1

Agricultural

Marketing 

Service

February 2020 update on

United States–South America Ocean Grain 

Freight Spreads (Summary)

This paper is an update of the summary of: U.S.–South America Ocean Grain Freight Spreads, by Jay 

O’Neil, International Grains Program Institute (IGP), Kansas State University (KSU). The full paper is 

available at http://hdl.handle.net/2097/18876. For more information on this summary, contact the 

author at Delmy.Salin@usda.gov or 202-720-0833.

Delmy Salin

WHAT IS THE ISSUE?

The world export market for soybeans is highly competitive. Even though U.S. production costs are higher 

than those of South American soybeans, because U.S. total costs (including transportation costs, from 

point of production to the destination in Asia), are generally lower than for South American soybeans, 

U.S. soybeans are able to compete. However, developments in Brazil are lowering its transportation costs, 

making the country more competitive in the world market.

At the end of November 2019, the Brazilian government announced that the last 28 miles (43 km) of 

pavement along Brazilian highway BR-163 connecting Sorriso, North Mato Grosso, to Miritituba was 

completed. According to industry analysts, transportation costs will be reduced by about U.S. $7/metric 

ton (mt) (reais (R$)30/mt) when BR-163 is completed. In addition, Brazilian seasonal port backlogs 

declined significantly because of the added loading capacity in the Northern Arc ports, and increased 

vessel loading efficiencies in the Southern ports, which expedited exports. The added capacity in the 

Northern Arc ports helped relieve congestion in the busy Southern ports by shifting cargo away to the 

Northern Arc ports, especially to Barcarena and São Luís. The Port of Santos is still the largest Brazilian 

grain export gateway.

WHAT DID THE STUDY FIND?

This report found that during the 2019 peak harvest season, Brazilian ports and the U.S. Gulf loading 

delays and vessel backups were similar, averaging 3-10 days—narrowing the time spread between the 

regions. Relatively small changes, such as this one, in seaborne transportation costs, can make South 

America soybean exports more competitive than those of the United States and diverting trade from U.S. 

exports to Brazilian or Argentinean exports, or the reverse. Ocean freight spread is the cost difference 

between two vessel routes to the same destination, such as between the U.S. Gulf and the Pacific 

Northwest to Asia versus South America to Asia (China and Japan), or the U.S. Gulf to Europe and China 

versus South America to Europe and China.1

1  The U.S.–South American ocean freight spread competitiveness occurs in the Atlantic route (U.S. Gulf) to China and not in 

the U.S. Pacific Northwest (PNW) route to China because of the Panama Canal and the Canal transit costs limitations.
2

Table 1. Vessel costs from U.S. Gulf to Shanghai, China versus Argentina and Brazil to Shanghai, 

China, October 15, 2019 to November 15, 2019

Cargo mean 

quantity

U.S. Gulf

Argentina Argentina Brazil

Rosario Bahia 

Blanca Santos São Luís/Itaqui

58,000 mt1 68,000 mt 68,000 mt 55,000 mt 60,000 mt

 66,000 mt 65,000 mt

Panamax PostPanamax

PostPanamaxNo 

Top-Off 2

2 Port With 

Top-Off

Route via Panama 

Canal Neo-Canal3 Cape of 

Good Hope

Cape of 

Good Hope

Cape of 

Good Hope

Cape of 

Good Hope

Panama 

Canal

Cape of 

Good 

Hope

Nautical miles 10,013 10,013 14,973 11,541 11,610 11,056 11,087 11,708

Voyage days 

(at 12 knots) 35 35 52 40 40 38 38.5 40.5

Panama Canal 

wait time 2 4 0 0 0 0 2 0

Laytime both ends 15 15 15 20 26 20 20 20

Total voyage 

duration days 52 54 67 60 66 58 60.5 60.5

U.S. Gulf daily hire 

rate ($18,000 x 

total voyage days)

$936,000 $972,000 $1,206,000 - - - - -

Brazil and 

Argentina daily 

hire rate($16,500 x 

total voyage days)

- - - $990,000 $1,089,000 $957,000 $998,250 $998,250

Ballast Bonus4 $800,000 $800,000 $800,000 $650,000 $650,000 $650,000 $650,000 $650,000

Singapore Bunkers5

($12,500/day) $437,500 $437,500 $650,000 $500,000 $500,000 $475,000 $481,250 $506,250

Port Fees $232,025 $280,300 $280,300 $260,000 $434,000 $56,000 $80,000 $80,000

Panama Canal Fees 

(one way) $198,783 $239,783 - - - - $239,783

Total vessel costs $2,604,308 $2,729,583 $2,936,300 $2,400,000 $2,673,000 $2,138,000 $2,449,283 $2,234,500

Freight rate per mt: $44.90 $40.14 $43.18 $43.64 $44.55 $32.39 $37.68 $34.38

Note: The above estimates assume that a vessel is simply waiting for a transit slot and not paying extra for a reserved schedule to 

transit through the Neo-Panama Canal locks. 

1

mt=metric tons.

2No top-off: the port of Rosario channel draft is not deep enough to load full Panamax and Post-Panamax vessels. Sellers have to 

decide to load up to 45,000 mt of cargo at Rosario (No top-off); or 2 ports with top-off—i.e., to load 45,000-50,000 mt at Rosario 

and finish loading (top-off) an additional 10,000-15,000 mt at Bahia Blanca.

3Neo-Canal = new Panama Canal locks.

4Ballast Bonus is a special payment above the chartering price when a ship has to sail a long way with no cargo to reach the next 

loading port.

5The fuel cost estimates include the costs of the global Sulphur limit of 0.50% m/m (mass by mass) to comply with the 

International Maritime Organization (IMO) regulation of 0.50% m/m (mass by mass), called IMO 2020, effective January 1, 2020. 

Vessel fuel cost is an estimate for a laden Panamax vessel steaming at 12 knots and consuming 25 tons of intermediate fuel oil 

(IFO) per day.

Source: O’Neil Commodity Consulting.
3

Market conditions at any given time may change the estimated route voyage cost. The estimated vessel 

freight trade may be above or below the straight cost calculations shown in Table 1. Consequently, the 

market will trade at whatever price level it deems appropriate. Seasonal port backlogs affect the logistical 

flow of commodities and shipper costs, but in a commodity supply push market (markets where supply 

is abundant), these extra costs generally get passed back to the local producers rather than paid by the 

shipper or commodity buyer and, therefore, have a smaller effect on ocean freight rate spreads. This is 

true whether commodities are sold free on board (FOB) or cost and freight (CNF).2

The ocean freight rates for grain cargos from South America to Asia are often less expensive than from 

the U.S. Gulf because of dry-bulk vessel route patterns, lower cost port charges, Panama Canal tolls, and 

less burdensome navigation restrictions. South America shipments provide some natural competitive 

advantages for Brazilian and Argentinean grains and oilseeds by sailing around Cape of Good Hope 

and avoiding the Panama Canal when the need exists. South American shippers can load large vessels 

gaining economies of scale and avoiding Canal fees and delays. Brazilian ports also provide less expensive 

berthing (dockage) costs for vessels. However, recently, Panamax and Post-Panamax soybean vessels 

from the U.S. Gulf to China are also gaining economies of scale by going around the Cape of Good Hope, 

bypassing the Panama Canal to avoid fees, waiting times, and the uncertainty of getting a slot to transit 

the new expanded Locks.3 U.S. Gulf grain transits the Panama Canal mostly in Handymax, Supramax, and 

Ultramax vessels and some Panamax vessels with a cargo capacity of under 69,000 mt. Unlike container, 

auto, and liquefied natural gas (LNG) vessels, dry-bulk vessels are not allowed to preschedule their lock 

times in transiting the new Panama Canal locks. Grain vessels must wait for an opening if they wish to go 

through the new locks.

Currently, loading delays and vessel backups in South America resemble those in the United States. The 

cost of any resulting vessel demurrage, however, does significantly affect the value of the FOB cargo and 

the price received by South American producers.4 For example, “FOB Santos” shows that the Brazilian 

seller will pay for transporting the grain to the Port of Santos and the cost of loading the grain onto the 

ship, including inland haulage, customs clearance, origin documentation charges, and demurrage. Once all 

the grain is on board, the buyer pays for all costs beyond that point. There are no readily available public 

data identifying the ocean freight spreads between the United States and South America. This publication 

aims to fill that gap.

HOW WAS THE STUDY CONDUCTED?

This study is based on primary data from O’Neil Commodity Consulting. Secondary data sources are 

USDA-AMS Transportation Services Division, Bluewater Shipping Port statistics, Agri Port Services USA 

and Brazil, Clarksons Platou Singapore, Searates.com, Sea-Distancees.org, Advansea Brokerage and 

Consulting, and the Panama Canal Authority. The study does not include inland transportation costs in 

each competing region.

2 FOB Origin indicates that the sale is considered complete at the seller’s shipping dock, and thus, the buyer is responsible 

for freight costs/liability. CNF refers to a common type of shipping agreement where the seller pays for delivering the item to 

the port closest to the buyer. CNF shipping terms do not include the cost of cargo insurance.

3 Post-Panamax are vessels with a capacity of 85,000-100,000 dwt; Panamax vessels have a capacity of 75,000-78,000 dwt. 

New vessels can load more cargo on lower drafts. Deadweight carrying capacity (dwt) is the weight that a cargo ship can carry 

when immersed to the appropriate load line, expressed in tons, including total weight of cargo, fuel, fresh water, stores, and 

crew.

4 Demurrage costs are the charge levied when a shipment is not loaded or unloaded within the allowed time. 
4

Preferred citation:

Salin, Delmy, United States–South America Ocean Grain Freight Spreads (Summary), U.S. Department of 

Agriculture, Agricultural Marketing Service, February 2020. 

Web <http://dx.doi.org/10.9752/TS213.02-2020>

USDA is an equal opportunity provider, employer, and lender.