The Incidence of Increased Ocean Freight Rates during the Post-COVID Era

Jungkeon Jo and William Secor

No 379025, 2023 Conference, April 24-25, 2023, St. Louis, Missouri from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: The lingering effects of COVID-19, including increased freight demand and supply shortages, have led to a historic rise in ocean freight rates spanning from mid-2020 to 2021. The rise in ocean freight rates has raised concerns about its implications for the U.S. agricultural sector. This paper examines the incidence of increased ocean freight rates on the soybean marketing margins between the United States and China. Our findings show that ocean freight rates have a significant positive effect on soybean spreads between the two countries. Furthermore, a one standard deviation rise in ocean freight rates leads to a 0.9 cents per bushel increase in soybean prices in China, while decreasing prices in the United States by approximately 4.3 cents per bushel. These results highlight how higher ocean freight rates widen the marketing margins between the two countries, elevating soybean prices downstream (China) and reducing prices upstream (United States). Moreover, the findings suggest a higher elasticity of Chinese excess demand compared to U.S. excess supply, as reflected by the more pronounced price decrease in the United States.

Keywords: Agricultural and Food Policy; Demand and Price Analysis (search for similar items in EconPapers)
Pages: 24
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nccc23:379025

DOI: 10.22004/ag.econ.379025

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