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Where are the real problems?

Къде са истинските проблеми?

In recent days, global markets remain anxious about grain logistics and transportation. While efforts have been focused on dealing with the damage caused by COVID-19, military conflicts have also emerged, hampering traffic in the Black and Red Seas.

For a low-margin business like the grain industry, this perfect storm of problems makes meeting financial goals an increasingly difficult task.

But political and regulatory issues actually create the real problems for grain exporters. For example, the US government recently unveiled a $1 billion plan that will explore the potential breach of the Columbia and Snake River dam systems in the Pacific Northwest to address salmon declines.

If this plan is adopted, it will effectively close the world's third-largest export corridor for grains and oilseeds. Grain traders, forced to find more expensive, alternative export routes, will have no choice but to pass on the added cost to their customers.

The IGC Grains and Oilseeds Freight Index rose 19% year-on-year in December. Argentina, Australia, Europe, USA, Black Sea and Brazil sub-indices also posted big gains.

These figures came mostly in the fourth quarter and are likely to continue throughout 2024. One reason for this increase is demand for bulk carriers outstripping supply, but drought and military conflicts hampering seaborne grain trade are also part of the equation.

Studies have found that food insecurity is more of a political than a supply problem. This is certainly relevant in 2024 as well, as conflict and misguided politics hamper the fight against hunger, including the ability to transport grain in a timely, efficient and ultimately cheaper way.

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