mayor may not loaded steamer " .... proceed to St. Vincent (Cape have been sold at the time of shipment, but Verdes) or Las Palm as or Teneriffe (Canary Islands) or Madeira or Dakar, at the Master's option, for orders most commonly is covered by aggregate sales (unless these be given him by charterers on signing of cash grain or futures.5 If the exporting Bills of Lading) ...." firm is also the importer, grain may be put 5 On occasions, when the owner can no longer afford afloat more or less continuously with only a to hold it, wheat shipped unsold becomes "distress cargo," with important influence on market prices. general destination. Later, ships may be di­ But there is no necessary relationship between the vol­ verted to one port or another, depending upon ume of "for orders" shipments and the usually much the need for supplies to fill orders secured smaller volume of wheat shipped on open consign­ ment. by the firm's selling organization. GRAINS IN SEABORNE TRADE 81

The proportion of grain shipped "for or­ grain is plentiful, these considerations tend to der" from various countries depends on the increase the amount of wheat shipped for distance between the exporting and importing orders. But truly speculative shipments, countries, the character of interior movement which were common in the heyday of the sail­ in the exporting countries, the financial power ing vessel and before the development of fu­ of exporters and the character of their or­ tures markets, nowadays constitute only a ganization, and the like. The distance be­ small proportion of total shipments. tween the countries is of large importance Necessarily the terms and conditions under because it limits the time within which the which grain is sold in international markets grain has to find a "home." After the order and the terms and conditions of shipment has been given to the ship, the choice between cannot very well be considered as separate prospective buyers is greatly narrowed down matters. Forms of contracts vary consider­ -to those in the port to which the ship has ably between export countries and are being been ordered. When the ship arrives in the revised frequently to protect the interests of port, it must be unloaded at once, because both buyer and seller. The London Corn Trade charter parties provide for heavy demurrage, Association alone has over fifty different similar to that charged by railways. It is forms of contract. Without going into all the therefore considered good practice to dispose terms and conditions of sale, brief mention of the grain shipped for orders well ahead of should be made of phases relating to the ship­ the time the order has to be given to the ship. ping of grain.1 Because of their nearness to the European With negligible exceptions all grain con­ markets, their relatively more abundant stor­ tracts in the international trade are "c.i.f." age space, and the smaller participation of (cost, insurance, freight) contracts by which, tramp ships in the trade, Canada and the for a stated price, the seller agrees to provide United States do not generally ship grain the commodity and deliver it to the ship in "for orders" in the same volume as do Ar­ the port of shipment, to insure it, and to pay gentina and Australia. the freight on it to the port of destination.2 Argentina accounts for the greater part of The contract stipulates the classification of "for orders" shipments. This may be partly be­ the vessel in which the grain is to be shipped cause so heavy a proportion of the Argentine and the port or ports of shipment and desti­ grain trade is in the hands of a very few large nation. If the contract is for a full cargo, the European export-import concerns. During re­ broad options in charter parties as to the port cent years, when the USSR has been a wheat or ports of destination of the cargo are usu­ exporter, a substantial number of Russian ally ceded to the buyer in toto. Part cargoes shipments have been for orders; and except and parcels shipped in tramps are also fre­ that it is an official monopoly, the Exportkleb quently offered with an option of discharge is in some respects similar to private con­ at any of two or several ports. In all cases cerns such as Louis Dreyfus & Company, certain adjustments in freight rates are made 'Bunge & Born, and the Continental Grain depending upon the options selected; usually Company, which dominate the trade in Ar­ the larger the total quantity bought, the greater gentina and operate all over the world. is the choice between the port or ports of des­ The proportion of total shipments made for tination. Liner delivery, of course, is limited orders varies with conditions in the world's to the ports of call on the regular schedule of grain markets. When spot grain is at a dis­ the liner service. count, the shipper may select a longer route or a slower ship so as to delay his cargo in 1 For more detailed information see A. A. Hooker, TIle International Grain Trade (London, 1936), and anticipation of better cash prices. Under these S. K. Thorpe, Grain Trade Documents (Liverpool, circumstances he saves on storage charges, as 1924). the ship serves as a warehouse while he pays 2 Other bases of contracts, such as r.o.b. ("free on only for transportation service. On long voy­ board") or f.a.s. ("free alongside ship"), apply to do­ mestic business or steps in the transaction which ulti­ ages from Australia or Argentina, and when mately results in a c.i.f. sale to an overseas buyer. 82 SllIPPING AND PRBIGIlT RATES IN TilE OVERSEAS GRAiN TRADE

Largely because the capacity of the vessel upon arrival whether the damage was due to to be used and of each of its holds may not poor condition of the grain when it was be known at the time c.i.f. sale is effected, and shipped, or to one or more other causes. More­ because the capacity of the vessel and holds over, partly due to the nature of grain, the is not in round figures, as sales usually are, insurance company is not responsible for all the quantity of grain sold is determined with damage to the grain, under the insurance pol­ a margin. The usual margin is "10 per cent icy usually required and provided in the in­ more or less" for cargoes and "5 per cent more ternational grain trade; and part of the dam­ or less" for parcels (only part of the marginal age remai'ns uncovered. Grain importers, who quality is settled for at the contract price, for naturally resist taking chances, have been the remainder of the price at the date of bill successful in inducing exporters from several or bills of lading is used as' the basis). The countries (including Argentina, Russia, and size of shipment is usually expressed in tons, the Danube countries) to guarantee the con­ quarters, or loads. Generally the "long ton" of dition of the grain upon arrival. Since this 2,240 pounds is referred to. Typically the guarantee was first established for the ship­ "quarter" for wheat and maize is equal to 480 ments of rye (from Russia), it became known pounds,1 On the Atlantic coast of North as "rye terms." C.i.f. contracts for grain and America a "hoatload" is 1 ,000 quarters,2 similar goods which contain this stipulation rather than a designated number of tons vary­ are called "Rye Terms" contracts, contrasting ing with the capacity of the carrier. Orders with "Tale Quale" contracts under which the from foreign buyers usually specify the quan­ s~ller guarantees good condition only at time tity of grain in multiples of 1,000 tons, which and place of shipment. The exporters of the is also the unit of futures trading on the Liver­ United States, Canada, and Australia are the pool Corn Exchange. most important ones among those who have In part owing to the uncertainty as to the been successful in resisting the demands of time when the chartered ship will be ready to the importers for a guarantee of the condition load, the time for shipment agreed upon by a upon arrival and are still selling their grain c.i.f. contract is seldom less than a month. on "Tale Quale" contracts.B Predominantly, in fact, a calendar month is Various methods of chartering tonnage for the customary period. Half a calendar month grain cargoes have been employed. At pres­ (first half of January, for example) is some­ ent the principal charter parties used are the times stipulated for shipments in the immedi­ Baltimore Form "c" in the North Atlantic, ate future, or for sales of grain in process of the "Centrocon"4 in the River Plate grain shipping or afloat; for such transactions there trade, and the "Austral" in the Australian are used also such conditions as "prompt shipment," "shipping-shipped," or afloat, or 1 Definitions have varied to some extent, even for even the name of a specific vessel may be a wheat, and stilI vary for oats and barley. See Hooker, part of the contract. For deferred shipments, op. cit., pp. 11-12. As a unit of volume, the quarter is 10.6 cubic feet. Nowadays the commercial measure­ two-months contracts are very frequent; for ment of grain is by weight rather than by volume, and example, new-crop Canadian wheat is usually for this purpose a "quarter" of grain is defined as so sold for shipment in October-November. many pounds. It is in the nature of a c.i.f. contract that the 2 In other terms tllis is 4,800 centals or 480,000 pounds, equivalent to 8,000 bushels of wheat and ap­ seller is responsible for the condition of the proximately 8,571 bushels of corn. The "boatload" goods only at the time and place of shipment. equivalent for parcels shipped from all other sell­ The buyer has to accept it as it arrives, as it boards is 250 tons (1,166.66 quarters of 480 pounds). is (tale quale), having recourse to the insur­ 8 "Rye Terms" and "Tale Quale" terms also relate to the qu ali ty of the grai n sold. ance company for damages if any. Grain, how­ 4 Both the "Centrocon" (1914) and "Austral" (1928) ever, may suffer damage en route if it has are Chamber of Shipping of the United Kingdom been shipped in poor condition. The seller, forms. From the Northern Range (Atlantic) ports it is true, guarantees shipment in good con­ grain has been carried frequently on a modified or "net" form of the Baltimore C, which means that the dition, but it may be impossible to ascertain charterer loads and unloads the cargo and pays llII GRAINS IN SEABORNE TRADE 83 trade. All voyage (trip) charter parties have ing dredging of rivers and harbors when nec­ in common certain clauses specifying in detail essary) shipowners commonly pay through the terms and conditions under which the port charges, while shippers pay for loading shipowner carries cargo for freight. and discharge service. All such influences are reflected in relative freight rates from or to PonT REQUIHEMENTS different ports. Technological progress in ship construction There is some degree of specialization in and operation is of limited use unless there is port and port facilities as well as in vessels. corresponding development in ports and port Special needs in storage facilities, handling facilities. Otherwise the advantages of greater equipment, or type of labor are created by cargo capacity, fuel economy, and greater the character of a port's major business­ speed may be more or less completely offset. grain, coal, ore, nitrate, lumber, petroleum, Perhaps the most important consideration sugar, etc. In turn, the kind of trade and type governing the size of vessels that may operate of port influence the type and size of vessel out of any port is the depth of water. Some­ using it. times a port is handicapped by a natural ob­ Some ports are often congested, so that the struction and it becomes necessary to load by "turnaround" is slow and expensive. Others lighter, which may be considerably slower impose certain surcharges or dues on the than loading alongside a dock, especially if amount of cargo loaded or discharged. Some direct loading from an elevator is feasible. are handicapped by physical conditions (shal­ Such handicaps increase the time a vessel low shores) making the use of lighters man­ must remain in port and incur expenses. datory; others have dangerous entrance or When the shipowner has any alternative, he clearance, or are inadequately supplied with will be inclined to choose the port without handling equipment or dock labor. Most port these handicaps. works are not owned by the shipping indus­ The bulk of the grain traffic moves predomi­ try. For their use and maintenance (includ- nantly toward large ports well equipped to handle varied cargo and heavy traffic. Large port charges. Freight paid on this basis is more or ocean liners have their own berthing places, less "nct" to the steamer. while there is ample room and equipment for For a discussion of charters and chartering prac­ tices, see n. E. Annin, Ocean Sltippin(J (New York, ships carrying full cargoes to unload rapidly 1920), pp. 239-355. and depart. But numerous smaller European 1 There is a substantial difference in the usual type ports are also well equipped for handling of handling necessary for grain in the ports of export­ grains. When one port of discharge may be inl( and importing countries, which helps to explain cCl'tuin features of the freight-rate structure. substituted for another with comparative ease, Most of the grain in exporting countries arrives at without materially affecting costs or rates, thc ports hy mil, and the most practical way of load­ there is little interruption or obstruction to ing hu\l{ grain is by means of an elevator directly into the ship. Even if the gl'ain is loaded in a more the conduct of the trade. primitive manner, the ship usually needs a berth for Charter rates are therefore the same for convenient handling. a wide range of ports of discharge, where­ The common method of forwnI'ding overseas im­ pods of grain in the importing countries is by lighter. as in the newer exporting countries with much Lighters or similar cI'aft are also frequently used for less highly developed port business, rates may transshipment to smallel' ports; if necessary, the vary appreciably between ports located even lighters serve as convenient storage space. The most practical way of unloading bulk grain is, therefore, closer together but unequally navigable or by means of floating elevators. Under these conditions, differently equipped for handling grain car­ II berth is unnecessary for the ship; a ship which is goes.1 Some of the more important illustra­ not berthed may be unloaded simultaneously from both sides; and waiting for a berth, the most usual tions, with special reference to a number of Cl\use of delays, is eliminated. Sufficient depth of different ports in Argentina and Australia, WilleI' and a sufficient number of floating elevators are are mentioned in the following section in nil thut Is needed for n good grain-receiving port, and it is uncommon to scnd ships to ports which lack which a considerable number of grain ship­ su/llcient depth for them. ping routes and ports are discussed. 84 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

IV. GRAIN ROUTES AND PORTS

The principal markets for the surplus grain Britain or European countries.4 Accordingly, of exporting countries are in the British Isles the most important grain routes and ports and continental Europe. For many decades and the most significant grain rates are those large portions of this densely populated area to the United Kingdom and continental Eu­ have depended upon distant sources of sup­ rope from North America, South America ply. Before the war, Russia and the Danubian (Argentina), and Australia. countries produced much larger grain sur­ The map designated Chart 8 shows the pluses, and much larger quantities moved major grain routes of the world, and certain over the relatively short routes from the minor routes, based primarily upon the aver­ Black Sea through the Mediterranean to Medi­ age movement of wheat and maize during the terranean and European Atlantic ports, and eight calendar years 1929-36. The relative via the Baltic and North Seas.1 Since it was importance of the major routes may be meas­ not then necessary to transport so much grain ured by the wheat movement with one excep­ over so many thousand miles of ocean,2 de­ tion-the route between Argentina and Eu­ mands of the grain trade on shipping were rope. Inclusion of maize greatly increases the smaller than since the war. During the past importance of this route. The inter-Asiatic decade the United States, Canada, Australia, rice trade is also indicated on the map in a and Argentina have accounted for approxi­ general way. The rice movement to other mately 85 per cent of the world's net exports parts of the world is so small that its omission of wheat and flour. a Over three-quarters of does not appreciably alter the picture. all shipments have been destined for Great Grain routes, obviously, are important com­ ponents of the main arteries of world sea­

1 Broad changes in the international trade in wheat borne traffic. A dozen main divisions of sea­ and flour (including overland shipments) are indi­ borne commerce are recognized in British cated by the following average net exports from the shipping circles. Transatlantic trade em­ principal exporting countries, in three 5-year periods (August-July crop years) before and after the war, in braces routes between North and South Amer­ million bushels: ica and the United Kingdom and Continent, Region 1909-14 1927-32 1933-38 including those via the Panama Canal from Canada ...... 95.6 277.8 179.0 Argentina ...... 84.7 163.3 126.5 and to the west coasts of these continents. United States ...... 108.5 143.2 18.5 Another division is designated as Australian Australia ...... 55.2 110.1 104.3 India ...... 49.8 (3.8)a 7.9 trade. The commerce of the United States and Russia ...... 164.5 36.7 22.3 Canada to and from the Far East is known as Danubian countries ... 109.0 50.1 14.8 the transpacific trade. Then there are trades a Net imports. between India and the Far East and the 2 Routes from Black Sea ports to European destina­ tions, however, are roughly comparable (in terms of United Kingdom and Europe, from the Black days) to the North Atlantic route. Sea, from the Mediterranean, and others. For a The percentage varies from 82 to 88, depending more specific examination of the sea routes upon the sources used and years selected. The addi­ over which most of the world's commerce in tion of lower Danube countries, exports of which are less important from the standpoint of shipping, would grain moves, the following classification is bring the percentage to over 90. more useful;5 4 Broomhall's data (WHEAT STUDIES, December 1937, XIV, 170) show 78 per cent to Europe in 1927-32 and Division Major grain route Minor grain route 75 per cent in 1933-36. Shipments destined to other Trans­ Atlantic Coast of Gulf (U.S.) to countries, accounting for the remaining quarter of ex­ atlantic North Amcrica U.K./Contincnt ports, are widely scattered, i.e., China, .Japan, Central America, Brazil, Egypt, North and South Africa, India, to U.K./Continent (wheat) the United States, and others. (wheat) 5 No attempt is made to include all the lesser move­ South America North Pacific ments, examples of ·which are the flow of rice from (River Plate) to (Canada and U.S.) Siam, India, and Burma to Europe and that of malting U.K./Contincnt to U.K./Continent barley from California to Great Britain. (whcat, maize, etc.) (whcat) T 8 ROUTES PORTS

.Wheat ~Maize [BURice

A S I A NORTH

AMERICA

AFRICA

SOU T H

ARGENTINE AMERICA GRAIN SHIPPING PORTS >- AUSTRALIA

20

10 I NOTES ~------0'32 '34 '38 Trade data tram official trade publications, the International Institute of Atrlculture, Broomhali', Corn Trade Yearbooks, and Gr ••t Britain, Imperial Economic Committee, (Jroln Crops ... (London, 1937). Bahia. Blanca Freltht rite, (In rectln.les) from Tlble III, In cents per bushel. DI,'ances, routh estimates, In nlutical miles.

P.S.KING

GRAIN ROUTES AND PORTS 85

Division Major grain route MInor grain route seaboard, Gulf, and Pacific ports. Some Australia Australia to U .K.! Australia to the Canadian grain moves through New York, and Continent (wheat) Orient (wheat) some United States grain through Canadian Trans­ North Pacific ports. Most important is the movement from pacific (U.S. and Canada) the immense area tributary to the Atlantic, to the Orient (wheat) and the paths converge to form a major North India and India to U.K.! Atlantic grain route. Here liner services are Far East Continent (wheat) most highly developed; yet there is room for Black Sea Black Sea to Ant­ the tramp ship, especially in the handling of werp/Hamburg (wheat, corn, barley) seasonal cargo. Atlantic export points in the United States north of Norfolk, Virginia­ International trade in grains had declined New York, Philadelphia, Baltimore, Newport steadily for five years until, in the crop year News-comprise what are known in shipping 1936-37, it sharply increased for a single year. circles as the "Northern Range" or "Atlantic Even at the lower level, however, the volume Range" ports. The official designation of the approximated the average for the five pre­ major North Atlantic to Europe route, under war years. From the standpoint of trade the tramp shipping minimum freight scheme routes the significant fact is that the average of co-operation, is "S1. Lawrence and North­ length of haul has increased. Among the three ern Range U.S.A. (Eastwards)." major grain routes, the North Atlantic has Both Canadian and United States grain latterly declined in relative importance of moves through Montreal. It is the leading shipping employment provided, and the Ar­ grain port of North America, and the most gentine and Australian routes have gained. important seasonal port associated with the grain trade. Its facilities for handling grain MAJOR GRAIN SHIPPING ROUTES are much superior to those of even so impor­ North Atlantic to Europe. - Traffic over tant a port as New York. It is on a direct transatlantic routes is by far the largest. It water route from inland growing and ship­ flows predominantly in the easterly direction. ping points to Europe, which means cheaper Ordinarily both Canada and the United States over-all transportation when the St. Lawrence ship wheat in large volume, and smaller quan­ is open. Its chief drawback is that, because tities of other grains. From Gulf and Atlantic of ice in the winter, a year's business must be ports the United States sends cotton and tim­ done in less than eight months. ber to Europe. Some fertilizers, ore, wood Other shipping points must be used when pulp, and coal provide inadequate return car­ the S1. Lawrence is closed to navigation­ goes. usually from late November until early May. The North American grain movement is Although the Canadian harvest is completed effected by some combination of routes from within a month, the St. Lawrence closes while Canadian Atlantic, Pacific, and Hudson Bay the grain movement is still strong. Just before ports,1 and from the United States Atlantic the river freezes every available ship on the Great Lakes is commonly employed in rush­ 1 Shipment routes for Canadian wheat as they stood ing grain to Buffalo and other lower lake ports. in 1925 are treated in C. P. Wright and J. S. Davis, "Canada as a Producer and Exporter of Wheat," In following months elevator stocks are de­ WHEAT STUDIES, July 1925, I, 251-60. See also A. E. pleted by rail shipments to Atlantic seaboard Taylor, "Projected Waterways in North America as ports, and some of the last cargoes remain in Related to Export of Wheat," ibid., August 1932, VIII, 445-68. Beginning with 1931, Canadian shipments the holds of the lake steamers through the (chiefly of wheat) have been made from Port Church­ winter. During the closed season, Canadian ill on Hudson Bay, typically in September-October; grain moves to some extent through Canadian hut in no shipping season has the total yet reached 5 million bushels, and the 7-year average is only half ports such as St. John and Halifax, but New this amount. In recent years Norwegian vessels have York is normally the chief beneficiary of taken cargoes direct from Fort William-Port Arthur. Montreal's enforced inactivity. See Commercial Intelligence Journal, Aug. 20, 1938, p. 299. New York's big advantage as a grain port 86 Sll/PPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

lies in the volume and diversity of business handling facilities, have certain obvious ad­ handled. More regular liners ply between New vantages. They have usually gone ahead while York and European ports, and sailings are ports less favorably situated have slipped be­ more frequent than for any other North hind. Ports which enjoyed no export grain American port. A large amount of Canadian business before elevators were built have been as well as United States grain business is at­ able to operate newly-constructed elevators at tracted here, since grain is a cargo that liners capacity much to the advantage of the port.2 are willing to carry at very low rates and ship­ This has been particularly true in Canada and ments can be made at almost any time. the United States, though the drastic decline Shipments from New York are predomi­ in United States grain exports during the past nantly by liners in parcel lots; from Montreal, decade has more or less permanently counter­ while the port and the St. Lawrence are open, acted this influence. three or four tramp shipments are often made All of the leading Atlantic ports enjoy some to one liner shipment. grain export business at times, the volume Since late in 1932, under the operation of varying with changes in their competitive po­ the Bri tish-Canadian Ottawa Agreements, sitions and the size of United States grain ex­ shipments of Canadian wheat through United ports. A difference of a fraction of a cent per States ports have been discouraged and com­ bushel in the cost of ocean freights, insurance, plicated, and to the United Kingdom largely and other marketing costs, between alternative stopped.! Nevertheless, Canadian grain con­ routes to shipping points, may suffice to alter tinues to move by this route, especially in the the route. Position of the grain and desired four months from October to January, and delivery date overseas also determine whether chiefly for continental European destinations. wheat will move from one port or another, With a very uneven flow of traffic across in cargo or parcel lots.3 the North Atlantic, ports are able to attract A.rgentina to Europe.-Practically the only tramp shipping in proportion to their capacity regular export by tramp ships from Europe to for supplying full cargoes in one direction and South America is coal from Great Britain. absorbing them in the other. On the Atlantic Neither Argentina nor Uruguay possesses coal seaboard, Canadian and American wheat has deposits of any importance, and fuel must tended to flow through the port which could still be imported despite the beginnings of a offer both regular tonnage and "distress petroleum industry in Argentina. Such traffic space" at the moment. in the southerly direction is heavily out­ Ports enjoying a favorable inland railway weighed by the return cargoes of grains and freight rate on grain, as well as adequate meats from Argentina and less bulky cargoes from Brazil. 1 To quote the latest annual report of the Liverpool Next to North America, Argentina is the Corn Trade Association: "It is well known that, since the date of the Ottawa Agreements, the former Fort most important exporter of grains, but Argen­ William/Buffalo/New York route has, for all practi­ tine ports are farther removed from the main cal purposes, been closed to the United I{ingdom importing centers. Every month wheat, maize, Importers. The Customs would, of course, admit Canadian Wheat via this route, subject to the 2/- per and smaller amounts of lesser grains (also lin­ quarter duty as though it was a foreign product, but seed) are being shipped from the River Plate. the regulations have been so drawn, or are so con­ New-crop shipments of wheat begin about the strued by the United Kingdom Authorities, that the Preference to which Canada is entitled is, in practice, first of the calendar year and usually reaeh denied." their peak in March. Maize shipments begin in 2 H. S. MacElwee, Port Development (New York, April-May and attain maximum volume usu­ 1925), chap. xii. ally in June or July; weather conditions some­ a Under these conditions, no single series of ocean freight rates provides a continuous measure of trans­ times retard shipments by making the grain portation costs between the Northern Hange ports and unfit for shipment until later, and maize ex­ Europe, such as is provided for routes from the HiveI' ports are sometimes fairly heavy even in Octo­ Plate and Western and South Australia to the United Kingdom and Continent. Hence the series included in ber-December, most recently in 1936 when the Table III is a composite series. United States crop was very short. GRAIN ROUTES AND PORTS 87

The navigable river system consisting of the river on the Parana-navigable for some 300 River Plate and the Rivers Parana and Uru­ miles. It is the center of the richest maize­ guay, together with the principal grain-ship­ producing territory and the principal port for ping ports, are shown on the inset map in shipments of maize and all grains combined. Chart 8. At the heart of this system is Buenos During certain times of the year, usually in Aires. Through it pass the bulk of Argentina's the early months when the river level is imports. To the northwest, west, and south­ several feet higher, larger vessels may load west lie rich grain lands from which originate with safety at ports still farther up river. the maize, wheat, linseed, oats, barley, and rye The river between Rosario and Santa Fe cargoes that are shipped from numerous ports requires continual dredging in order to main­ along the Parana and the River Plate, and tain a 19-foot depth, which is inadequate for from a few ocean ports on the coast to the larger vessels. As a result, ports on the Parana south. north of San Lorenzo not only take a higher All ports north of Buenos Aires are termed freight rate but account for a small proportion "up-river" ports. "Down-river" ports include of total Argentine grain shipments. North of not only Buenos Aires and La Plata, thirty Rosario are Colastine, Diamante, and Santa miles apart on the River Plate, but also Mar Fe-frequently referred to as the ocean port del Plata, Necochea, and Bahia BIanca to the of Parana, which is located opposite but is south along the Atlantic seaboard. The tab­ unable to accommodate vessels of the size ulation below summarizes, in thousand metric that can berth at Santa Fe. tons, the export shipments of wheat, maize, Even Rosario and San Lorenzo are at some and linseed by groups of ports in 1937, a year disadvantage because of the Martin Garcia of relatively large total exports:1 bar. The larger ships loading grain or linseed at one of these ports may be required to load Port Total Maize Wheat Linseed additional grain by lighter after passing below ------this obstruction, in order to make use of their North of San Lorenzo .... 825 214 208 403 Rosario and San Lorenzo 6,560 4,424 1,475 661 full cargo capacity. South of Rosario are such South of Rosario ..... '" . 2,337 2,109 90 138 ports as San Nicolas and Villa Constitucion. ------Bahia Blanca, about 500 miles by sea from 'rotal up-river ports __ .... 9,722 6,747 1,773 1,202 Buenos Aires and La Buenos Aires and some 20 from the open Plata ...... 3,950 2,413 999 538 ocean, ranks with Rosario as a wheat port Bahia Blanca, Mar del and handles significant quantities of lesser Plata, and Necochea ... 1,340 ..... 1,197 143 ------grains. When there are normal yields in all Total, 1937 .... _...... 15,012 9,160 3,969 1,883 the wheat regions, Bahia BIanca becomes the 1936 ...... 11,565 8,388 1,619 1,558 leading port for Argentine wheat exports. Pending completion of elevators now under Up-river ports accounted in 1937 for some construction, it is the only port with an three-fifths of all grain shipments. Rosario, adequate bulk-handling system. Its facilities Bahia BIanca, and Buenos Aires, the three are such that six ships can be loaded simul­ leading grain ports, typically send out three­ taneously at a rate of 1,000 tons of grain per quarters of all Argentine wheat exports, and hour to each. Furthermore, it has over 30 Rosario and Buenos Aires ship more maize feet depth of water compared with not over than wheat. 25 feet at Buenos Aires and about 20 feet at Rosario is about 200 nautical miles up Rosario. It offers wool cargoes, which stow

•1 Times of Argentina, Jan. 10, 1938, p. 27. Total well, in addition to wheat . shIpments of three lesser grains, in the same unit, These factors are important, for handling were as follows: Year Total Oats Barley Rye facilities vary considerably in Argentine ports, 1937 ...... 721 384 244 93 rapid loading is often called for,2 and at 1936 ...... 541 171 233 137 times dispatch has been abnormally slow. 2 In a record week in January 1937 about 502,000 ~ons of wheat, maize, linseed, and oats were shipped Congestion, inadequate handling facilities, III 125 steamers. loading dependent largely upon hand labor, 88 SlllPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

and port strikes, have provided sources of ir­ Tramps and cargo liners use this route also, ritation to ship operators as well as involved but ordinarily prefer that via the Cape. Suez delays and additional expense. Canal tolls, the necessity of paying them in Australia to Europe.-The trades to and gold, low freight rates, and the strong liner from Australia are now predominantly liner competition for cargo on the Suez route, have trades but there is a large volume of tramp tended to keep tramp shipping on the slightly business in wheat, and lesser amounts in wool, longer Cape route.4 ores, and special kinds of lumber. Both Aus­ In the five years before the war, probably tralia and New Zealand are well served by 40 per cent of Australian wheat exports were liners from Europe. Those specially equipped carried by sailing tramps. Today the few with refrigeration carry frozen meat, butter, sailing ships remaining in the international and fruit to the United Kingdom and Con­ grain trade ply between Australia and Europe. tinent.t The traffic is unbalanced since Aus­ In the 1937-38 season twelve sailing vessels tralia's imports are insufficient to even up took part in the trade. They carried about the outbound cargo movement. 43,450 tons of wheat and a dozen passengers, Longest of all grain routes, that from Aus­ and all but one took the route around Cape tralia to Europe is really a dual one-by way Horn. of the Suez Canal and via the Cape of Good Growing areas in Australia are compar­ Hope.2 Before the war, traffic on the Good atively near the seaboard. The range in ex­ Hope route far outweighed that on alternative port points is as wide as for the Atlantic ports routes from Australia to Europe. By 1922 it of North America, but the distance from Aus­ was about evenly divided between Suez and the tralia to the European market is so great Cape. 3 Mail, passengers, express freight, and that relatively less importance attaches to the perishable cargoes commonly go via Suez. specific point of export within the continent. In most instances, a shilling per ton will 1 In recent years, chilled meat has begun to move cover the freight differences between the near­ from Australasia, but as yet "this does not constitute a serious threat to the Argentine trade, owing to the est and farthest port of shipment over the superior competitive position of Plate producers." 11,000-mile route to Europe.5 See S. G. Hanson, Argentine Meat and the British Mar­ Both the southern and western parts of ket (Stanford University, California, 1938), p. 208. Australia produce wheat for export, but 2 Steam and motor ships do not ordinarily go via Cape Horn, as sailing vessels did and still do. neither South Australia nor Western Aus­

B .J. Russell Smith, Industrial and Commercial Geog­ tralia, where wheat production increased raphy (New York, 1913), p. 826; E. T. Chamberlain, rapidly during the 1920's, enjoys the same "Liner Tonnage in Overseas Trades," Commerce Re­ ports, July 27, 1925, p. 187. liner services that make Sydney and Mel­ 4 On Apr. 1, 1937 Suez Canal dues were reduced by bourne regular ports of call. New South 14 per cent. During the year the tonnage passing Wales and Victoria are thus able to take ad­ through the canal exceeded that of any recent year vantage of liner bottoms for shipping wheat and the cargo carried was only 5 per cent lower than in 1929. Chamber of Shipping of the United Kingdom, in parcel lots. The bulk of Australia's wheat Annual Report, 1937-38, p. 17. " .... Australian traffic exports normally goes by chartered ships, and via Suez, which had greatly decreased in 1936, experi­ several hundred tramps are usually employed enced an appreciable revival. The diversion of this traffic via the Cape of Good Hope was less important in handling this traffic each year. The form than in the previous year. If it is true that the re­ of charter party used in the Australian trade, ductions granted by the [canal] company are not un­ known as the "Austral," provides for loading connected with this return to the Suez route, it must also be attributed in part to the effect of favorable at two ports in Western Australia, or at two economic circumstances, and especially of a period of in South Australia, or at Melbourne, Geelong, relatively high freights." Annual report of the Suez and Portland in Victoria, or at Sydney. Ships Canal Company for 1937, printed in the Economist, June 18, 1938, p. 686. may be required to proceed via Panama, the 5 Under the minimum freight rate scheme, this is Cape, or Suez, and to discharge at the usual the differential in favor of Western Australian as com­ range of United Kingdom, Continental, and pared with South Australian or Victorian ports, in Mediterranean ports. shipments to United Kingdom/Continent/Mediterra­ nean ports. In Australia, as in Argentina, the pace of GRAIN ROUTES AND PORTS 89 development in ports and port facilities for ers, although at times they have commanded a handling the grain trade has been somewhat premium over cargoes.2 slow. Shippers and shipowners have had little opportunity to shift their business to rival MINOR GRAIN SHIPPING ROUTES ports-they have been more or less compelled Gull and North Pacific.-Both the Gulf and to make the best of conditions since cargoes the North Pacific routes are usually of minor other than grain have not been plentiful. Both importance compared with the North Atlantic nations have recognized their port deficiencies route to Europe,3 but together they handle an and made substantial progress in overcoming appreciable volume of traffic and have tended them during the past decade, under the stress to gain in importance. Gulf ports handle siz­ of export competition from other countries. able American shipments in some years and Even yet the dispatch of ships is slow at are an unimportant factor in others. The Pa­ many ports, and the various costs incurred cific Northwest usually exports some wheat for labor, port charges, and so on, are con­ even when the United States is a net importer. siderably higher than those at modern Euro­ Liverpool and London are farther from New pean or North American ports. Orleans or Galveston than from New York, Mounting port charges, irregular quantities but the cost of transportation by water is of cargo offered in both directions, and heavy so much less than by rail that Gulf ports are Commonwealth taxation (including the opera­ the cheapest outlet for grain from a sizable tion of the Navigation Act) for a number of wheat-growing area in the United States lo­ years threatened to cause a rise in Australian cated along and west of the Mississippi and freights. An "Australian Overseas Transport south of the Missouri.4 For years this south­ Association," formed in 1929, sought to de­ western region has been the outstanding sur­ crease the number of ports of call, regulate plus-producing area of the United States. The berth cargoes, and secure greater business for hard red winter wheat that it produces is liners.l Parcel rates by liners are now de­ the type that ordinarily bulks largest in Amer­ termined by the Oversea Shipping Represent­ ican exports. Galveston and New Orleans now­ atives Association. They tend to run lower adays handle most of this movement; with than full cargo charter rates by tramp steam- shifts in the producing area, Galveston has enjoyed more favorable railroad rates and has

1 See W. Millar Smith, The Marketing of Australian gained relative to New Orleans. Shipments and New Zealand Primary Products (London, 1936), generally go by tramps, at rates which only pp. 277-78. The cost of loading at Australian ports is recently were subjected to regulation. high, ranging from 4s. 9%d. to 7s. 9%d. per ton, as compared with 2s. lld. to 4s. 6d. for Canada. Costs The main wheat movement through the of discharge in Australian ports run even higher. Gulf ports frequently overlaps the beginning 2 Late in 1934 and early in 1935, before the mini­ of the heavy cotton movement. Since cotton mum freight scheme was placed in effect which checked the falling tendency in tramp rates and is unsuited for handling in full cargo lots, effectively raised their level, parcel rates were higher ship operators seek some heavier cargo to than cargo rates. They were again higher during sev­ help balance the loading. Heavy grains, such eral months of 1936, the initial increase in parcel rates being larger than for cargo at the outset of the 1936- as wheat and corn, serve this purpose. Since :17 general rise in freight levels. Appendix Note A cotton carries a comparatively high freight contains a reference to a parcel-rate series from Aus­ rate, shipowners can ofTer relatively low rates tralia, available from 1933. on grain because of their need for additional 3 The crop year 1937-:18 was an exception, primarily because of the extremely short crop in Canada. deadweight. 4 Formerly the Gulf route competed with the Chi­ Wheat grown in large areas of Alberta and cago-Buffalo route to the Atlantic seaboard from as smaller areas of Washington, Oregon, and far north as southern Nebraska and the Ohio River. Idaho moves to the Pacific Coast for export See T. H. Hammatt, Methods of Merchandizing Ameri­ c~n Wheat in the Export Trade, Part I (U.S. Dept. to the Orient and to Europe via the Panama Comm. Trade Information Bull. 183, February 1924), Canal. Generally more Canadian wheat goes p. 7. In the past decade pl'aclically no wheat from to Europe than to the Orient, but in several west of the Mississippi has been routed for export through Atlantic seaboard ports. recent years more United States wheat has 90 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

gone to the Orient than to Europe. Since the Black Sea to Northern Europe.-Intra­ war the opportunity to use the Panama Canal European grain shipments by sea are pre­ has greatly facilitated the traffic to Europe, dominantly from the Black Sea via the Medi­ though for decades earlier sailers and steamers terranean. All four of the lower Danube carried grain from California and the Pacific countries ordinarily produce surpluses of var­ Northwest around the Horn to Europe. Ocean ious grains. Rumania has several ports well freight rates to the United Kingdom and the equipped for handling grain: Braila and Galatz continent of Europe from the several North on the Danube and Con stanza on the Black Pacific ports, principally Vancouver and Port­ Sea. The Bulgarian Black Sea ports, Varna land, are in general the same. and Bourgas, are not so well and modernly Western Canada is well equipped with coun­ equipped. However, the Danube basin has try elevators, which are an important factor adequate facilities for handling its present . \ in the handling of grain in Canada and the gram surpluses.s From the Black Sea ports United States generally. The Pacific terminals (which are usually open all year) freight rates likewise have large storage capacity. During are usually lower than from the Danubian recent years grain received at the elevators in (which are closed for two or three months Vancouver and New Westminster, British during the winter), because of the risks and Columbia, has ranged in volume from 100 mil­ difficulties encountered by seagoing ships upon lion bushels in the crop year 1932-33 to 52 entering the Danube. million in 1933-34, with small additional When Russia is an exporter of wheat, the quantities at Prince Rupert and Victoria.1 Black Sea (and the Sea of Azov) route is the Most of this moves into export channels natural outlet for her wheat-growing areas through Vancouver, the chief Canadian port. and is used almost exclusively. Her major The business is distributed over the year, export harbors on these two seas are Odessa, hence considerable cargo is available for tramp Nikolaev, and Kherson to the south, and Ros­ ships on the run to Europe as well as for the tov-on-Don and Novorossiisk to the southeast. liners making Vancouver. Both tramps and The leading grain ports, Odessa and Nikolaev, liners share in the trade to the Orient also, are kept open to navigation by icebreakers. tramps often carrying mixed cargoes such as India to Europe.-Though never exporting grain and lumber. a very large part of her grain production, The chief outlet for United States grain India's participation in the world grain trade exports from the Pacific Northwest is Portland was formerly significant. But for the decade on the Columbia River, although Seattle and preceding 1936-37 India was frequently, and Tacoma on Puget Sound also ship considerable on balance, a net importer of wheat. The grain and some other ports participate. Total grain route from India to Europe is today shipments of wheat and flour from these only a minor one.4 ports to foreign countries ran as high as 64 1 The "grain divide" of Canada has moved more and million bushels in the crop year 1927-28, but more to the east. Elevator facilities and low railroad were less than 10 million bushels in four of freight rates have drawn increasing shipments to the the five years ending with Even yet, Pacific. Moreover, Vancouver is an ice-free harbor, 1936-37. which is not the case for any eastern Canadian port. grain in the Pacific Northwest of the United 2 For an account of the marketing aspects of wheat States is commonly sacked at the farm, as in in the Pacific Northwest see J. S. Davis, "Pacific North­ Argentina and most of Australia, and upon west Wheat Problems and the Export Subsidy," WHEAT STUDIES, August 1934, X, 377-83. arrival at the port of shipment must be bulked 8 Port facilities of Danubian and Black Sea ports and graded. 2 Because of the scarcity of regu­ are described by V. P. Timoshenko in "The Danube lar liner connections between this region and Basin as a Producer and Exporter of Wheat," WHEA'I' Europe, most of the wheat exported to Europe STUDIES, March 1930, VI, 249-51, and Agricultural Russia and the Wheat Problem (Food Research In­ moves by tramp ship. When the volume of stitute, Stanford University, Calif., 1932), pp. 340-47. exports is reduced to a mere trickle, business 4 For an account of export shipping of wheat from is insufficient to attract tramps, and liners India see C. P. Wright and J. S. Davis, "India as Ii Producer and Exporter of Wheat," WHEAT STUDIES, pick up occasional parcels. July 1927, III, 361-71, 378-90. GRAIN ROUTES AND PORTS 91

In the past two crop years, Karachi has phasis on general cargo business than across employed a number of tramp ships to haul the North Atlantic, where passenger traffic is cargoes of sacked wheat to Europe. The of greater importance. greater part of India's export wheat is thus While the bulk of Australian wheat exports shipped. In periods of small export move­ is destined for Europe, at times the movement ment, tramps largely withdraw from the trade, to India and the Orient is substantial. In Far and cargo liners carry the available parcels. Eastern marlfruits, ore, and general merchandise. At moderate shipments from Argentina, Aus­ times, some full cargoes of maize are avail­ tralia, and India. Neither Russia, then the able for tramp ships. Tramps also take coal world's largest grain exporter, nor the coun­ cargoes from Natal to India and Ceylon, as tries of the Lower Danube, have regained well as across the Atlantic to South America their prewar positions. Canada, Australia, and where they may pick up return grain cargoes Argentina expanded their wheat production for Europe. and exports substantially, and Argentine maize Transpacific tramp trades involve carrying as well as wheat became more important in lumber from the PaCific Northwest to Australia the total grain trade. Prewar and postwar and Japan, wheat to the Orient from the contrasts in sources of supply and overseas North Pacific and Australia (the North Pacific grain movement are therefore marked. shipments via Panama to Europe are con­ Rough calculations based upon Broomhall's sidered as transatlantic trade), and nitrates data on shipments suggest that for the five and other ores from the west coast of South years just before the war about 63 per cent America to United States Atlantic ports and of all wheat and corn entering into seaborne Europe. trade was transported a distance averaging Grain, both wheat from India and rice from 3,000-3,500 miles, another 30 per cent traveled Burma and Siam, provides tramps with Eu­ 6,000 miles, and around 7 per cent involved rope-bound cargoes over the India-Far East voyages of approximately 11,000 miles. 2 For trade route. In addition, cargoes of oil seeds, the five crop years 1927-32, when the total sugar, spices, cotton, jute, rubber, ores, and volume of trade had increased about 28 per various special types of timber are available cent, the same amount of grain was trans­ for both tramps and liners. Liner services in ported over the shorter routes but represented this part of the world generally place more em- only half the total. The increase was all ac­ counted for by shipments over the 6,000- and 1 Calcutta, once India's principal grain-export port, 11 ,OOO-mile routes, the former rising to 39 per has long since lost importance in this respect; but cent of the entire movement and the latter to ~vhen India imports wheat (typically from Australia) It enters chiefly through Calcutta. 11 per cent. 2 The shortest routes include shipments from North Between these two periods, the decline in All1erica, Russia, and Danubian countries (Black Sea shipments from Russian and Danubian Black ports); the 6,OOO-mile group includes Argentina, Uru­ guay, and India; Australia alone accounts for the Sea ports was offset by the increased move­ Illovement under the 11,OOO-mile classification. ment to Europe from North America, leaving 92 SlIlPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE the use of tonnage on the shorter trades Average North miles roughly the same. India ceased to be a factor Yeur Total AmerIca Australia Argentina per ton in Lhe trade, and practically all of the addi­ 1929-30 .. 69,400 34,500 15,100 19,800 5,900 tional trade in the (>,OOO-mile group resulted 1936-37 .. 63,300 17,500 24,600 21,200 6,500 from greater Argentine exports of wheat and corn. Stated in another way, the average ton of It may be assumed that a cargo of grain wheat exported in 1936-37 had to travel some from Argentina provides roughly twice the 600 miles farther than in 1929-30. employment of one from Atlantic North Amer­ World wheat exports in 1929-30 were only ica or the Black Sea, and shipments from Aus­ 4 or 5 per cent larger than in 1936-37, but tralia provide roughly three times as much. exports from the four major exporting coun­ On this assumption, if one ignores other fac­ tries were a fifth greater in the earlier year. tors, it would appear that the 28 per cent in­ With a uniform 20 per cent shrinkage in ship­ crease in the volume of trade should have led ments, the cargo ton-miles of employment for to a 44 per cent increase in the employment of shipping wheat from these regions should have ocean carriers, the difference being due to the fallen from 69.4 billion to 55.5 billion; the growth in importance of the longer trades. actual drop was nearer to 63.3 billion, or less But other factors require consideration. The than 9 per cent. In terms of employment, cargo-carrying capacity of tramp ships, which and amounts of cargo tonnage involved, this account for the bulk of the overseas grain works out roughly as follows:a movement, has been increased-perhaps by 6

rl'rlps I, One year's per cent during the period (see p. 58); aver­ or , continuous RegIon loads Dlstnnce ISpeed employ- age speeds have increased, perhaps from 9 and year of (nll,utical' (/enots) Days ment for 7,000 mile8) number knots to 10; and, due to improved port facili­ tons of tramp shIps ties, bulk handling of grain, and so on, the ----- time for turn-around has been substantially North America reduced. Such economies in the use of ships 1929-30 ...... 1,030 4,SOO( 519 107 may fully offset the increase in demands aris­ 193&-37 ...... 590 4,2005 10.5 (17 55 ing from the changed distribution by routes. Australia 1921J-30 ...... 193( S50 With nothing better than crude estimates, one 193&-37 ...... 3135 11 ,200 10.0 47 (Sl cannot be sure; yet it seems doubtful whether Argentina comparable volumes of grain transported over­ 1921J-30 ...... 463~ 569 193&-37 ...... 4975 6,100 9.5 27 (74 seas nowadays provide more shipping employ­ ment than before the war.1 If all the wheat shipped overseas from the The supply of tonnage, moreover, has more major exporting countries had been trans- than kept pace with the growth in the volume

of trade. Except briefly during 1926 and 1937, 1 Such estimates do not imply that better utilization recent years have witnessed no shortage of has been made of increased cargo-carrying capacity, tonnage available for carrying the world's or that the average number of days during which car­ grain overseas. The shrinkage in volume of riers have earned freight revenue hus increased. 2 In 1929-30 approximately 79 per ccnt of all export trade during the depression years has already shipments 'were destined for Europe; in 1936-37, the been discussed. percentuge was 81. Houghly proportionate dish·ibu­ The significance to shipping of longer routes tion of 80 per cent is assumed. Distances are taken as 11,200 nautical miles for Australia and 6,100 for Ar­ in the grain trade may be further illustrated gentina. For North Amedca 4,800 miles is used for t)y contrasting two recent years-neither a 1929-30 and 4,200 for 1936-37 due to different degrees representative one-in which there was a of participation of the North Pacific and the Gulf ill shipments during the two years. marked difference in the distribution of wheat 3 The speed assumed on the Argentine run is loW !,uppJies for export. Translating the export because of the predominance of tramps, including wheat tonnage to be moved overseas into terms some old and slow boats which bring down the aver­ of distance, the ton-miles involved (in mil­ age (9.5 knots is probably high). For Australia, where there are relatively fewer old tramps operating lIud lions) in the movement were as follows: 2 probubly a higher liner participation, 10 knots is as- OCEAN FREIGHT RATES ON GRAIN 93

ported by tramps; if, instead of the bulk of it job to another, incomplete use of maximum heing marketed over a period of a few months, cargo capacity, and so on, the numher of ships there was a continuous even flow throughout needed would be probably twice as great. the year; and if the carriers had turned right Moreover, since the grain movement is irregu~ around upon discharge and returned for an~ lar, the number of ships actually participating other load, loading and discharging involving in it is much larger than would be required no delays-there would have been in 1929-30 for exclusive employment if the movement continuous employment for 226 ships through~ were evenly distributed throughout the year. out the year, and in 1936-37 continuous em~ In addition to tramp ships, numerous liners ployment for 210 ships, each averaging 7,000 carry parcels of grain and in the aggregate tons of cargo per voyage.1 Thus 7 per cent these parcel shipments scattered over several fewer ships would have been needed, despite months are equal to many full shiploads. In the fact that exports of wheat from these all, probably several thousand seagoing ves­ countries were 20 per cent smaller. sels are in some degree involved in the trans­ Making allowance for time of loading and portation of the world's surplus grain supplies discharge, coaling, delays in going from one overseas.

V. OCEAN FREIGHT RATES ON GRAIN Any appreciable change in the volume of borne grain movement, however, consists so freight offered for shipment in relation to the largely of the heavy grains that rates on wheat vessel space available in an important com­ and maize alone merit specific consideration. mercial area is felt throughout the world. De~ Substantial quantities of wheat-equivalent pending upon circumstances, the rate response to about 100 million bushels a year even in may be slow or rapid, fleeting or sustained, recent years of diminished volume-move slight or substantial. The grain movement is overseas in the form of flour. Flour, how­ of sufficient magnitude to generate such alter­ ever, is almost always transported by liners, ations in the demand for cargo space and thus and its movement is not subject to the sea­ influence rates on other bulk commodities. sonal and other changes characteristic of Ocean freight rates on wheat, corn (maize), grains. Sacked flour is shipped to European and rye, the so~called "heavy" grains, are usu­ destinations from New York commonly as ally the same per unit of weight, therefore liner berth cargo, along with provisions, cot­ slightly lower per bushel on rye and corn. On tonseed oil, grain, and similar commodities. barley and oats, which are lighter and hence Rates over a dozen recent years are shown in occupy more cargo space per ton, rates per ton Chart 9 (p. 94). Ocean freights on flour gen­ are usually higher by amounts varying with erally are considerably higher than on grain, the route, trade customs, and so on. The sea- and tend to be more stable. sumed. Liners out of New York raise the average TYPES AND LIMITATIONS OF RATE DATA speed for the North American route. Tramp speeds Liner rates include "conference" rates and are normally between 8 and 11 knots, with the aver­ age probably not over 10. The days computed, 17-19 "open" rates. With some recent exceptions for North America, compare with Broomhall's "aver­ mentioned below, rates on grain have not or­ age time of passage" statement (carried regularly each dinarily been fixed by conference agreement, Monday in a supplement to the Corn Trade News) of 18 days; the 47 days for Australia compare with chiefly because grain is not a typical liner Broomhall's 46 days; and the 27 days for Argentina cargo. When the parties to a conference of compare with Broomhall's 36 days. The major dis­ liner operators cannot agree upon the rates crepancy is on the Argentine route, where, perhaps be­ cause of many slower ships and coaling time en route, to be charged or for other reasons desire no the average time of voyage is really higher. regulation of certain rates, or when the trade 1 Isserlis' analysis of tramp voyages in 1935 showed is one in which no conference exists, liner approximately this average cargo per trip, but nearly 7,500 tons for grain cargoes, for vessels of 3,000 gross rates are "open." Such rates ordinarily re­ tons and over. Op. cit., pp. 81, 124. flect competitive conditions more accurately 94 SlllPPING AND FREIGHT RATES IN TIlE OVERSEAS GRAIN TRADE than "conference" rates, since each line is free based on the type of cargo. "Time" charters to impose any rate that will secure business. are also used in the transport of grains as well Of the "open" rates, a large group apply to as other commodities. These give the char­ "berth cargoes"-usually "parcels" of com­ terer the use of a vessel for a specified period modities that are commonly carried by tramp of time by the payment of a monthly rental ships. Rates for berth cargo, known as "berth" usually based on the vessel's deadweight ton­ rates, are usually very low. Even when these nage.!

CHART 9.-0CEAN FREIGHT RATES ON FLOUR AND WHEAT FROM NEW YORK TO LONDON, MONTHLY, 1926-37* (Cents per 100 pounds)

L-__~ ___~ __~ ____~ ____L- __~ __~ __~ ___~ ____L- __~ __--J 0 ., .,. • I .. .!If ... ~_ ....."'\.'L /" '1 I I "0 o~."/ \ 'I ,,' ~ .... ., -- -F-- j " '/ Diffe~ential ---- '5 ",+------Flour rate 1If~~f .. \I mrnv.s r4t ~ \r 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 • Northwestern Miller, "Almanack Number," Apr. 27, 1938, p. 40. Flour rates are for shipments in bags; shipments in boxes are 5" cents higher, and in barrels and half barrels 5 cents higher still. Earlier Almanacks give rates for earlier years, but the fo llowing caution appears in a representative issue: "Wheat rates in 1920-25 are merely approximate, for although the Shipping Board differential of 5c per 100 lbs. between wheat and flour was maintained as the basis, actual rates quoted by cargo vessels varied widely and full information regard­ ing them is not available." hardly cover handling costs, such business Numerous variations in form, of both voy­ may not be unprofitable if the berth cargo is age and time charters, are not always reflected carried in lieu of ballast. When an ample vol­ in quoted rates, although a few of the options ume of more profitable high-class freight is included in the agreement are customarily available, of course, the liner is less aggressive reported.2 Voyage charter parties often leave in bidding for berth cargoes. unspecified the exact ports involved; thus, All tramp rates are also "charter" rates of from "North Atlantic Range" or to "Antwerp­ one kind or another, since tramps move under Hamburg Range" means any port within the contractual arrangements with shippers. Quo­ specified range of ports that the charterer may tations represent "fixtures" which have been subsequently designate. As already noted, made, i.e., when the shipper has chartered a tramps carrying grain frequently sail "for or- certain vessel and a "charter party" has been executed. 1 In normal times an average of 25 or 30 per cent of the Norwegian merchant fleet is employed in this man­ There are various forms of charter rates. ner, according to John O. Egeland, Fairplay, Jan. 13, The charterer may desire the use of the ship­ 1938. This proportion is much higher than for ships owner's vessel for a single voyage or for a pe­ of other nations. riod of time. "Trip" or "voyage" charters, 2 For voyage charters, for example, there are "gross forms" and "net forms," reflecting rate differences under which a large proportion of overseas according to the division of loading and discharging commerce is carried, are effected for the full expenses as agreed upon by shipper and shipowner. capacity of a vessel for a single voyage be­ Under a "bareboat charter" the time charterer em­ ploys the vessel only, hiring his own crew, paying all tween specified ports, the freight rate being port charges, making repairs on the vessel, and so on. OCEAN FREIGHT RATES ON GRAIN 95 ders," and en route or at some intermediate ciflc rates often yields only a general indica­ point are given a routing to a particular port tion of the prevailing rate level. or ports of destination, the shipper having sold There are other reasons why averages based the cargo or made his decision as to its de­ on fixtures reported for a particular week or livery after the ship left the loading port. month have no very precise meaning. A few Since the shipping industry is in very lim­ fixtures may be for ships ready to load ited degree regulated or controlled by govern­ ("spot"); others for vessels available within ment agencies, there is almost no compulsory a week or so ("prompt position"); still others rate reporting.1 Not all rates are fully or re­ for loading some weeks or months hence. liably reported: an indeterminate number are There is nothing in any regular charter mar­ not reported at all, and some reported rates do ket corresponding to a futures market in not reflect the basis upon which business was grain. Nevertheless, exporters 'making for­ actually transacted. Published rates on goods ward sales may usually protect themselves moving in bulk by chartered ships represent against changes in freight rates by engaging a day-to-day report of business transactions, space several weeks or months in advance. but rates on parcels carried by liners are often The protection thus afforded is somewhat no more than "offering" rates. The fairly com­ analogous to the protection against price prehensive records published in shipping jour­ changes afforded by hedging in a futures nals result mainly from contacts of reporters market. with freight brokers or steamship companies. One might compute the January rate from Enormous fluctuations in charter rates sig­ the River Plate, for example, on the basis of nal extreme caution in the use of recorded rates charged by all ships loaded in that month data. For example, in the River Plate market, regardless of when fixed. 2 This procedure, perhaps the best barometer of grain charter however, is open to objection, not alone be­ rates, within a year the high is often twice the cause of the magnitude of the computation low rate, and fluctuations of several hundred task. Each of the various options as to ports per cent sometimes occur. The full extent of of loading and discharge, so common in char­ these fluctuations is not revealed by the ter parties for grains, carries a specified rate; monthly averages of rates used generally in and even if all fixtures were reported accu­ this study. Averaging a large number of spe- rately and completely, there is no feasible method of determining which options were used and therefore what rates were earned. 1 In 1935 the United States Shipping Board Bureau Freight differentials within a certain range issued an order through the Department of Commerce requiring all common carriers operating in United of ports may be set forth in the charter party. States foreign trade to file their rates and charges But when the freight market is weak, the char­ except on those commodities shipped in bulk without terer is likely to demand all the options he ~ark 0: count. "This order has been very helpful In term mating the secrecy existing as to common car­ may have any conceivable need for, and the Tier rates in foreign trade, and has for the first time shipowner is not in a position to be anything made available to the public the rates which are actu­ but lenient. Conversely, when freights are ~lly charged in this service," according to H. S. Perry, The ,united States Shipping Industry," Annals of the strong and space is at a premium, the owner's American Academ" of Political and Social Science, tendency is to grant only such options as are September 1937, CXCIII, 91. Grain rates, however, are not among those required to be reported. usually customary and to require the charterer to pay more dearly for others. 2 Since 1934 thc International Institute of Agricul­ ture, more interested in export-import price compari­ Averages of reported rates must be used sons than in the freight market, has systematically with due regard to the nature of the quota­ ;,ollowed the practice of reporting grain rates relating tions on which they are based. They are least to contracts made, often during a period extending back several months, to operate during the weeks open to objection when used, as in the present spec~fie.d." See Monthl" Crop Report and Agricultural study, in considering the general level and StatIstIcs, April 1937, XXVIII, 307S. Since 1936 the course of rates over a considerable period. average rates reported by the International Institute of AgrlCu . I ture have on several occasions notably dif- For other types of analyses, such as the fcred from those reported by other sources. cost of transporting grain overseas from a 96 Sl1/PPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

specified country, or the earnings of shipping ton higher, and "down-river" ports-Bahia companies, averages provide only crude ap­ Blanca, Buenos Aires, La Plata, and Monte­ proximations. For such purposes, reported video (Uruguay)-take the same amount less rates would need to be weighted according to than the base rate. Although the distribution the volume moved at each rate. For com­ of exports between Argentine ports varies parisons of shipment costs with price spreads, from year to year, up-river shipments tend to "prompt position" rates are generally most predominate; hence quotations from up-river significant.t ports taking the base rate are somewhat more Ocean freight rates on grain from Argentina significant if one series of rates among several are fairly easy to follow. On the average, prob­ is to be selected. Inasmuch as rates are quoted ably 85 per cent of the exports are handled for heavy grain, the varying proportions of by tramp steamers, and there is a some­ wheat to maize handled by different ports pre­ what standard relationship between the rates sents no difficulties. During some weeks of the charged for berth cargo in liners and prevail­ year, however, fixtures are made largely from ing charter rates for tramps.2 During much of a few ports; hence in order to have a continu­ the time the berth parcel rates that are quoted, ous series of comparable quotations it would though about 2s. 6d. per ton lower, are purely be necessary to adjust available quotations nominal. Yet so long as this differential exists, by applying the more or less standard differ­ the series of berth rates provides a simple ential between ports. guide to the general course of ocean freight The same procedure may be used in follow­ rates in the River Plate market, without the ing grain rates from Australia to Europe. Rates numerous ups and downs characteristic of from Western Australian ports, for shipments charter rates. in bulk, are generally Is. per ton less than Differentials in rates between ports several from other Australian wheat ports except Syd­ hundred miles apart tend to remain nearly ney; there, due to the superior handling facili­ constant, even in the absence of agreements. ties, they are usually quoted only 6d. higher, Under the minimum rate scheme, a basic rate ex silo, than from Western Australian ports.3 is set from Argentina to "picked ports" in the Rates for wheat shipped in bags run 2s. 6d. United Kingdom. Rosario and some other higher than for bulk shipment from all ports "up-river" ports take the base rate. Ports far­ except Western Australian, where the differ­ ther up to Santa Fe take a rate 1s. 3d. per ential has been 2s. under the minimum rate scheme. 1 Such rates are usually directly related to the price By selecting a specific port in Argentina or spread between spot wheat prices in an exporting market and importers' c.Lf. quotations on prompt Australia, and following the grain rates from shipments. The corresponding price spread against that port to Europe, it is possible not only spot wheat quotations in an importing market is not to appraise changes in the level and course of always directly related to shipment costs; but when such a relation exists, the pertinent freight rate is rates over this route, but to obtain some meas­ usually the "prompt position" rate. The price of spot ure of the cost of moving wheat from the ex­ wheat in importing markets is not determined on the porting country to the European market. If, basis of the freight actually paid on the shipment. Price spreads between futures in exporting and import­ over a period of years, the representativeness ing markets may depend on freight rates for late ship­ of one port changes, another can be substi­ ments rather than on prompt position rates. tuted. Since the bulk of shipments from these 2 When this relationship is disturbed, it occasions countries is by tramp ships, liner rates may commcnt. In the Times of Araeniina, Sept. 13, 1937, the editor wrote: "As one agent put it to us on the usually be disregarded and only charter rates Bolsa last week-end, 'I have no idea what the current followed. rate is for parcels. With open charter rates at 35/- up­ No similarly convenient procedure, however, river/U.K., parity would be 2/6 less for parcels; but shippers are offering no more than 31s., whereas a can be used in considering grain rates from shilling more would be but logicaL'" the United States or Canada. The several 3 When the new terminal elevators ("silos") are North American routes differ materially in completed at Williamstown and Geelong, the wheat ports of Melbourne, these ports will presumably get distance and time required, and the numerous the Sydney rates. ports of shipment are widely scattered. The OCEAN FREIGHT RATES ON GRAIN 97 whole situation is very different from that in rable basis. But quoted liner rates, predomi­ Australia, where the greater distance to over­ nantly "open" "berth" rates-"quoted" or seas markets renders of small importance the "offering"-have often not represented the variations in the length of the route due to the actual figures at which business was done. choice of route or the location of loading ports. Only since 1935, when tramp agreements were Moreover, there is considerable fluctuation effected, have minimum liner rates on grain in the direction of flow of the North American likewise been fixed by agreement for most movement from season to season and year to routes to United Kingdom and Continental year. Grain tends to flow along the cheapest ports, a few remaining "open," as for cer­ route, and this is determined by taking into tain French and Mediterranean ports. account ocean freight rates, rates from the Charter rates from the St. Lawrence, prin­ inland terminals to shipping points, port and cipally Montreal (usually quoted in shillings insurance charges, and sometimes Canal dues per quarter of 480 pounds), provide a repre­ also. Ocean freights, being less stable than the sentative measure while the St. Lawrence is other costs, precipitate numerous changes of open to navigation, but the North American minor or major importance in routing over a grain movement is by no means completed period of years. when the river is closed. Vancouver becomes When the United States is actively export­ an important North American grain shipping ing, numerous Atlantic, Gulf, and Pacific port particularly during the month or two Northwest ports may be used, but the volume following the close of the St. Lawrence, yet of shipments may be affected by the addition rates via the Panama Canal to Europe are or absence of Canadian grain. When the hardly comparable with those from Montreal United States is a net importer, the Gulf or New York.1 route is used but little or not at all, Pacific Since no general view of ocean freight rates Northwest shipments from United States ports changes is obtainable by considering rates are greatly reduced, and New York and Albany from anyone port in North America, it be­ handle Canadian grain, principally during pe­ comes necessary to consider the North Atlan­ riods when the St. Lawrence River is closed tic range as a whole and the North Pacific to navigation. separately. This is satisfactory for purposes Further complicating the problem of ascer­ of examining trends, but it would be totally taining the freight cost to Europe from the unsuited to more detailed appraisals. vast North American continent is the shifting in means of ocean transportation used. When RATE LEVELS AND EXPORT COMPETITION the major part of the grain movement from The limitations of rate data do not preclude New York is in parcels by liners, tramp char­ some significant comparisons of rate levels. ter rates from New York are obviously less Most of the expansion in grain acreage and significant. On the other hand, when tramps production in the 1920's took place outside are carrying most of the grain from the Gulf Europe. Effective competition with European ports, the liner rates quoted have little signifi­ agriculture by Argentina and Australia, as cance. This was the situation in the early welI as by Canada and the United States, was months of 1938. New York tramp and liner 1 In addition to United States Atlantic ports and rates, though down to the minimum agreed Montreal, the Canadian ports of St. John and Halifax Upon by shipowners, were out of line, and ship grain in varying amounts upon which rate data tramps in the Gulf trade were getting prac­ ~lre published. But when a large volume of wheat is being moved from the Pacific to Europe via Panama, tically all the available business. To remedy this longer route must also be taken into account. this condition the minimum freight scheme Composition of rates from the Northern Range was extended to Gulf trades beginning Au­ ports has, in the past, varied according to whether gust 25 of this year. New York happened to be handling most of the busi­ ness 01' whether grain fixtures were also reported from Were liner rates as meaningful as tramp Baltimore, Philadelphia, Boston, Albany. or other ports charter rates, it would still be possible to fol­ on the United States Atlantic seaboard. These differ­ ences have largely disappeared under the minimum low grain rates regularly on a fairly compa- freight scheme. SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE greatly promoted by low shipping freights,l equilibrium temporarily prevailed in the vari­ though grain quality and marketing efficiency ous supply and demand factors in the grain were also important factors. In more recent trade, as well as in the ocean freight market. years, extreme nationalistic measures have When changes are small and of minor im­ led to increased wheat production in Europe, portance over a two-year interval, it should despite still lower levels of ocean freights. be possible to appraise fairly the comparative Competition is not alone between the older level of freight rates over different routes. European countries and the newer surplus­ producing countries as a group; it is strong CHART 10.--RANGE AND ANNUAL AVERAGES OF between the chief exporting nations on both MONTHLY AVERAGE GRAIN FREIGHTS TO U.K./ CONTINENT, CROP YEARS 1922-23 TO 1937-38* price and quality. From the standpoint of (Cents per bushel; louaritllmic vertical scale) competition, how the various elements of cost that are reflected in prices are incurred is .~ .. not so important as what they total. But the total cost cannot long exceed the price re­ ~~~ ceived in international markets without seri­ 10 10 ously affecting the fortunes of grower, ship­ 30.------ra--~------__,30 per, or shipowner. 2*-----~~~~~~------~~ The minimum freight schemes thus tend to create temporary inflexibility in levels of rates. Over a term of years, however, ocean freight rates on the various trade routes tend to move in the same direction. As Chart 10 20,------11------,20 shows, the magnitude of the fluctuations Isi------fil.North Atlantic ------j varies a good deal, but rate relationships be­ tween routes are fairly constant.2 Develop­ 1~~~~~~1C~:J======~32~ ments which produce changes occur gradu­ el----~--_#~~~~-~-~~~~ ally, strengthening or weakening the position 41------~~~----~ of one country relative to another in foreign 3~. ~ 1_ marketing. '23 '28 -33 -38 * Based on data in Table III (North Atlantic routes) ond In the international grain trade, there are Table IV. The heavily shaded bars indicate the widest range few periods during which no important in the year. For monthly data see Chart 16, p. 118. changes take place in the distribution of ex­ That this two-year period is suitable for portable surpluses, prices, and the volume of present purposes is suggested by the remark­ trade. Rarer still are periods during which able correspondence with results secured by the freight market is simultaneously quite averaging rates over a 15-year period extend­ stable. However, the crop years 1931-32 and ing from 1922-23 through 1936-37-a pe­ 1932-33 constitute a period, perhaps as nearly riod which included violent fluctuations in ideal as can be found since the war, in which crops and marked gyrations in the freight market. One would ordinarily hesitate to 1 The situation from the standpoint of European lump all these variables together in the form agriculture is summarized in a League of Nations of averages. The selection of a period by study, The Agricultural Crisis (Geneva, 1931), II, 23-24. the criteria mentioned, plus the confirmation 2 See also Chart 5, p. 71, for similar evidence in freight rate indexes. of the longer-term averages, provides some 8 Although the combined North American exports assurance that the results tabulated below are differed by less than 10 per cent in the two years, the representative of the differences in rate levels distribution between Canadian and United States dif­ fered considerably, the United States movement being over different routes that tend to prevail over smaller and the Canadian larger during the crop year an extended period of time. The rates are all 1932-33. This does not affect the reliability of the over routes to the United Kingdom and conti­ results for the three major routes or the North Pacific route, but may render the data for New York subject nental Europe expressed in U.S. cents per to criticism. bushel.8 For comparative purposes, the aver- OCEAN FREIGHT RATES ON GRAIN 99 age rates have also been presented as percent­ above tabulation shows them only 20 per cent ages of the Argentine (River Plate) freight higher. Higher underwriters' charges on the rate/ St. Lawrence route accounted for a large part of these earlier differences. For the two­ ~ Two·year average 15-year average year period 1933-34 to 1934--35, however, 1931-32 anti 1932-33 1922-23 to 1936-37 there was no difference between Montreal and Region Percent· Percent· Average age of Average age of New York rates. The fact that, under the rate River rate River (U.S. cents) Plate (U.s. cents) Plate minimum freight scheme, no distinction is rate rate --- made between grain rates from the St. Law­ Australia ...... 12.5 168 20.3 168 rence and from United States Northern Range North Pacific ... 10.4 140 16.9 140 ports indicates that the parity level currently 100 Argentina ...... 7.4 100 12.1 prevails. Canada ...... 4.4 60 7.2 60 North Atlantic .. 4.4 59 7.1 59 The extent of the significance of comparative New York ...... 3.6 48 5.5" 45" levels of ocean freight rates in export compe­ tition depends upon the other charges that "A 14-ycar average, 1936-37 excluded for lack of quota­ go to make up the total spread between the tions. price on the farm and the European miller. The average level of grain rates from Aus­ On wheat, for example, the price spread be­ tralia to Europe is 68 per cent higher than tween farms in Kansas or Western Canada from Argentina, whereas North Atlantic rates and the Liverpool miller may be roughly average 59 to 60 per cent of Argentine rates. 30-40 cents, of which the ocean freight charge Perhaps in few years will these relationships may represent anywhere from a fifth to a half, be as uniform as during the period 1931-32 depending principally upon the freight mar­ to 1932-33. In 1938, when rates fell to the ket. Between the Argentine farm and the established minima on all major routes, Aus­ Liverpool miller, ocean freight may account tralian rates were only 24-38 per cent higher for half or more of the spread of around 25-30 than the Argentine minimum, while North cents. If the producer of wheat is located in Atlantic rates were approximately 51 per cent Western Australia, South Australia, or Vic­ of River Plate rates. This suggests that the toria, ocean freight will represent about three­ minimum for the River Plate trade was fixed quarters of a total spread not much larger relatively high. than for Argentina. If, however, wheat must Because of many variables for which it is be hauled a greater distance by rail, as in impossible to make adequate allowances, it New South Wales, the total spread is in­ is more difficult to measure changes in relative creased 3 or 4 cents and ocean freight charges levels of rates over the different routes during become relatively less important. the past 15 or 20 years. Every selection of Between these overseas countries and the shorter periods, however, shows a decline in miller in Germany, France, or Italy, the price the general level of North Atlantic, North spread is strikingly higher because of pre­ Pacific, and Canadian Atlantic rates relative vailing import restrictions of one kind or to Argentine rates, while the evidence is in­ another. Variations of 5, 10, or even 20 cents conclusive for Australian rates or for rates in ocean freight rates shrink into comparative from New York. insignificance when the total price spread is St. Lawrence rates have plainly declined from one to two dollars a bushel. relative to New York rates. Despite the shorter distance to the United Kingdom, Canadian SEASONAL VARIATIONS IN RATES Atlantic rates for many years averaged about Because of the heavy movement of agricul­ a shilling per quarter higher than New York tural products, a characteristic peak volume of rates. In 1922-23 to 1923-24 Montreal rates world trade is usually reached during the were approximately 27 per cent higher. The fOurth quarter, the low point normally in 2 1 Data from Table IV. the first quarter or the third. With seasonal 2 See League of Nations data in Table VI. expansion or contraction in the volume of 100 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

trade, ocean freight rates in general tend to principal tramp cargo carried to Europe, and rise or fall. As shown by the topmost curve there are practically no outbound tramp car­ in Chart 11, the Economist Index of Shipping goes; hence grain rates overshadow rates on Freights typically rises rapidly between Sep­ every other cargo and the seasonal curves tember and October, reaches its peak in No- are almost identical. Seasonal variations in rates from Australia to Europe, moreover, fol­ CHART l1.-SEASONAL INDEXES OF OCEAN low closely the seasonal movement of world FREIGHT RATES* shipping freights, except that the amplitude II O'--:-:-:-:-=--=-I'-illlt===:;r==.==c::;-, II 0 l WORLD is greater and the peak comes a month later. The percentage range in grain rates is nor­ 100 mally smaller than for Argentina and North America.2 Australia's remoteness and isolation serve to dampen many of the temporary com­ petitive and other influences that are quickly reflected in trades less remote from the impor­ tant markets. Grain is the chief tramp cargo from Argen­ tina also, but the index covers some other

110 110 tramp cargoes from parts of South America SOUTH AMERICA j...... ·... La Plata down rIVer other than Argentina. This traffic is predomi­ 100 ";:'-~. ~k nantly overbalanced in the northerly direction, ~V .. ,...... '...... \\.... 17" 100 yet southbound coal cargoes figure in the in­ ...... dex. Consequently it is less heavily weighted with grain freights; and it is not surprising 120',------,cr·':-;--,----,-----,-,----,-,----.--,120 NORTH AMERICA ...... \. I. ,I, I to find that, while the direction of seasonal ../' \~orth AtlanilC movement in rates is commonly the same, the "0l--t--t-+--+-t':--t--I-+-t-+--+-fc---lll 0 fl' /r., ~,~ Norlh PacifIc seasonal variation in grain rates is greater l V-,,.-,, ~-...... than for charter rates in general. 100~~F=...... L" ··r--::,~~"~~~~:t--I'-=~'·W~-=lIOO ,- I" .,..-V 1-0 18 I 6 ent seasonal characteristics. - In both countries, rates ordinarily average I-. highest during December, and a second but 14 10 10 I 4 V' Wheat and flour lower peak occurs in rates from the River 1\ shipments Plate in April-May. A firmness in rates just {I NsE T SCALE 12 8 J el 2 as crops begin to be exported in growing vol­ V ~ """-., I ume seems to be a common characteristic of I 10 \. f\ ~, o routes heavily dependent on tramps. This :..<- "V may be attributable to a temporary relative ",.. .,.0, scarcity of tonnage available for prompt po­ 8 8 /0/ '~Tt freights-N:r AtI.ntlc sitions, as shippers who have contracted for 0 _0/ 0, '0-1- 0- ,+_0- -o/t"", '0_ -0 space in advance tend to utilize a large pro­ 6 6 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul portion of the tonnage assembled early in the shipping season . • Shipments data (Broomhall) are 3-week moving aver­ ages of averages for corresponding weeks in August-July Wheat begins to move from Australia in crop years 1924-25 to 1933-34; freight rates data are 15- growing volume normally about mid-Decem­ year averages for identical months in crop years 1922-23 to 1936-37, based on Table III. ber, increasing rapidly and reaching a high in January. Shipments then taper off gradually, Wheat exports from North America typi­ although the volume continues large for about cally increase in volume during the late sum­ three months. In Argentina wheat shipments mer months, reaching a peak in November begin to increase late in December and nor­ just before the St. Lawrence closes. Ocean mally attain their maximum volume in Feb­ freights attain their peak during the same ruary-March. Usually the Argentine maize month. Shipments are substantially reduced crop is ready as wheat shipments begin to during the winter, when the routing is changed taper off, and the enlarged movement of the to Atlantic seaboard ports, the smallest move­ two grains combined tends to sustain or ment commonly occurring in March. As soon strengthen rates. Because of the combina­ as the St. Lawrence is again open to naviga­ tion of wheat and maize, the export move­ tion, a bulge in shipments takes place; this is ment from Argentina is somewhat better dis­ accompanied by a rise in freights, which have tributed than it is from North America or a second but lower seasonal peak in May. Australia. A somewhat similar seasonal behavior of Ocean freights from Argentina tend to rise rates is indicated for the North Pacific route during Odober and November, though Ar­ to Europe via the Panama Canal. The highest gentine exports of wheat and maize normally rates are normally in December, when the decline in these months. Tramp operators closing of the St. Lawrence tends to increase know that the season of heavy shipments is 102 SfllPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE temporarily over and that the larger move­ curred and the wheat movement begins in ment of new-crop wheat will not begin until large volume, Argentine rates tend to decline. mid-December or January. In the meantime, They are usually lower in January than in October and November are the months of December. Many tramps have been attracted heaviest North American shipments and the to the River Plate. The large North American period when freights in general are at their movement is over, and normally it is late for seasonal high. The tramp operator can take employment in the Australian trade. With advantage of this situation. Likewise, if he a plentiful supply of tonnage, and a large is interested in cargoes from Australia, which number of shippers having already chartered, become abundant beginning in December, he prompt-position rates tend to ease. must get his ship into position. Again in July, rates from Argentina to Europe move upward as shipments of wheat CHART 13.-AvERAGE SEASONAL COURSE OF TOTAL and maize decline. This is also probably due WHEAT AND MAIZE EXPORTS, AND OF FREIGHT to a shortage of tonnage in relation to the RATES TO EUROPE, FROM ARGENTINA* supplies to be shipped. Unless Argentine (Million metric tons; cents per bushel) maize shipments have been retarded by weather conditions or economic factors, the peak in offerings for shipment overseas has passed, and there is a withdrawal of tonnage for the North American movement soon to begin. World shipments over all routes con­ 10 1.0 1.0 I 0 ... tract to a seasonal low in the month of July, ... ,- '. ... , r- 1-'"' but only in North America is that month the .8 .8 - ~, ,~ seasonal low in grain rates. Ships not already " Wheat and maize ~', on the River Plate will hesitate to make the ' .. '" exports .6 .6 voyage south just as the available business is tapering off, while employment is almost certainly assured from North American ports. .4 +-+-+-+--f--h/YVI--l-""-jf'---=t"-o;;;;d--j-A VWheat exports -", During other months of the year, supply and demand factors are in such relationship .2-t-.. J 1\..2 that Argentine rates generally respond to f"'-i-r--- local demands for tonnage as expressed by

o'~--~~--~~--~~~~~--~~~~o the volume of shipments. Conditions in other Ju/ Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Ju/ trades continue to influence Argentine rates, • Export data (from official sources) are averages for but the international grain trade creates less corresponding months In August-July years 1924-25 to 1933- conflict in its demands upon shipping. 34; freight rates data, for wheat and maize, computed as indicated in note to Chart 12. Seasonal fluctuations in wheat rates from Australia are also influenced by factors other As a consequence of these relatively more than purely local relationships between the attractive alternatives at the moment, Argen­ amount of cargo available and the supply of tine rates tend to remain firm and even rise shipping tonnage. Freights normally rise as large amounts of tonnage are withdrawn from a low in June until they reach a high in from the River Plate for other employment. December, while shipments tend to decline At the same time, advance chartering be­ from June to November. The highest rates gins for space in the early months of the year ordinarily prevail in December, about a month when the new-crop wheat movement is in full before shipments reach their peak. swing. When fixtures are made at rates The rise in Australian rates from June to higher than prevail at the moment, this af­ November, while shipments are at a low fects the indexes here used and also, at times, level, is explained by two facts. Some of the acts as a prop to current rates. tramps that might be employed in the Aus­ After much advance chartering has oc- tralian trade have more attractive alternatives OCEAN FREIGHT RATES ON GRAIN 103 closer at hand in North America. During the cember-June is at least partly attributable to months of small wheat movement from Aus­ a characteristic of the Liverpool price quo­ tralia, liners are in a position to handle all tations. These are generally for prompt ship­ or most of the available business, leaving few ments during the early months of the ship­ full cargoes for tramps. ping season, but often for wheat afloat or already arrived in later months. The price CHART 14.-AvEHAGE SEASONAL COURSE OF TOTAL spreads based on Liverpool c.i.f. quotations WHEAT AND FLOUR SHIPMENTS, AND OF FREIGHT for wheat about to arrive, compared with spot RATES ON WHEAT TO EUROPE, FROM AUSTRALIA* quotations at Melbourne, have no necessary (Million bushels; cents per bushel) relation to freight rates currently being 2 6 28 quoted. They may tend to be most closely related to freights quoted a month or two whL Jce Jead t··· '''0., 28 f-- between Melbourne ····0 .... 2 6 earlier. Part of the discrepancy between the and British markej •• "0 ..... -0··· .. .. -0..... course of freights and that of the price spread "'.,. may reflect a tendency for prompt position 24 2 4 ...... II " freights at certain seasons occasionally to ...... \ move out of line with the rates actually being / ~ 22 2 2 .....b" •••• paid by most shippers, on tonnage engaged V I--'" " earlier. Wheat frelg~ 2 During August-November the Melbourne­ 2 0 L -... o r-. Liverpool price spread averages less than ..-/ -...... ~ 'v-'" freights plus other shipment costs. After 4 I 6 8." r- June or July, Australian wheat supplies are Wheat and floui '\ shipmenl$ r-- often so far depleted that prices at Melbourne K ~ rise above a parity with Liverpool and ex­ ~ ports to Europe are discontinued for a time. '-/ '" This is especially likely to be the case in Jul Aug Sep Ocf Nov Dec Jan Feb Mar Apr May Jun Jul September and October. • See note to Chart 12. The price-spread curve at the top is based on monthly average prices of Australian wheat in Melbourne and in British markets (parcels), based on EFFECTS OF TRAMP RATE CONTROL August-July years 1922-23 to 1936-37; data in WHBAT As previously observed, the British Ship­ STUDIES, October 1937, XlV, 66. ping (Assistance) Act of February 26, 1935 Chart 14 also shows average seasonal vari­ inaugurated an experiment in co-operation ations in the spread between Melbourne and which is unique in the annals of an industry Liverpool prices of Australian wheats, over traditionally unhampered by regulation.1 To the same 15-year period used in computing comply with a condition of the law, a Tramp average seasonal variations in freight rates. Shipping Administrative Committee was set During these years Liverpool prices averaged up, composed of twelve tramp and three liner highest relative to Melbourne in the month shipowners. Although the act was designed of December, when ocean freights averaged primarily to promote British shipping inter­ highest and shipments from the new crop ests, the co-operation of foreign operators were just beginning. The price spread aver­ was generally secured, and they too have aged about 4lj2 cents more than the freight. benefited from the operation of the minimum From December to June, freights and the freight schemes promulgated by the Com­ price spread both tended to decline, but after mittee. February the freights declined more than the The first schedule of minimum rates was price spread, so that by May the spread ex­ ceeded the freight by nearly 6 cents. The 1 In 1934 an International Tanlicr Pool scheme was slight difference between the seasonal course adopted, and it continues in effect; but the differences of the Melbourne-Liverpool price spread and between tankers and general traders are so numerous that this represents no significant exception to the the seasonal course of freights during De- statement in the text. 104 SlI/PPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE agreed upon for the River Plate grain trade. of Mexico on August 25, 1938. Here also, This was a graduated scale of rates designed rates were stepped up gradually, but after to raise the level from around 12 shillings per September 15 were to be on a 3s. 6d. per quar­ long ton current in February 1935 to 16s. 3d. ter hase for Gulf ports and 3s. 3d. for South­ by the end of April.l The minimum rates be­ ern Atlantic ports. These rates represent a came the prevailing rates for the remainder of marked increase. 1935 and over half of 1936. By additional in­ At the same time that minimum freight creases they were raised to 17s., 19s. 6d., 22s. rates were established for tramp cargoes, (jd., and finally to 25s. 2 On March 28, 1935 a minimum rates for liner parcels were also similar scale was adopted for the Australian fixed by agreements among liner companies. trade to Europe and to Far Eastern ports. 3 Ef­ The co-operation of liner conferences in es­ fective August 10, minimum rates on grain tablishing a satisfactory differential between were also fixed for St. Lawrence and Northern berth and charter rates has contributed toward Range (United States) ports. Over these three the sucessful operation of the tramp schemes, major grain routes rate control has been to the advantage of liner companies as well operative since 1935. as to tramp operators. How the relationships The most recent extension of the rate con­ between rival tramps and liners work out is trol scheme was to United States Atlantic thus described by one liner operator:4 ports south of Cape Hatteras and in the Gulf We have conference rates out to South America, but. we have nothing to hold on to homewards 1 Rates were based on a "handy size" steamer except the Tramp Administrative Committee's (5,500 tons carrying capacity) loading from San Lo­ minimum rate, so it is of considerable benefit to renzo or Bosario to picked United Kingdom ports, with reductions of Bd. for vessels of 7,000 tons, 6d. fOl' us to co-operate. But let me say at once that these 8,000 tons, and 1s. for vessels over 8,000 tons. benefits are not all on one side. Many a time we have had to sail from the Argentine only partly 2 The later advances pal·ticularly aroused com­ plaints from shippers. The Times of Araentina said loaded because we refused to accept our com­ editorially on Feb. 22, 1937: " .... In no case should pletion parcels, which were available, below the more than 20/- he fixed for this market, for this allows minimum rate. So you will see our support is a modern tramp to come out in ballast and more than also invaluable to the tramp scheme. pay its way on the round trip..•.. The raising of the official level above cost has somewhat incensed the Unquestionably the controls were a factor shippers and we can rest assured that if they can breaJ( the influence of the Committee, they will do so in the rise of freights which occurred in 1936 with glee .... it would be better for that policy to and 1937; but reduction of surplus tonnage, be based on costs and .... in no case should large increased trade, and longer voyages trans­ profits be guaranteed ....." porting grain from Argentina and Australia 3 Rates were for cargoes up to 8,250 tons net cargo, with a reduction of 6d. per ton for vessels carrying were even more important. Poor European more than this. The Japanese tramp owners did not harvests in 1936, the need for United States join the arrangement for the Far Eastern trade. importations of corn from Argentina, and 1 In a speech before shareholders of Lamport and heavy demands for tonnage to carry scrap Holt Line, Ltd. (London, Mar. 23, 1938) by Philip Hal­ din, printed in the Times of Argentina, Apr. 18, 1938, and raw materials to those countries rushing p. 19. to rearm, all contributed to the rise of freights. r, The minimum rates in force in 1935 to 1937 may Minimum rates were successively stepped be summarized as follows: up by the Tramp Shipping Administrative -----'frade --Unit --Lowest --Hig-hcst Perl or! Committee until July-August 1936. Then St. Lawrence .. Quarter 18.0d. 18. Or]. Mar. 21, H)35 to Apr. 15, 1036 freights began to rise of their own accord, 2 0 2 6 Apr. 16,1936 to Jan. 29,1937 with increased demand for shipping tonnage. 2 0 2 9 ,Jan. 29, 1937 to Dee. 31,1937 River Plate ... rl'on 13 6 22 3 Feh. 14, 1935 to Oct. 23, 1936 As freights rose further in response to im­ 22 3 22 3 Oct. 2.1, 1936 to .J an. 20, 1037 proved conditions, the committee increased 25 0 25 0 .Jan. 20,1937 to Dec. 81,1037 Australia" .... 'ron 22 0" 24 6 Mar. 28, 1935 to Oct. 0,1935 the minima on all routes, though until the 24 G 27 0 Oct. 10, 1035 to Jan. 29, 1987 fall of 1937 these were well below the going 31 0 31 0 .J an. 29. 1937 to Dec. 31, 1037 markeL" In 1938, after freights had fallen a Basis Western Australia, bulk grain. drastically, the minimum levels again became b In this period, 20s. was the low rate for "prompt" ship­ ment, and 22s. for "forward" shipment. the market rates, and to date (October 1) the OCEAN FREIGHT RATES ON GRAIN 105 schemes appear to have prevented a further when the average level of freights rose above decline. Even at the minimum levels main­ that prevailing in 1929, as they did in 1937, tained in 1937 and in early 1938, the high­ the Administrative Committee has had a some­ est set by the committee, the ofIicial organ what different status since the beginning of of shipping in Great Britain commented: 1938. With the official basis for its existence " .... it is doubtful whether present [mini­ removed, it has been enlarged, made more mum] freights in markets as a whole with the representative of British tramp and liner ship­ present volume of employment are sufficient to ping, and assisted by subcommittees on which provide even for depreciation."l In further other countries co-operating in the freight defense of its control scheme the Tramp Ship­ schemes are represented.3 An international ping Administrative Committee states: Consultative Committee has also been set up under the International Shipping Conference How little effect minimum freight rates have had on the interests of consumers may be judged from to advise on questions of freight co-operation the proportion which the present minimum rates policy-including the extension of minimum for carriage of wheat bear to the price of a quar­ freight schemes and the need and possibility tern loaf of bread, costing 9d., as follows :-3,000 for a compensation fund for vessels with­ miles from Canada. 26d., 6,000 miles from Argen­ drawn from the market in the interests of 2 tina .497 d., 11 ,000 miles from Australia .625d. adjusting supply to demand. In addition to establishing minimum rates, In the second quarter of 1938, a laying-up the committee imposed various restrictions scheme was proposed by the Tramp Shipping on outward sailings in ballast of unfixed ton­ Administrative Committee. Its object was nage on all routes under control. Further­ to facilitate the orderly withdrawal of the world more, it brought time charters as well as trip tonnage surplus to the requirements of the mar­ or voyage charters under its jurisdiction when, kets from time to time by the creation of a pool, to which members entering vessels would be on November 5, 1936, it ruled that "any time bound to pay a percentage of all gross freights charter entered into shall contain a stipulation in respect of such vessels under charters entered that the vessel shall not be loaded with grain during the duration of the pool, the pool funds from the St. Lawerence for any destination being applied in paying laid-up allowances in re­ covered by the St. Lawrence schemes." This spect of such vessels entered which may be laid Up.4 was subsequently extended to United States Northern Range ports. The plan was to apply to vessels in all Inasmuch as the tramp subsidy feature for trades, whether regulated by minimum freight British shipping was automatically canceled schemes or not. Similar proposals have often under the terms of the original act of 1935 been made in the past, without result, and this phase of the program for "rationaliza­

1 Chambcr of Shipping of the United Kingdom, An­ tion" of tramp shipping has not yet been put lIual Report 19.37--38, p. It. into effect. "Fourth repOI·t to thc President of the Board of Most voluntary co-operative arrangements Tradc on the work of the Tramp Shipping Administra­ tive Committec, Fairplay, Fcb. 4, 1937, The four l'e­ are at least threatened with breakdown under ports to date havc bcen issucd as "white papers," Cmd. adverse conditions. The fact that tramp own­ 5004, 5084, 5291, 5363. ers generally were in such a bad financial " Chamber of Shipping of the United Kingdom, An­ plight made co-operation feasible in the be­ lIual Report, 1937-38, pp. 28-:10. ginning. Even Greek operators, who had ,. From the "official summary" of thc Committee's schcmc, printed in the Times of Argentina, May 16, set the competitive pace with their secondhand 1938, p. 14. ships during the depression, were brought u GI'celt tramp shipping had made illl·oads particu­ into the scheme." From mid-1936 until the larly in the River Platc trade. Operating the oldest ships, purchased at depression prices, thcy wcre able fall of 1937, freights ruled above the estab­ to competc successfully even during the years of very lished minima, so that there was no difficulty low freights. In fact, during 1932 and 19:1:1, a con­ in keeping the plans in operation. The cur­ siderable amollnt of British and Nonvcgian tonnage abandoned this trade, but Greck, Italian, and Yugo­ rent situation is more critical since shipowners slavian tramps increased. are strongly tempted to undercut the mini- 106 SIIIp,PING AND FREIGHT RATES IN TIlE OVERSEAS GRAIN TRADE

mum rates rather than be totally deprived of Yet it is perhaps significant that, after several employment. By the middle of 1938 shippers' years of experience, many of the original complaints against the minimum rates were misgivings within shipping circles have dis­ becoming numerous;1 rumors of downward appeared, and that ambitious proposals for revisions were current especially on the River adjusting tonnage supply to current demands, Plate, and of breaking the minimum on the St. in order to maintain rates, seem to have the Lawrence; and agitation increased for bring­ support of the industry. No control, stabiliza­ ing Gulf rates under the co-operating scheme tion, or rationalization program can long re­ as both st. Lawrence and Northern Range sist an economic tide or trend moving in the points were losing business.2 opposite direction, but it is within the realm Thus far, however, the minimum freight of possibility that adjustments will be made schemes have held. As to the future of the in the future with less hardship and economic "rationalization" plans one can only guess. waste than in the past.

VI. ELEMENTS IN THE OUTLOOK In a study of this character, there is no There are at present no signs of any rapid point in attempting to forecast ocean freight reversal in the distribution of supply sources. rate developments in the near future. But Thus, the long trades from Argentina, Aus­ some consideration of the prospects for the tralia, and the North Pacific to Europe con­ longer term can hardly be omitted, even if stitute a favorable factor for shipping and have it stops short of prediction. Various consid­ helped to sustain employment, despite smaller erations affecting the outlook are involved. European grain requirements during the past Tonnage requirements for the international decade and increased efficiency in shipping. movement of grain have varied since the Also tending to sustain shipping employ­ war due to fluctuations in the aggregate vol­ ment, however, have been other factors of ume of exports, but they have also been altered less permanent duration such as the long because of a redistribution of supply sources. trades created by a series of poor harvests in In general, the movement over the shorter North America and by demands in recent routes has been radically reduced, and that years from Europe and the Orient for Amer­ over the longer routes substantially increased. ican scrap metals. Offsetting whatever favor­ able influence the more stable long trades in 1 "At the annual conference of the Victorian Wheat grain may have is a factor perhaps more Growers' Association ••.. the President .... moved that in view of the excessive charges of overseas important to shipping than the distribution of freights the conference commended the reported in­ supply sources-the effects of restrictive tention of the Federal Government to foster a revival measures upon the volume of the grain trade, of the ship-building industry in Australia..... " -Wheal and Grain Review (Melbourne) April 1938, Restrictions now imposed upon the trade, p. 5. particularly in wheat, cause shifts not only 2 After Gulf rates were brought under the scheme in the length and direction of movement, but late in August, a storm of protest hroke out as affected United States wheat shippers filed complaints with the in consumption and trade volume. Maritime Commission against the Tramp Shipping Just before the war, when world wheat Administrative Committee, alleging that the rates re­ production was fairly well adjusted to con­ flect "a concerted effort by the British interests to force the movement of grain through the Canadian sumption, the wheat trade was stabilized ports." See Soulhwestern Miller, Sept. 27, 1938, p. 40. perhaps as much as any commerce on a world 8 For a comparison of tariffs and a discussion of scale is ever stabilized. There were fewer other harriers, see Helen C. Farnsworth, "Decline and barriers to trade,a Then the war brought Hecovery of Wheat Prices in the 'Nineties," WHEAT STUI>IES, .June-,July 1934, X, 318-20. Prior to 1928-29 radical changes in the distribution of produc­ there were few barriers to trade other than tariffs; tion and trade. Now, as European nations milling quotas, mixing specifications, direct price-fix­ have again undertaken to supply their own ing, price-supplementing subsidies, international agree­ ments to limit exports, etc., have since been exten­ requirements and raised obstacles to imports, sively employed. repercussions of these changes are being felt. ELEMENTS IN TIlE OUTLOOK 107

If prices are low enough, fairly high bar­ artificial maintcnance of shipping services and riers can be surmounted. If, bowever, low the construction of new vessels hy the grant­ prices are feasible only as a result of growers' ing of various forms of subsidies. Though and shipowners' sacrifices, production and ex­ strenuous etrorts are heing made in some ports will be discouraged. Changes will not quarters to remove the obstacles to interna­ take place suddenly. Probably a period of tional commerce and to eliminate the friction years would elapse before those involved he­ caused by national shipping competition, both came convinced that unprofitahle operations the demand for and supply of vessel tonnage were not traceable to temporarily abnormal are being influenced by factors noneconomic conditions. By that time some reversal in in charader. Moreover, certain long-term trend may have occurred which would maliC economic influences affect the fJutlook for the flow of trade easier and provide an incen­ world trade, shipping, and freights. Some of tive for the grower to continue planting crops. these elements, can be appraised in a general In the meantime both shipowners and ship­ manner while others cannot. pers would be attempting to derive a profit International trade has been based on inter­ from the highly competitive grain trade. En­ national specialization. Much of it has been forced shrinkage in the volume would ac­ between old and new countries economically, centuate the ever-present conflict of interest an exchange of manufactured goods for food­ in which ocean freight rates are made. A stuffs and raw materials. Expansion of pro­ continuation of tendencies efTectively raising duction and trade in staple foods can profitably obstacles to the grain trade cannot have other go only so far. Beyond a certain point, as pro­ than an adverse effect upon both the agricul­ ductivity and incomes increase, not only is a tural economy of several important surplus­ smaller proportion of incomes spent upon producing countries and the shipping indus­ food, hut per capita consumption of the try, particularly tramp shipping. Such devel­ cheaper types which enter world trade tends opments would be reflected in the ocean to decline. freight rate level. With the maturing of nations, ditrerential Although an important influence, the for­ advantages between new and old countries tunes of the grain trade constitute only one become less marked. Products of the soil factor in the complex shipping and trade situ­ are cheapened by developments in the science ation. Were such restrictive influences con­ of agriculture. New countries develop in­ fined to the grain trade, the outlook would be dustrially. Industry encroaches upon agri­ somewhat different. But ocean freight rates culture and competes with foreign manufac­ depend upon the volume of all international tures formerly imported. The economic ad­ seaborne trade and the total supply of ship vantages of international specialization tend tonnage. Both of these broad demand and to diminish. Credit advances are less needed supply factors are subject to a variety of and this factor tending to sustain trade is economic influences, but they are also sub­ largely removed. stantially affected by developments in trade, With longer-term forces working toward agricultural, and merchant marine policies a narrowing of the economic advantages of of the more important nations of the world. nations in international trade, changes and Since the onset of world-wide economic de­ disturbances may become more numerous and pression in 1929, world trade has been re­ severe. If a large part of foreign commerce is stricted by numerous policies inspired by na­ thrown into a border-line category. interested tionalistic motives. 1 For related reasons, gov­ nations would be strongly tempted to apply ernments have still further encouraged the restrictive or other measures designed to tip

J Despite such restrictions, the volume of world the scales and produce at least temporary trade in 1929 was 25 per cent greater thall in 1913; competitive advantages. But additional inter­ und even in 1932 it did Ilot fall below three-quarters ference would only tend further to stifle of the 1929 level. trade. This is part of the argument by the 2 "The Futul'e of Intel'llutional Trade" Economic Journal, March 1938, XLVIII. 1-14. • British economist, D. H. Robertson.2 Not only 108 SlIlPPlNG AND FREIGHT RATES IN TIlE OVERSEAS GRAIN TRADE the shrinkage in volume, but the shifts, too, depends not alone upon the ultimate result­ would have profound repercussions upon ship­ ant of the various conflicting demand forces, ping and ocean freight rates. but also upon a similar set of factors influenc­ But there are oLhers who see in these tend­ ing the supply of ship tonnage. More impor­ encies litlIe basis for extreme pessimism. tant than aggregate tonnage figures are the Over the longer period there exists, says overseas carrying capacity of today's merchant Boehler, " .... a remarkable constancy of ships and the tonnage laid up without em­ relations between the difl'erent economic fac­ ployment. The practical efTect of increased tors which resist state interference and polit­ carrying capacity per ship is to reduce the ical change as well as cyclical fluctuations number of vessels required to transport the and war influences ..... "1 There may be world's goods. Although total steam and an increasing tendency for many nations to motor tonnage has increased from 45.4 to attempt greater self-sufficiency in foodstuffs G6.9 million gross tons between 1914 and 1938, and raw materials for some time to come; but world trade expansion has not kept pace with because of unavoidable reactions " .... one the enlargement of transport capacity, nor may expect that this tendency will find a grow­ has it been as great as might be expected from ing objective resistance, so that in the long run normal population growth coupled with tech­ the relations between inland production and nological developments and raised living imports will not be changed."2 standards. Changes have been occurring in the char­ For several years prior to 1936 the amount acter, distribution, and volume of international of idle shipping was abnormally large, being trade for many decades. Likewise, changes 20 per cent of the tonnage of existing ships as have been taking place in that part of inter­ recently as 1932. From 1924 to 1936 freights national trade which involves transportation were not sufficient to meet normal deprecia­ of goods overseas. In looking ahead for a tion charges.s Only by mid-1936, after such period of five or ten years it might be safe low rate levels had stimulated the breaking to reason that, on the whole, the tendencies up of over 7.5 million gross tons of shipping working toward a shrinkage in world trade and when the percentage of tonnage idle was would probably be in the ascendancy. But down to 6, did there seem to be an opportu­ if a period of several decades is considered as nity once more for shipping to enjoy "three the longer term, then one might seriously years' prosperity."4 question the prediction that a permanent de­ The 1936-37 rise in freights brought greater cline has set in, just as one may reasonably profits but was accompanied by rising costs. question the long-term trend predictions as Government rearmament programs increased to popUlation growth. shipbuilding activity, normally beneficial to The level of ocean freight rates, however, merchant shipping, but also increased build­ ing costs of merchant vessels. At the close of 1 Sec especially "Memorandum on the Technical Long Term Factors in the Reduction of the Volume 1937, a 9,000-ton (deadweight) cargo vessel of Overseas Trade," by Dr. Eugen Boehler, in Tile built in Great Britain cost £135,000, or ap­ Improvement of Commercial Relations between Na­ proximately twice the prewar cost, and 50 per tions-The Problem of Monetary Stabilization, Joint 5 Committee Carnegie Endowment, International Cham­ cent more than eighteen months earlier. Oper­ her of Commerce, Paris (printed in Belgium), June ating, labor, fuel, and supply costs likewise 1936, p. 14. rose. 2 Ibid., p. 25. Higher costs temporarily tend to offset the 3 According to the editor of Fairplay, Mar. 18, 1937. greater efficiency of the newer ships, but over 4 The shipping industry generally figures on a ten- year cycle, of which three years' prosperity must make the longer term technological developments good seven years of depression. See address of the will doubtless continue so that the long-term President of the Chamhel' of Shipping of Great Britain, trend of costs in the shipping industry is prob­ before the annual meeting of that organization in 1937. ably still downward. Though the nature of the r, FairplalJ, Jan. l:l, }!J38. This contrast is even more striking than that shown in Table I for a 7,500-too shipping business fixes many of the conditions vessel. of operation so that the unit costs of trans- ELEMENTS IN THE OUTLOOK 109

portation cannot be reduced in the same man­ For perspective, Chart 15 (p. 118) deserves ner as unit costs of producing a simple manu­ attention. Two indexes of ocean freight rates, factured article-for example, simply by ob­ reduced to a common hase, are "deflated" by taining a larger volume of production with an index of wholesale prices in Great Britain, essentially the same machinery and labor­ expressed in terms of the same base. The in­ developments of the past few decades never­ dexes, and the "deflating" procedure also, are theless demonstrate that the opportunities open to criticism; yet the process roughly have not all been exploited. eliminates the influence of changes in curren­ Furthermore, the technique of co-operation, cies and price levels, which tend to obscure particularly in tramp shipping, is still in its certain underlying trends. Ignoring the war infancy. There are many reasons why one years, the most striking fact is the broad would not ordinarily expect the development downward trend in the adjusted indexes of effective co-operative schemes within this shown. In the light of this historic trend, the industry.l For many years, however, the in­ pre-depression level of rates appears less ab­ dustry has experienced fortunes that are per­ normally low than it seemed at the time, when haps not ordinary. Tramps, after the war and the high levels of 1915-20 were so recent; and up to the beginning of the present decade, were the 1937 level appears distinctly high. apparently losing ground to liners, particu­ The reduction to more nearly normal pro­ larly the cargo liners which enjoy the benefits portions of laid-up tonnage during the past of the freight conference system.2 Though the few years was the result of an expansion in decline of tramp shipping may have been ar­ trade based upon factors none too reassur­ rested in recent years, the improved position ing from the longer-term view. A disquieting is probably only a relative matter as overde­ outlook internationally, rising raw material veloped liner services were curtailed with the prices, and actual warfare or preparations for shrinkage in world trade. Conferences of liner war, accelerated the pace of trade. Trade companies and consolidations do not seem to based upon abnormal shipments of scrap steel, have had adverse effects upon shippers' inter­ metals of military importance, and oil, is not a ests. In their longer-term movements, liner firm base for confidence in the outlook for re­ rates and tramp charter rates have run closely vival of foreign commerce. The same factors parallel. About the only noticeable effect of that promote trade of this character also for­ combinations and the conference system has tify motives for increased self-sufficiency. been to reduce the amplitude and frequency Likewise, the influences which contributed of rate fluctuations. With the lines standing to a temporary world trade revival in 1936 and to gain by co-operation in the existing tramp 1937 operated to increase the supply of ship­ rate control schemes, it is probable that their ping tonnage. On the one hand, nationalism influence and experience will tend to keep in­ finds expression in actions which can have no dividual shipowners in line if it can be shown other effect than to reduce the demand for that all are likely to benefit. shipping, and, on the other hand, adds to the At best, however, control or rationalization supply through the encouragement of ship­ schemes are usually a factor of transitory im­ building and operating for "strategic" reasons. portance in the outlook for ocean freight rates. Even with high construction costs, ship­ owners tend to order new ships when govern­ ment assistance is forthcoming. Although this 1 Any agreement must include all nations to be effective and the wide variety of charter forms must applies more to liners than to tramps, an ex­ necessarily be somewhat standardized. Perhaps in cessive tonnage of cargo liners has the same f~w other trades are there so many opportunities for hIdden concessions as in the chartering of tramp ships. effect of depressing general freight levels. Be­ • 2 Steamship conferences of liner organizations may, cause nationalistic policies are involved in In general, have become a more decisive factor in the both demand and supply influences, localized stabilization of rates, but it is doubtful that this and internal conflicts of interests seem inevi­ ge.lIeralization applies to the grain traffic, which is stl.ll ?ominated by the tramp on most of the world's table. prinCipal grain routes. If the forces currently operating to con- 110 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE tract world trade and increase shipping ton­ zation" of the shipping industry will durably nage persist, it is difficult to see how current support the level of rates, or merely postpone minimum freight levels can be long main­ disastrous declines in rates. tained, barring unforeseen developments such Notwithstanding certain possibly offsetting as general war or inflation. Much will depend influences, technological progress will con­ on whether the recent depression will spread tinue. The function of the tramp ship in and continue or be overborne by powerful transporting seasonal agricultural products, recovery forces. Higher operating and ship­ such as grains, will be performed for some building costs, plus rate stabilization meas­ time to come. That it can be performed at a ures, may prevent ocean freight rates from still lower cost is possible. That it will be per­ falling as low as they were for many years formed at lower rates of freight, assuming after the war; but it remains to be seen comparable currencies and barring additional whether further progress in the "rationali- wars, is probable.

V. D. Wickizer, now lecturer in economics at the University of California (Berkeley), wrote this study while on the staff of the Food Research Institute as acting associate economist. Joseph S. Davis gave counsel throughout and particularly assisted in the final stages, and other colleagues, including N. Jasny, made help~ ful contributions. The charts were drawn by P. Stanley King.

APPENDIX NOTES

A. SOURCES OF OCEAN FREIGHT RATE DATA Rates charged for transportation of freight Practically all original freight rate quotations overseas apply to such a wide range of products, are in terms of shillings and pence sterling per trade routes, and conditions, and so diverse are long ton of 2,240 pounds or, ehiefly in the case the uses to which such information might be put, of North America, per quarter of 480 pounds. Un­ that it is not surprising to find few systematic less otherwise stated, this may be implied in con­ selections, compilations, and publications of ocean nection with the sources enumerated below, and freight rate data well adapted to analytical uses. wheat and maize may be considered as the grains Within an industry of traditional secrecy about referred to in the mention of freight rates on its affairs, the task of compilation is difficult, the grain. Liner rates for parcels are commonly reported information is frequently incomplete or quoted in sterling per quarter, but in some cases not wholly reliable, and the emphasis is upon cur­ -notably the berth rates on liners operating from rent data which largely serve the purposes of the United States on the North Atlantic route­ those primarily interested. in United States cents per 100 pounds. Most rates on grains are charter rates applying As classified below, some sources are useful for to cargoes to be transported by tramp ships and current information on rates, others primarily originate from fixtures that are reported. There for reference purposes. is always a problem of selecting "representative" fixtures as a measure of prevailing rates. Some CURRENT QUOTATIONS rates are for prompt positions, others represent 1. International Institute of Agriculture (Rome). an agreement which becomes operative some -Weekly quotations (also current monthly aver­ weeks or months later. Probably no two compil­ ages) of ocean freight rates on wheat and maize ing and reporting agencies will consistently se­ over the principal routes of shipment appear, lect the same fixtures, options, points of loading without discussion, in Monthly Crop Report alld and discharge, and rates. When chartering is Agricultural Statistic.~ bulletins, which are also relatively inactive, the differences may not be included in the Institute's International Review of large, but in periods of rapidly changing freights Agriculture. the discrepancies between sources may be sub­ In the bulletin for April 1937 appears the state­ stantial. ment: "These are average rates for entire cargoes, APPENDIX NOTES 111 and relate to contracts made, often during a pe­ low and high quotations. The series on parcel riod extending back several months, to operate rates, extending back to January 1933. is probably during the weeks specified." This practice was the most valuable feature of this tabulation, al­ adopted in 1934, but prior to 1936 there was no though generally parcel rates are less significant, notable divergence between the various series since shipments are made predominantly by tramp carried by the International Institute and those ships. from other sources. The ratcs are as of the last day of the month, In effect, the current quotations on ocean and so do not agree with monthly rates from other freight rates published by this source are some­ sources arrived at by taking averages of weekly times for prompt positions and sometimes repre­ averages or of one quotation a week. sent rates arrived at as the result of advance 5. New York Journal of Commerce.-This daily chartering. There is no method of determining carries a regular feature, "Ocean Freight and which except by a regular comparison with series Charters," which discusses the market, giving available from other sources. Were it not for this chief attention to North American chartering. It serious defect, the International Institute of Agri­ quotes "asked rates" to various ports of Europe culture would provide the best source on grain from New York by liners (some in cents per 100 rates available to the analyst, for its compilations pounds) as well as cargo rates from the Gulf, St. have been the most systematic over a period of Lawrence, etc., based upon reported fixtures. years. 6. Chicago Journal of Commerce.-This daily 2. Broomhall's Corn Trade News (Liverpool). has, since early in 1937, included a grain trade -This leading trade daily, and its weekly Special feature section in its Tuesday edition. It con­ American Edition, publishes a table headed "Lat­ tains a discussion of the chartering market for est Grain Freights." This provides weekly quota­ North America and reports Gulf and St. Lawrence tions on prompt position wheat rates over the fixtures in detail, but carries no formal tabulation principal routes of shipments at the time, together of rates. with comparisons of rates a week, a month, and a 7. Fairplay (London) .-This weekly shipping year earlier. A brief discussion of rates and journal contains a general discussion of the freight changes is given in addition to the tabulation. market and a tabulation termed "Representative Most of the rates published apply to tramp ships. Fixtures During the Week," which docs not, how­ From New York, St. John, and Galveston, rates ever, always indicate the cargo involved. Under are often for "berth parcels," presumably by a regular feature, "River Plate News," grain rates liners. on that route are frequently mentioned. Broomhall's rates are as of a particular day­ 8. Lloyd's List and Shipping Gazette (Lon­ the "latest" available to the publisher. They may don) .-The daily freight market reports of this at times represent the high or low quotation of publication are probably the most authoritative the week, and sometimes appear to be the rate and are, of course, invaluable to one following at the close of the previous week rather than the day-to-day developments in freights in all parts Monday or Tuesday just prior to publication to of the world. The absence of any formal summary which they are said to apply. This makes little of daily fixtures somewhat limits its usefulness difference except in periods of rapid change in for most analytical purposes. rates. 9. London Grain, Seed and Oil Reporter.-In 3. Times of Argentina (Buenos Aires) .-This connection with its daily sales report, this pub­ weekly shipping journal contains a regular fea­ lication includes in unorganized fashion scattered ture, "The Freight Market," which discusses con­ information on freight rates. In its "Review of ditions in the River Plate market, lists the fixtures the Week" (Friday), freights are discussed more effected during the previous week, and includes fully, usually by reprinting the discussions from a table of berth rates on parcels by liners. Al­ the Daily Freight Register. though no formal tabulation of selected or repre­ 10. Miscellaneous.-Various interests in the sentative rates is attempted, one who follows this shipping or brokerage business make compila­ market from week to week is provided with a tions of rates which are reprinted in shipping reliable source of information. journals. For example, J. E. Turner and Com­ 4. Commonwealth Bureau of Census and Sta­ pany (London) Ltd., issue a River Plate Weekly tistics (Canberra), Monthl" Summary of the Report, which is reprinted in Fairplay and Times Wheat Situation in Australia.-This gives each of Argentina; the Chartering Department of the month a tabulation of current rates, both cargo General Steamship Corporation, Ltd. (San Fran­ and parcel, from Australia to the United King­ cisco) issues a monthly Pacific Coast Freight and dom and Continental ports, with data for several Charter Market Report, which is reprinted in prior years. In the past, charter rates have been various United States newspapers and shipping recorded only quarterly, in March, May, Septem­ journals; and brief discussions and news items on ber, and December. Beginning in March 1937 they grain freights appear from time to time in the have been reported monthly, giving a range of various milling journals. 112 SlJIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

Practically all shipping magazines carry dis­ important routes. Formerly these summaries in­ cussions of the freight market in more or less cluded a maximum of four routes. From 1932 on, detail, but none includes rate tabulations in a form six routes are given-Northern Hange to U.K., suitable for most analytical purposes. In addi­ Karachi to Liverpool, HiveI' Plate (down-river), tion to the shipping journals mentioned above, Australia to U.K., Montreal to Liverpool, and regular features discussing the freight market are North Pacific to U.K. carried in such publications as the Nautical Ga­ 3. Chamber of Shipping of the United King­ zette (New York; published every other week) dom, Annual Reports.-These include a tabulation and the Pacific Shipper (San Francisco, weekly). by weeks for one year of freights over seven im­ The larger daily newspapers in the United portant routes, three of which are primarily for Statcs, Canada, and abroad, which include com­ grains. Also included are monthly data on grain prehensive financial or commercial sections, also rates from Canada to U.K. and from Gulf ports to discuss freights from time to time, particularly U .K.!Continent. when some spectacular movement occurs. 4. Dominion Bureau of Statistics (Ottawa), Re­ port on the Grain Trade of Callada.-These annual REFE1IENCE PUBLICATIONS reports contain tabulations of grain rates from Chiefly of interest to the analyst are the refer­ various Canadian ports to United Kingdom, Con­ ence publications listed below, which summarize tinenlal ports, and the Orient. The period cov­ for a period of years the ocean freight rate data ered is usually the crop year. Freights are ex­ on grains that appear currently. Practically all pressed in cents per bushel, conversions being are subject to the limitations imposed by averag­ made at current rates of exchange. In some cases, ing rates, usually on a monthly basis. instead of monthly averages, a low-high range is 1. International Institute of Agriculture (Rome), given, which at times is so large as to suggest Yearbooks of Agricultural Statistics.-These give that no distinction is made between prompt-posi­ monthly and yearly averages of freight rates on tion rates and those determined as a result of ad­ wheat and maize over selected routes and are vance chartering. available for years since 1927. Previously the 5. Angier's Steam Shipping Report, appearing weekly averages were reproduced. annually in Fairplay's Special Annual Returns In its monthly bulletins, quotations are given for Issue, published in January.-This review of the both up-river and down-river ports from La ocean freight rate situation over all routes for the Plata to U.K.!Continent, but only the up-river year just closed provides one of the longest rec­ quotations are averaged and summarized in the ords obtainable. The reports have been prepared Yearbook. by the Angier family regularly for 100 years. A For the Canada-United Kingdom route, entire 50-year collection of these reports compiled by cargo rates are used for the period during which E. A. V. Angier is available in one volume, Fifty the St. Lawrence is open to navigation (Montreal Years' Freights, 1869-1919 (published by Fair­ to U.K.) ; during the other months, parcel rates in play, London, 1920). liners from St. John to Liverpool are used. In connection with these reviews a tabulation The Yearbooks also include rates on wheat and is given showing the high, low, and present rates maize from the Black Sea to Antwerp/Hamburg on grain cargoes over a generous number of Range, New York to Liverpool, North Pacific to routes during the year reviewed. United Kingdom, and Australia to United King­ 6. Statistisches Jahrbuch fur das Deutsche dom/Continent. Reich.-This tabulates on a monthly basis grain 2. Broomhall's Corn Trade Year Book.-This rates on the principal trade routes, and also in­ summarizes, in monthly averages bascd upon one cludes ocean freight rates on a fairly wide variety quotation per week, the rates published in Broom­ of other products shipped by both tramps and hall's Corn Trade News for certain of the more liners. B. INDEXES OF OCEAN FREIGHT RATES Perhaps the most systematic compilation of are based on charter rates charged by tramp ocean freight rate data has been undertaken by ships under trip or voyage charters,l as reported organizations which sponsor and publish indexes by the sources listed in Appendix Note A. Only of freights. Such index numbers provide the best two indexes are for time charter rates. Obviously, guide to the course and level of shipping freights these must be general in character, there being no in general. Practically all of those indexes men­ ready way of determining where, when, or how tioned below are compiled and reported upon a ships so chartered have been used. Trip or voy- monthly basis. They do not ordinarily supply in­ formation currently upon specific rates by com­ 1 The Federal Reserve Board index, mentioned be­ modities and trade routes, such as are needed for low, for a few years covered rates across the North various comparisons over longer periods. Atlantic, where liners predominate and such rates are All of the better known indexes now published significant even though sometimes difficult to obtain. APPENDIX NOTES 113

agc charter indexes, on the other hand, can be indexes. Fairplal}, Aug. 14, 1930, p. 409, states: constructed on the basis of routes, commodities "While the Chamber of Shipping figures indicate involved, and direction of tramc movement. a decrease of 1.42 % in July as compared with June, Llol}d's List, in its statistics, records an in­ PRINCIPAL INDEX NUMBERS crease of 2.10% from which it would appear that 1. The Economist (London) "Index of Ship­ absolute reliance cannot be placed on the figures ping Freights."-Published monthly, this is de­ of one or the other sources." Discussion follow­ scribed in the Economist Monthly Supplement for ing the presentation of a new index for the Cham­ July 21, 1923, p. 3. Data are "based on 28 repre­ ber of Shipping by Dr. L. Isserlis at a meeting of sentative routes for tramp tonnage, divided into the Royal Statistical Society in December 1937 six groups: (1) European waters, (2) North suggests a better explanation for differences. Be­ America, (3) South America, (4) India, (5) Far tween January and March 1936, the Chamber of East and Pacific, (6) Australia ...." Shipping Index fell 7 per cent in February and The general index represents the un weighted rose 5 per cent in March. The Economist and arithmetic mean of the six group indexes, which Lloyd's List index numbers agreed that there was are calculated in the same manner, either from a downward movement in freights over those the percentages relating to each maritime route three months. The incorrect movement of the or from the averages for traffic to and from the Chamber of Shipping Index showing a rise in United Kingdom. March was due to omitting in February the quo­ The index numbers are expressed in terms of tation from Northern Range to West Italy, which averages for the base period 1898-1913. Currently happened to be much higher than the general the Economist also gives the general index on a average. 1913 and on a 1929 base. The latest revision of the Chamber's index con­ 2. Chamber of Shipping of the United Kingdom tinues to give a fairly heavy weighting to grains; (London), "Index Numbers of Shipping Freights." and inasmuch as the basis for revision was 1935 -This is published monthly in the Statist (Lon­ data, during which year the minimum-freight don), and reprinted in shipping journals, e.g., scheme went into effect, it is possible that the Fairplay, the Times of Argentina, etc., and also average rates on grain for that year may be high without detail in the London and Cambridge Eco­ in relation to rates on other commodities. nomic Service Monthly Bulletin, which does, The Chamber of Shipping also compiles an in­ however, carry the back figures for the total index dex of time charter rates, the base for which pre­ for several years. sumably will also be shifted from 1920 to 1935. The original index was begun and its con­ 3. Lloyd's List and Shipping Gazelle (London), struction was described in the Statist of Octo­ "Lloyd's List" Special Index (of Whole Cargo ber 29, 1921. It is described in detail by Dr. L. Rates). - This monthly index is infrequently Isserlis in a paper read before the Royal Statistical quoted, permission to reproduce being confined Society, December 21, 1937, and published in to Lloyd Anversas in Belgium, Goteborgs Handels that Society's Journal, Part I, 1938, CI, 86-95. In och Sjofarts Tidning in Sweden, and Scheepvaarl January 1938 the index was revised and the base in the Netherlands. period shifted from 1920 to 1935. The index Data are based on five routes or subgroups for employs data from as many of the 97 routes as tramp shipping-Europe, North America, South quotations are conveniently available. The actual America, East Indies, etc., and Pacific, etc. In weight of cargo carried by British tramp ships addition to a classification by areas, there is a and freights earned in the year 1935 provides the classification by cargoes, index numbers being basis for weighting the new index. prepared on coal freights, grain freights, and The main difference between the old and new "other" freights for the world as a whole. index numbers is that "in the old index number The base period is the year 1923. The general Grain is given much more weight relatively to index of whole cargo rates is also shown on an Coal than in the new" (p. 93). The revised index adjusted basis to eliminate the influence of sea­ is published on a commodity rather than a route sonality. basis as formerly. Coal, grain, timber, ore, fer­ In publishing its "Special Index" Lloyd's List tilizers, sugar, iron and steel and scrap, are the and Shipping Gazelle reproduces in one of its seven commodity groups used. The Chamber's daily issues each month the detailed route and new index is the only one providing considerable subgroup numbers which indicate the precise detail on different important tramp cargoes. composition of the general index number for the It has been subject to criticism, however, be­ month involved. cause of its heavy weighting with grain freights. Compiled for Lloyd's List by E. A. V. Angier P:rhaps more serious is the procedure of drop­ (Hall, Angier & Co., London) is a quarterly index Pll1g quotations from the index when they arc of lime charter rates, based upon average rates not available. This accounts for some of the dis­ paid for cargo tonnage of all sizes, all periods, and crepancies in direction of movement of different all trades, many thousands of fixtures being uti- 114 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE lized. The index is available from 1913 on. The issue of August 28, 1922), and in Survey of Cur­ base year is 1900 but, from 1930 on, the index has rent Business until discontinued in 1931,1 also been calculated with 1929 as the base year. ADDITIONAL REFERENCES OTHER INDEXES Below are listed sources available to the analyst In addition to the three voyage charter indexes less concerned with current information and of worldwide scope listed above, there are a num­ more interested in ocean freight indexes over a ber of regional, restricted, or discontinued in­ period of years. dexes of ocean freight rates. Some of the better 1. The Economist (London) for February 26, known of these arc listed below. 1938 (p. 484) gives a complete record of the 1. Denmark: A general index is published in Economist Index of Shipping Freights, annually Statisliske Efterrelninger and described in the is­ for six routes and total, from 1898 to 1937 inclu­ sue of May 23, 1925. It represents the simple arith­ sive, and monthly for the all-route total from 1920 metic average of 26 indexes relating to as many through 1937. world routes selected with a view to indirect 2. Annual reports of the Chamber of Shipping weighting. Seventeen of the routes converge on of the United Kingdom (London) usually give Denmark, Finland, or Sweden. detailed indexes as well as actual rates for the 2. Germany: An index of Germany's seaborne year reviewed, and general indexes of voyage and trade, weighted on the basis of thc volume of time charter rates back to 1920. traffic on the different routes in 1925, is published 3. The Statistical Year Book of the League of in Wirtschaft und Stalistik and described in the Nations (Geneva) includes several indexes of issue of January 15, 1926. ocean freight rates, varying from time to time. 3. Sweden: An index representing simple arith­ The 1936-37 Year Book reproduced indexes from metic averages is published in The Index (Stock­ four countries, monthly for several years, and holm). It pertains to shipments of English coal annually since 1926, all converted to a 1929 base. and American cereals to Sweden, and shipments Included in this number were indexes from Ger­ of Swedish wood and pulp to England. many (Statistisches Reichsamt), Denmark (Sta­ 4. United Stales: (a) A monthly index of berth tistiske Departement), United Kingdom (Econo­ rates on the North Atlantic, beginning in 1920, mist), and Sweden (Svenska Handelsbanken). was formerly published by the Federal Reserve 4. A quarterly index of Time Charter Rates Board and described in the August 1921 issue of from 1913 (chart) is "Calculated and drawn for the Federal Reserve Bulletin (VII, 931-34). Regu­ 'Lloyd's List and Shipping Gazette' by E. A. V. lar publication was discontinued in June 1925 Angier, F.I.C.S. (Hall, Angier & Co., Ltd., 91, Bish­ with the statement that current figures could be opsgate, E.C. 2) ," London. obtained upon request. b) A quarterly index of trip charter rates since 1 One of the Department's difficulties, apparently, 1920 was compiled by the U.S. Department of was in finding a regular record of grain or other char­ Commerce (Transportation Division) and pub­ ters, due to the decline of the tramp and the rise of lished in Commerce Reports (described in the liners in the Atlantic seaboard and Gulf trades. APPENDIX TABLES

TABLE I.-WORLD MEnCHANT SHIPPING STATISTICS, 1920-38 (Million gros .• tons, except for last three columns)

ShIps of 100 gross tons and upwards' ShIppIng employment, values, and freIghts

Lost or I Cost of Chamber of ShippIng Year On regIster, June aoa Under Launched, scrapped, Idle tonnage, Jan. It new, ready freight Indexes§ construe· year Year ------7,500-ton tlon, endIng ending World UnIted UnIted l(d.W.) cargo Voyage 1'lme '.rotal Steam June 30' June 30 e June 30d total StateR KIngdom steamer: charter charter Motorl~~~ . ------1920 ..... 57.3 52.9 1.0 3.4 7.6 5.9 .5 ...... £105 100.0 100.0 1921. .... 62.0 57.6 1.2 3.1 6.2 4.3 .5 ... '" ... 60 37.6 36.3 1922 ..... 64.4 59.8 1.5 3.0 3.2 2.5 .7 10.9 5.3 1.8 66 29.7 26.6 1923 ..... 65.2 60.7 1.7 2.8 2.5 1.6 1.4 9.0 5.3 1.0 60 28.4 21.6 1924 ..... 64.0 59.5 2.0 2.5 2.5 2.2 1.6 6.8 4.3 .9 61 29.6 23.2 1925 ..... 64.6 59.7 2.7\2.3 2.3 2.2 1.0 5.8 4.2 .7 53 25.3 22.0 1926 ..... 64.8 59.2 3.5 2.1 1.9 1.7 1.2 5.7 4.1 .6 61 28.0 24.5 1927 ..... 65.2 59.0 4.3 1.9 2.8 2.3 .9 4.1 2.9 .5 62 27.8 24.9 1928 ..... 67.0 59.7 5.4 1.8 2.7 2.7 1.2 4.5 3.0 .5 62 25.8 22.5 1929 ..... 68.1 59.8 6.6 1.7 2.8 2.8 1.4 4.0 2.8 .5 58 24.9 24.7 1930 ..... 69.6 59.9 8.1 1.6 3.0 2.9 1.2 3.2 2.0 .5 49 l!U 17.7 m31. .... 70.1 59.3 9.4 1.4 1.8 1.6 1.3 8.6 2.6 2.4 38 19.9 14.2 1932 ..... 69.7 58.3 10.0 1.4 1.1 .7 1.7 12.2' 3.0' 3.1' 32 18.8 13.3 1933 ..... 67.9 56.4 10.2 1.3 .7 .5 2.7 12.6 3.6 3.1 37 18.1 14.5 1934 ..... 65.6 53.8 10.6 1.2 1.2 1.0 2.1 7.5' 2.9' 1.7' 52 18.9 14.6 1935 ..... 64.9 52.4 11.3 1.2 1.3 1.3 1.4 6.5 2.6 1.5 60 19.0 15.9 1936 ..... 65.1 51.7 12.3 1.1 2.0 2.1 ... 4.2 2.2 .7 78 22.6 19.3 1937 ..... 66.3 51.5 13.7 1.0 2.8 2.7 ... 2.8 . .. .3 90 34.9 40.5 1938 ..... 67.8 51.7 15.2 1.0 2.8 2.9 ... 1.3 ... .2 ......

* Data of Lloyd's Register of Sllipping, in part as reprinted in annual repo·rts of the Chamber of Shipping of the United Kingdom, and in annual "Merchant Marine Statistics" published by the U.S. Department of Commerce. t ChiefIy estimates hy the Bureau of Foreign and Domestic Commerce (U.S.), in Commerce Yearbook, 1930, II, 661, and ibid., 1932, II, 705, and in World Economic Review, 1935, p. 81. For 1937 and 1938 the figures are estimates by Chamber of Shipping of the United Kingdom, Annual Report, 1937-38, p. 18. t Data in thousands, as of December 31, from Fairplay, Jan. 13, 1938. In March 1920, the cost of such a vessel was figured at £258,750; in June 1937, at £105,000. § From annual reports of the Chamber of Shipping of the United Kingdom; average for 1920 = 100. a Includes lake tonnage, chiefIy on the Great Lakes. On C Returns incomplete for Soviet Russia except in calendar June 30, 1914, United States lake tonnage on register was years 1926 to 1929, and for Spain in 1937 and 1938. slightly under 2.4 million gross tons; since 1929 it has been d Tonnage lost each year runs hetween 300,000 and 500,000 fairly constant at between 2.5 and 2.6 million. gross tons. The balance represents tonnage scrapped. • Excludes United States and Canadian lake tannage. The • For July 1, 1932 the corresponding estimates were 14.2, eXcluded item is small; since 1920, when it was 156,000 3.4, and 3.5. gross tons, it has only once (1923) reached 80,000 tons. , As of July 1.

TABLE n.-UNITED KINGDOM TONNAGE CLASSIFICATIONS AT SELECTED DATES, 1914 TO 1936* (Tonnage in thousand tons)

Tonnage Gross tonnage by types Gross tonnage in varIous tradesG Date Num· ber Dead· Oargo MIxed Pass. Coast· For· weIght Net Gross Tramp liner liner liner Tankeri Other Ing MIxed' Home" Mixed" elgn' ------1914, June 30 3,450 17,495 7,890 12,792 3,285 4,613 3,560 775 545 14 335 140 184 320 11,799 l!l29, June 30 3,632 21,704 10,163 16,819 3,890 6,028 3,769 1,219 1,864 50 317 187 187 963 15,115 1933,Oct.1 3,468 21,250 9,532 15,846 3,903 5,416 3,221 1,238 2,005 63 360 219 161 923 14,120 193G, June 30 3,525 20,321 9,086 15,308 4,333 4,941 3,129 852 1,986 67 452 239 311 905 13,334

* Condensed from much 1I10re elaborate data for these da tes given by L. Isserlis, in Journal of the Royal Statistical SOciety, Part I, 1938, CI, 96-99.

n Exclusive of unspecified types of vessels. d Partly in "home" and partly in "foreign" trade. • Partly in "coasting" and partly in "home" trade. • Excluding trade between Elbe and Brest limits. , EIbe and Brest limits. [ 115 ] 116 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

TABLE IlL-OCEAN FREIGHT RATES ON WHEAT AND CORN TO EUROPE, MONTHLY AND ANNUAL AVERAGES FOR CROP YEARS 1922-23 TO 1937-38* (Cents per bushel) Crop year Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. I Apr. May June July Average NORTH A1'J.ANl'lC 1'0 UNITED I{INGDOM a 1922-23 ...... 7.5 7.6 8.5 10.7 10.1 8.6 7.3 7.3 9.5 8.8 8.9' 8.2 8.6 1923-24 ... " . 7.4 7.6 9.4 10.4 8.7 8.9 10.7 9.7 8.9 10.2 8.7 7.7 9.0 1924-25 ...... 8.9 11.0 10.9 10.8 9.4 9.4 9.7 8.8 8.6 9.1 7.0 8.5 9.3 1925-26 ...... 8.2 8.5 9.6 10.6 10.0 8.5 6.4 6.1 6.6 10.1 10.1 10.6 8.8 192&-27 ...... 10.8 13.6 20.2 23.1 12.5 11.4 8.9 7.2 8.0 9.9 8.0 7.6 11.8 1927-28 ...... 8.5 10.1 9.9 10.3 7.2 6.9 7.6 '8.1 7.6 7.2 7.3 8.4 8.3 1928--29 ...... 9.5 9.8 10.6 10.4 7.6 8.0 6.6 4.9 4.6 7.1 6.3 6.1 7.6 1929-30 ...... 6.1 6.1 5.6 5.3 5.5 5.6 5.3 5.3 5.3 5.6 5.3 5.1 5.5 1930-31 ...... 5.8 5.9 5.5 5.0 4.9 5.1 6.1 5.5 5.3 6.6 5.1 4.9 5.5 1931-32 ...... 4.8 4.8 5.6 6.1 ... 4.9 6.1 5.4 5.2 4.9 4.2 3.5 5.0 1932-33 ...... 3.7 4.4 4.3 4.0 3.7 3.7 ... 3.3 3.6 3.8 3.4 3.6 3.8 1933-34 ...... 3.7 3.8 4.3 4.7 4.8 4.7 5.5 5.6 4.8 4.4 4.1 3.9 4.5 1934-35 ...... 4.4 5.3 5:2 4.8 4.6 4.6 4.6 4.5 4.5 5.0" 5.0 4.6 4.8 1935-36 ...... 4.7 4.6 4.9 6.2 6.2 5.4 5.5 5.4 5.7 5.8 6.3 6.3 5.6 ]93&-37 ...... 6.3 6.8 6.9 7.1 7.7 8.4 8.4 8.4 8.8 9.6 9.4 9.1 8.1 1937-38 ...... 8.9 10.4 13.0 13.3 9.4 9.0 10.2 8.6 7.8 8.8 9.2 9.2 9.8 Average 1922-37 ...... 6.7 7.3 8.1 8.6 7.4 6.9 7.0 6.4 6.5 7.2 6.6 6.5 7.1

NORTH PACIFIC TO UNITED KINGDOM

1922-23 ...... 21.7 19.7 21.3 22.5 23.0 22.5 22.0 22.5 23.3 23.2 23.2 22.4 22.2 1923-24 .. '" . 21.7 21.1 22.2 22.0 22.0 22.8 23.1 21.4 19.8 20.1 19.0 18.8 21.2 1924-25 ...... 18.4 1[1.6 22.3 22.0 22.0 22.4 23.2 21.6 21.6 22.3 ZO.8 20.2 21.3 1925-26 ...... 21.5 20.7 20.4 21.0 22.8 21.7 19.4 17.1 17.4 19.2 18.9' 19.8 20.0 192&-27 ...... 19.7 22.0 26.5 29.8 27.4 24.8 23.9 24.3 23.8 21.2 21.6 21.0 23.9 1[127-28 ...... 21.2 22.1 21.4 20.6 20.3 20.1 19.7 18.7 17.7 17.3 17.3 17.6 19.5 1928-29 ...... 19.0 18.8 18.8 20.5 21.2 21.5 20.1 19.7 18.7 18.7 18.7 18.5 19'.6 1929'""30 ...... 18.5 18.5 16.0 16.2 I 16.0 14.7 12.0 12.2 12.8 13.3 13.5 13.2 14.7 1930-31 ...... 14.2 14.9 15.1 13.8 15.0 14.6 14.6 14.2 13.8 15.3 14.5 13.7 14.5 1931-32 ...... 13.7 . ... 11.8 11.8 10.5 10.2 10.7 11.6 11.3 10.4 8.9 8.6 10.9 1932-33 ...... 9.8 10.5 10.1 10.0 10.0 10.5 10.2 9.0 9.0 9.8 9.5 11.20 10.0 1933-34 ...... 11.2 11.5 11.5 13.3 13.4 13.6 13.6 13.0 13.0 13.0 11.50 10.8 12.4 1934-35 ...... 13.5 13.5 13.6 13.6 12.6 11.8 11.1 11.0 11.0 10.9 10.6 10.60 12.0 1935-36 ...... 10.6 11.2 13.4 13.5 13.7 13.9 13.6 12.8 12.6 12.8 12.9 12.8 12.8 1936-37 ...... 13.1 12.6 15.1 16.4 21.4 21.4 21.3 19.8 21.7 23.2 23.1 23.7 19.4 1937-38 ...... 25.7 28.2 28.2 24.0 19'.6 24.7 18.1 18.4 16.7 16.6 16.6 16.5 21.1 Average 1922-37 ...... 16.5 16.9 17.3 17.8 18.1 17.8 17.2 16.6 16.5 16.7 16.3 16.2 17.0

• Averages of Friday rates published in International Crop Report and Agricultural Statistics, except that from June 1936 averages of Tuesday rates (converted from sterling rates per long ton) are taken from BroomhaU's Corn Trade News, for all routes except the North Atlantic. See also footnote c and Appendix Note A. Dots indicate lack of quotations, and monthly averages are based on the weekly quotations availab Ie. These are charter rates for entire cargoes except as indi­ cated in note a. Because of changes in British and United States currency bases and relationships, especially prior to April 1925 and between September 1931 and October 1934, these series in United States cents per bushel differ from ones expressed in sterling per long ton or per quarter. a May to November rates are for Canada to the United "Minimum rates adopted by Tramp Shipping Adminis­ Kingdom (Montreal-Liverpool). December to April rates are trative Committee and scheme of co-operation placed in ef­ for Northern Range ports to U.K./Continent, except for years fect. 1928-29 and 1933-35 which are rates for parcels in liners o BroomhaU's data. from New York to Liverpool. APPENDIX TABLES 117

TABLE III (Continued).-OcEAN FREIGHT RATES ON WHEAT AND CORN TO EUROPE, MONTHLY AND ANNUAL AVERAGES FOR CROP YEARS 1922-23 TO 1937-38 I Crop year Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May I June .July IAverage I I I I I I I I I I I I LA PI.ATA DOWN RIVER TO UNITED KINGDOM AND CONTINENT 1922-23 ...... 12.6 11.6 14.0 15.1 16.1 14.8 12.5 12.7 17.0 19.2 13.8 12.4 14.3 1923-24 ...... 11.6 11.6 10.5 10.7 12.4 15.1 17.2 16.6 16.0 16.3 14.0 12.4 13.7 1924-25 ...... 13.9 13.8 13.7 12.7 14.8 14.9 12.8 10.5 9.6 9.7 8.1 9.1 12.0 1925-26 ...... 11.0 8.2 9.3 11.5 12.8 10.4 8.1 8.7 10.9 10.6 11.8 16.6 10.9 1926-27 ...... 16.4 17.6 26.1 30.8 24.7 20.6 19.6 18.2 17.8 18.4 15.9 12.5 19.9 1927-28 ...... 15.2 13.5 12.8 15.4 15.6 14.4 11.9 13.0 14.6 13.9 12.8 13.8 13.9 1928-29 ...... 13.1 12.3 13.5 14.9 16.1 16.2 16.2 15.6 15.8 15.7 14.4 15.3 14.9 1929-30 ...... 13.5 10.2 8.1 7.9 8.4 8.4 6.8 6.4 8.1 6.7 6.3 9.0 8.3 1930-31 ...... 11.4 10.0 8.8 9.4 11.3 11.0 12.8 12.0 12.0 11.9 10.6 10.2 10.9 1931-32 ...... 10.9 10.0 9.0 8.0 7.3 7.9 8.1 8.2 8.3 7.5 6.4 6.3 8.2 1932-33 ...... 6.1 6.7 5.7 5.6 7.0 7.2 6.6 6.1 6.2 7.5 7.4 8.7 6.7 1933-34 ...... 8.5 7.5 8.0 9.7 10.5 10.1 10.2 9.5 9.5 9.2 10.0 9.8 9.4 1934-35 ...... 10.3 10.3 10.1 9.5 9.9 9.7 8.6' 8.8 9.6 10.3 10.4 10.5 9.8 1935-36 ...... 10.5 10.4 10.8 11.0 11.1 11.1 11.2 11.2 11.1 11.1 11.4 11. 7 11.0 1936-37 ...... 13.0 13.7 14.4 14.1 18.9 21.5 1S.S 17.0 21.4 20.7 21.4 21.3 17.8 1937-38 ...... 22.8 23.2 20.7 17.3 16.1 16.1 16.1 16.0 1S.0 15.9 15.8 15.7 17.S Average 1922-37 ...... 11.9 11.2 11.7 12.4 13.1 12.9 11.9 11.6 12.5 12.6 11.S 12.0 12.1

AUSTRALIA TO UNITED RINGDOM AND CONTINENT 1922-23 ...... 20.9 20.7 25.5 27.9 27.7 26.8 24.3 23.4 24.2 21.7 20.4 20.0 23.S 1923-24 ...... 19.8 21.1 22.4 22.9 23.2 25.2 26.7 24.6 19.9 18.7 18.2 18.8 21.8 1924-25 ...... 19.5 25.4 27.3 28.8 28.3 30.1 31.3 26.3 22.9 22.7 19.6 17.9 25.2 1925-26 ...... 22.8 25.8 25.8 25.5 27.3 25.7 19.7 16.7 16.5 17.8 16.3 25.5 22.3 1926-27 ...... 26.4 26.3 29.2 34.1 33.7 30.7 31.4 30.S 25.9 25.3 26.3 23.1 28.5 1927-28 ...... 21.8 24.7 25.1 24.7 24.5 22.7 20.S 4111.!2.1 24.4 23.3 22.9 21.8 23.2 1928-29 ...... 25.6 26.6 26.5 27.5 27.6 26.4 25.2 22.4 18.9 17.2 15.4 17.6 23.1 1929-30 ...... 19.1 20.0 19.6 16.6 16.3 16.0 14.0 13.6 15.5 16.0 17.1 16.8 16.7 1930-31 ...... 19.8 21.7 20.8 19.3 19.8 19.5 19.5 19.1 18.6 18.7 17.8 16.8 19.3 1931-32 ...... 16.9 14.3 14.4 14.5 13.1 12.5 12.8 13.8 13.5 11.8 10.4 9.9 13.2 1932-33 ...... 11.0 12.2 12.1 11.7 12.0 12.3 11.8 10.5 10.8 11.3 11.8 14.4 11.8 1933-34 ...... 14.2 14.2 14.6 16.7 17.5 16.9 16.7 15.4 15.5 16.1 16.3 16.4 15.9 1934-35 ...... 16.6 17.3 18.1 17.8 16.8 16.3 14.4 14.1 14.9" 15.5 16.0 16.3 16.2 1935-36 ...... 16.3 16.2 17.3 18.1 18.2 17.9 18.1 18.0 17.9 18.0 18.5 18.7 17.8 1936-37 ...... 19.4 19.9 20.2 20.6 28.0 28.9 27.0 27.6 33.0 32.2 32.2 30.8 26.6 1937-38 ...... 30.8 31.6 31.9 28.2 23.8 25,.7 23.0 22.2 22.2 22.2 22.0 22.0 25.5 Average 1922-37 ...... 19.3 20.4 21.3 21.8 22.3 21.9 20.9 19.9 19.5 19.1 18.6 19.0 20.3 ...... CHART 15.-DEFLATED INDEXES OF OCEAN FREIGHT RATES, 1869-1914 AND 1920-1937* ...... 150 I 50 00 Logllrifhmic ~fI,.tical scaltl 140 . 140 / Aisseriis 130 \ /'~ /\ N~ .... I 30

120 V \ / \ / V'\ .. ;- " 120 110 \ J 1"'\ !\ A \ 110 V Base period \- .. 100 \ I 100 . \. Economist , .. 95 95 ~". Jj 90 " 90 '" \Economist 85 ~ Ilf . 85 "\'.. ..01. :. \ I 80 ~ Average: 79 i··· ... .. 80 •...\ .... 75 75 1Ji ~ \ .". : .... ! ~.. -.. 70 , 70 \: 65 65 1865 1870 1875 1880 1885 1890 1895 1900 1905 1910 1915 1920 1925 1930 1935 1940 • Indexes used in Chart 4, "deflated" by dividing by Sauerbeck-Statist index of wholesale prices after its conversion to the co=on base, 1898-1913.

CHART 16.-0CEAN FREIGHT RATES ON WHEAT AND CORN TO EUROPE, MONTHLY, CROP YEARS 1922-23 TO 1937-38* (U.S. cents per bushel)

4oir------.------._------._----~------_.------._------._----_.------_,------._------._----_.------_,------,40 35 LOcMrithmic vsrtlca/ scale 35 l-----~------_+~74--~------+_~~~~~·~~------+_------~----_+------~------+_------~----_4------}------+---~~~~~~~~·~--~30 30 .... .r \ /1\. \ ...... , ,.... ! 11\\. 25 I • .\'. '-". • .~. • -~ \'1\ 25 ~~ !~~ ill'\ \..2~ \/...... \ ". Aust ra Ii a North Pacific jrrJ...... \ V\"- 20 20 A ~ rt \. \f!, .ll' ...... \ "-f-' ~I"\ \ ,.. - ...'\ \..... 1;-"'. .'r--'-'}\.I \. .. ~ ..... :, t ....., : , ~...... y I ~~ ,. \ A \....-. "\ ..... 1-. : ... ~ .. - I 5 15..! V \. ! \ -y \ .: f' t \ \! V····/·./ V V ~.'!\,\./\ ...... , !I~ ",' I r-'\-W-: r' 't ~ P:-....j.. r ... i IO!\"! ~ , '" ,i": \k~··~ A"/J~.. 'L '-::..kt... ·_·_···· 1\ 10 I\!\ !\!\" -'\~ 'I '..", 'I~ I" \-:.. \ \J"I • .....,. .,\/ , ..... Ij \1, _10 i \ 1- I ~ \ 'ii f \V \ ; \ i , , .', ~ , ... - " ,...... ,/ 8... .. f,.1 "{ ~ II ,J" . - . \.' .~.\ ,.; ~:La Plata down river./ 8 I , .. \, V\l .' \ ~ i\ i ,+-r 6~----_4------+------~--~\~~/--+_----~~----_+--~1~/'~~~~~--~h_~~~~~~.~.~.~.~.~~~~-----4------~-P~~~------~----~ 6 \ : ''-'-''" "\ J'-i~ I ", -.: "\ I.. I \."" .... 5~-----+------+-----~------~------~-----+---4+~IN-o+r-th~A~t~la~n~ti-c~~~~~~\~------~~~~\-t./P~~_-_-,J~~~~----+-----~------~ 5 , ,..... I \ 4~----~----~------~-----+------+------+------~----~----~----~~rtf~~c--A~~f-'---4f------+------~----1-----~ 4 " ., 3 3 1922.23 1923'24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 * Data in Table ill. APPENDIX TABLES 119

TABLE IV.-OCEAN FnEIGHT RATES ON WHEAT AND COHN TO EUHOPE, ANNUAL AVEHAGES AND RANGE IN MONTHLY AVEHAGES FOH CHOP YEAHS 1922-23 TO 1937-38* (Cents per bushel)

Year Canada to U.K. Northern Range (U.S.) to U.K. New York to I,Iverpoola North Paeltle to U.K. August- July Averuge Low High Avelage I Low HIgh Average Low High Average Low I High ------_. ------,--- lfJ22-23 .... . 9.2 7.5 11.6 8.0 6.9 10.1 5.5 4.3 8.4 22.2 19.7 23.3 1923-24 .... . 9.4 7.4 11.2 8.6 7.0 10.7 6.8 4.1 6.8 21.2 18.8 23.1 1B24-25 .... . 9.4 7.0 11.0 8.8 7.2 9.7 6.3 4.6 8.7 21.3 18.4 23.2 1~J25-26 .... . 9.0 6.6 10.6 8.0 6.1 10.0 7.0 4.8 10.4 20.0 17.1 22.8 1fJ2fH7 .... . 12.0 7.6 23.1 12.1 7.2 21.2 9.7 4.6 22.0 2.3.9 19.7 29.8 1927-28 .... . 7.7 5.3 10.3 7.7 6.8 10.4 5.6 4.5 7.4 19.5 17.3 22.1 1928-29 .... . 8.5 5.3 10.6 9.1 6.8 11.7 6.1 4.5 9.5 19.6 18.5 21.5 1029-30 .... . 5.5 5.3 6.1 5.4 5.3 5.6 4.7 4.0 5.3 14.7 12.0 18.5 1H30-31. ... . 5.6 4.9 6.6 5.4 4.9 6.1 4.6 4.6 4.9 14.5 13.7 15.3 1~J31-32 4.9 .... . 3.5 6.1 4.9 3.0 5.4 3.!) 3.2 4.9 10.9 8.6 13.7 HJ32--33 .... . 4.0 3.4 4.4 3.7 3.0 4.8 3.3 I 3.1 3.9 10.0 9.0 11.2 1933-34 .... . 4.3 3.7 5.7 .5.6 5.4 5.8 4.7 3.5 5.6 12.4 10.8 13.6 15J34-35 .... . 4.9 4.4 5.3 4.6 4.5 4.7 12.0 10.6 13.6 1935-36 .... . 5.6 4.6 6.7 5.7 4.6 6.3 4.6 4.6 4.7 12.8 10.6 13.9 1936-37 .... . 7.9 6.3 9.6 8.2 6.3 9.3 1!).4 12.6 I 2.3.7 1937-38 .... . 10.2 8.6 13.3 10.5 7.8 14.7 10.1 8.1 12.1 21.1 16.5 28.2 I

Year La PIa ta down river Australia Black Sea Karachi ! Gulf to August- to U.K./Cont. to U.K./Cont. to Antwerp/Hamburg" to U.K. I U.K./Cont.c July Average I Low High Average Low High Average: Low High Average Average ------.---,----I I 1922-23 ..... 14.3 11.6 19.2 23.6 20.0 27.9 ...... 15.4 11.0 1923-24 .... , 13.7 10.7 17.2 21.8 18.2 26.7 ...... 15.0 10.2 1924-25 ..... 12.0 8.1 14.9 25.2 17.9 31.3 '" '" ... 14.7 11.3 192.5-26 ..... 10.9 8.1 12.8 22.3 16.3 27.3 ...... 13.1 11.5 1926-27 ..... 19.9 12.5 30.8 28.5 23.1 34.1 ...... 15.8 10.3 1927-28 ..... 13.9 11.9 15.6 23.2 20.6 25.1 ...... 13.2 10.8 1928-29 ..... 14.9 12.3 16.2 23.1 15.4 27.6 ...... 13.1 10.6 1929-30 ..... 8.3 6.3 13.5 16.7 13.6 20.0 ...... 9.9 9.4 1930-31. .... 10.9 8.8 12.8 19.3 16.8 21.7 7.1 6.7 7.6 12.5 7.3 1H31-32 ..... 8.2 6.3 10.9 13.2 9.9 16.9 5.5 4.4 6.9 11.2 7.1 1932-33 ..... 6.7 5.6 8.7 11.8 10.5 14.4 4.8 4.3 6.3 ... 5.2 1933-34 ..... 9.4 7.5 10.5 15.9 14.2 17.5 6.8 5.7 7.3 5.3 1934-35 ..... 9.8 8.6 10.5 16.2 '" 14.1 18.1 6.5 6.1 7.0 '" ... 193.5-36 ..... 11.0 10.4 11.7 17.8 16.2 18.7 6.6 6.3 7.4 ...... 1936-37 .. '" 17.8 13.0 21.5 26.6 19.4 3.1.0 11.0 8.4 12.8 20.6 13.6 1937-38 ..... 17.6 15.7 23.2 2.5.5 22.0 31.9 11.5 7.3 16.5 17.9 12.9

• Source IIote to Table III applies with exceptions noted below. "Low" and "High" refer to low and high monthly aver­ ages, not to the lowest or highest quotation for the month. a Hate for parcels in liners. C Data prior to 1936 are from annual reports of the b From Illternaliollal Crop Report and Agricultural Sta­ Chamber of Shipping of the United Kingdom. Broornhall tistics throughout. data for 1936 and following are for berth parcels. 120 SHIPPING AND FREIGHT RATES IN THE OVERSEAS GRAIN TRADE

TABLE V.-SEASONAL INDEXES OF OCEAN FREIGHT RATES*

Economist Index Grain freight rates Month North South North North World America America Australia India Atlantic PacIfic Argentina I Australia

Aug...... 96.2 94.3 95.8 95.6 96.6 94.4 97.1 98.3 95.1 Sept...... 98.5 98.4 98.1 101. 7 99.5 102.8 99.4 92.6 100.5 Oct...... 104.0 104.9 99.6 104.8 100.9 114.1 101.8 96.7 104.9 Nov ...... 105.9 107.7 101.3 108.2 104.4 121.1 104.7 102.5 107.4 Dec...... 104.0 103.5 102.8 110.5 102.9 104.2 106.5 108.3 109.9 Jan...... 102.6 102.1 101.8 107.1 101.6 97.2 104.7 106.6 107.9 Feb...... 101.1 101.1 100.3 102.7 101.2 98.6 101.2 98.3 103.0 Mar...... 99.4 99.8 98.8 97.4 100.6 90.1 97.6 95.9 98.0 Apr...... 99.0 101.2 101.4 95.3 98.8 91.5 97.1 103.3 96.1 May ...... 97.7 100.4 101.8 93.6 98.8 101.4 98.2 104.1 94.1 June ...... 95.6 93.8 99.1 90.7 97.0 93.0 95.9 95.9 91.6 July ...... 95.9 93.0 99.0 92.9 97.5 91.5 95.3 99.2 93.6

* Averages for identical months in 15 crop years 1922-23 to 1936-37, adjusted to show percentages of corresponding 15- year averages. Basic data from the Economist, and Table III above.

TABLE VI.-INDEXES OF WORLD TRADE AND SHIPPING ACTIVITY, 1925 AND 1929-37* (1929 = 100) Quantum of world trade" Net tonnage Active tonnage Year shIps cleared In world In 42 merchant Year Jan.-Mar. Apr.-June July-Sept. Oct.-Dec. countries marine'

1925 ...... 83.5° ...... 79 90.0 1929 ...... 100.0 97 99 98 106 100 100.0 1930 ...... 93.0 95 93 88 96 99 99.0 1931 ...... 85.5 85 84 82 90 91 92.0 1932 ...... 74.5 76 73 68 79 85 86.0 1933 ...... 75.5 73 72 75 80 88 87.0 1934 ...... 78.0 75 76 75 81 91 90.0 1935 ...... 82.0 79 81 80 88 94 92.0 1936 ...... 85.5 83 83 84 91 95 95.0 1937 ...... 97.0 92 99 96 100 98 99.5 1938 ...... 88 ......

* League of Nations, Economic Intelligence Service, Monthly Bulletin of Statistics and World Production and Prices, 1936-37, p. 74, and ibid., 1937-38, p. 77. a Based on values in gold divided by prices in gold; data b As of June 30. for 75 countries until March 1937, then for 76 countries be- c Corresponding averages for 1926, 1927, and 1928 are cause of the separation of Burma from India. 86.0, 92.5, and 96. O.