By IRMA ISIP

Importers of grains and other commodities are being urged to consolidate their importation in order to save on costs according to shipping experts.

Pietro P.S. Lam, shipping manager of Prosperity Steamship Co. Ltd., of Hong Kong said freight rates have steadied after hitting record peak this year.

Lam said this is due in part to the fall in the price of oil from almost $150 per barrel to just about $70 today.

Ideally, he said, the lower freight rates should translate to lower price of commodities but suppliers of grains in the world market hold on to their stocks waiting for better price for their commodities.

"Skyrocketing freight rates translate to higher CNF (cost and freight) commodities," Lam said.

But he noted that with the recent economic tsunami, shipping and chartering businesses have been slowing down.

Lam also said buyers are having difficulty arranging letters of credit with banks.

"This means they are becoming apprehensive if they can cover the cost of commodities," Lam said.

He added that with dampened demand, commodity prices can be affected.

On the other side of the coin are the farmers who refuse to sell at low price.

"But prices should be reasonable for farmers because they too have difficulty getting financing," Lam said.

Jesus E. Avecilla Jr. , president and chief executive officer of Selma Shipping Philippines which is into ship operation and chartering, said in the case of the flour industry, US west coast farmers of wheat are not selling because the futures market are down.

In turn flour millers which have not bought supplies are holding on to their inventory and postpone buying until the last minute.

"Millers buy small portions only at the last minute just to sustain the operations of their plant. US farmers don’t want to sell if the prices are low," Avecilla said.

It takes three months before wheat is purchased, shipped and milled into flour. One shipment loaded in smaller vessels of 35,000 to 40,000 tons is good for one and a half months.

But Avecilla said futures prices are still high compared to spot prices, indicating that traders are still optimistic of a rebound soon.

"The forward freight index or bookings made by charterers or operators for the first quarter of 2009 or 2009 are still higher versus current prices," Avecilla said.

He cited as an example Panamax (80,000-ton vessel) rates for commodities now hover at spot $11,200 per day compared to $13,000 to $13,500 per day for futures. At peak this year, the same would have fetched $18,000 per day.

"This means they are still optimistic. Shipping is a sentiment business," Avecilla said.