Sandro F. Puglisi
Grain Markets Analyst

Record harvests alone no longer guarantee competitive grain prices. For millers, shipping routes, freight indices, energy costs, and climate-driven disruptions now weigh as heavily as yields in shaping margins. Logistics has become the true battleground of grain competitiveness.

For the milling industry, grain costs are not determined solely in the fields. Even with record harvests, the delivered price of wheat, corn, or barley can swing sharply depending on shipping rates, energy prices, and logistics bottlenecks. For millers and pasta makers, these factors are no longer background noise — they are decisive in shaping competitiveness, margins, and procurement strategies.

FREIGHT DYNAMICS – THE BALTIC COMPASS

The Baltic Dry Index (BDI) has become a daily reference for grain buyers. In recent months, Panamax rates have fluctuated enough to shift FOB wheat offers by $10–$15 per ton. For flour mills in North Africa or Southern Europe, such differences can dictate the choice between Russian FOB Novorossiysk wheat and French FOB Rouen cargoes. As of late September, the BDI stands at 2,240 points, near its yearly highs, translating into higher C&F; costs in Algeria, Egypt, and beyond. In late August, Egypt’s state buyer Future of Egypt (FoE) finalized purchases estimated at 200,000–400,000 tons, mainly from French and Black Sea origins. Market participants reported C&F; values in the $265–275/t range.

CHOKE POINTS AND GLOBAL CORRIDORS

A handful of critical corridors now determine the effective availability of grain. Drought restrictions in the Panama Canal have pushed South American corn onto longer routes, while tensions in the Red Sea have raised insurance and freight costs for Black Sea shipments to the Mediterranean. Inland, low water levels on the Mississippi and Rhine have disrupted barge flows, increasing the cost of U.S. Gulf and German exports just as harvest pressure mounted. For millers, these disruptions mean delivery delays, execution uncertainty, and premiums on nearby coverage, with impacts that can reach $5–$8 per ton on key routes. Geopolitical tensions are amplifying these disruptions. Houthi attacks in the Red Sea have raised insurance and freight costs for Black Sea grain shipments, with detours via the Cape of Good Hope adding 7–10 days and up to $1 million per trip. The Russia–Ukraine conflict continues to choke Black Sea exports, pushing millers to pay $5–$10 per ton premiums for EU or U.S. origins. These risks inflate CIF costs and force strategic sourcing adjustments.

ENERGY PRICES AND TRADE COSTS

Oil prices remain the hidden driver of grain costs. Brent near $68.78 per barrel and WTI at $64.69 feed directly into bunker fuel costs. Higher freight translates into elevated CIF values for importers. On top of volatility, new IMO environmental regulations are pushing for cleaner fuels, further raising costs. For the milling industry, this means procurement budgets are increasingly tied not just to crop sizes but also to energy markets — a linkage that, according to recent analyses, could add up to 15% to total transport costs in the coming quarters.

REGIONAL COMPETITIVENESS: FREIGHT AS A GAME CHANGER

Freight differentials are shaping origin choices:

- Black Sea vs. EU: Russian wheat, with lower freight to Mediterranean ports, has often undercut French offers despite production risks.

- South America vs. U.S. Gulf: Brazilian corn and soybeans gain market share when Gulf barge flows are disrupted. Despite offering some of the lowest FOB wheat prices globally in late 2025, U.S. competitiveness is often eroded by high barge and freight costs, reminding millers thatdelivered price — not field price — is what ultimately matters.

- Argentina’s move: The temporary suspension of export duties until October 31 adds further weight to South American competitiveness, cushioning buyers from elevated freight costs. China swiftly booked more than 10 cargoes of soybeans (some estimates 20–35) from Argentina following the temporary suspension — which was reintroduced on September 25 after the quota was reached. This not only underscores Buenos Aires’ renewed attractiveness but also reshapes shipping flows, tightening freight availability.

MENA tenders: Algeria’s OAIC recently booked around 600,000 tons of wheat in its latest tender, with C&F; values reported in the $258–262/t range, mainly from Black Sea and French origins. Meanwhile, market chatter suggested unusually large wheat bookings by Iran, with estimates ranging from 0.5 up to 2.2 MMT. Whether confirmed or not, such rumors alone can sway freight expectations and C&F; benchmarks across the region.

- Mediterranean Hub: Italy and Spain are strengthening their role as import gateways for both Black Sea and North African demand. For millers, these logistics-driven spreads directly impact the flour cost base. A $5–$10 per ton freight advantage can decide whether to buy from the Black Sea or the EU, affecting margins by up to 2–3% on the final product.

CLIMATE, INFRASTRUCTURE & RISK

Climate change is amplifying vulnerabilities. Drought in the Panama Canal, low water levels on the Rhine and Mississippi, and Gulf storms have shown how local events cascade into global price shifts. Infrastructure investment lags: Brazilian ports remain congested, European rivers fragile, and global shipping capacity stretched. For the industry, this translates into higher basis risk and the need for more diversified sourcing, with millers now considering forward contracts across multiple origins to mitigate spikes.

MEDIUM-TERM OUTLOOK – SHIPPING THE FUTURE

Looking ahead, logistics and energy will remain as decisive as yields and acreage. With Northern Hemisphere harvests closing and Southern Hemisphere planting campaigns underway, logistics networks are about to rotate their stress points — from U.S./EU ports to Brazil and Argentina — a seasonal shift that will again test freight capacity and C&F; spreads. Countries investing in resilient infrastructure — Brazilian ports, Russian terminals, Egyptian import hubs — are positioning themselves as long-term winners. Importers, especially in North Africa and the Middle East, will remain vulnerable to freight volatility. For millers and pasta makers, the challenge will be to hedge not only against crop prices but also against freight and energy costs — potentially through hybrid tools like freight futures, which are gaining traction in 2025.

EMERGING ROUTES: THE ARCTIC AND THE NORTHERN SEA ROUTE (NSR)

The gradual thawing of the Arctic is opening a new corridor between Russia and China, cutting Asia–Europe transit times from 40 to 20 days. On 20 September 2025, China launched the first regular service on this route. While this offers Russia new opportunities for investment in port and shipping infrastructure, access remains limited by NATO–Russia tensions and unresolved territorial claims. For the grain trade, the NSR could reduce reliance on the Suez Canal in the long term. Yet environmental and geopolitical risks remain, with some studies suggesting detours elsewhere have increased emissions by up to 14% in 2024, though projections for 2025 indicate a more contained rise of up to 5%.

GRAINS AT THE MERCY OF SHIPS AND OIL

In 2025, the cost of flour is written as much in freight indices and oil charts as in crop reports. For the milling industry, understanding logistics and energy is no longer optional — it is the difference between competitive margins and squeezed profits. Grain markets may start in the fields, but they are ultimately decided in the ports — and increasingly, in the fuel that powers them.

* Sandro F. Puglisi is an Italian agribusiness analyst and entrepreneur specializing in global grain markets and supply chains.