Grain and oilseeds market operators note that transportation logistics services are at the stage of asymmetric growth compared to the rise in prices due to the situation on world markets. And they emphasize that “the size of tariffs is determined not only and not so much by the type of products and distance, but also by the availability of spare capacity and the urgency of orders”.
Distance matters
Of course, the direction plays a significant role. As agro-marketing expert Iurie Rija notes, “on the route to Turkey, where Moldovan sunflower is actively exported, the cost of transportation by one grain carrier has increased from $1-1.1 thousand to about $1.4 thousand. With a standard load of a transport unit (about 22 tons of sunflower), the tariff increased from $46/t to $64/t – a jump of 39%.
That is, in this case, the combined effect of long distance, slow rotation of trucks and high demand in a short period of time can be clearly seen.
On the route to Romania, the dynamics of increase in truck tariffs is more moderate, but the upward trend continues. For example, for sunflower delivery to Galati, transportation costs increased from about $25/t to $30/t (about 20%). Freight transportation to the Romanian market by another route increased in average price from $32/t to $37/t, i.e. by about 16%.
Tariffs for road transportation of grain (mainly on the territory of the Republic of Moldova – from north to south) increased by 10% on average during the mentioned period. Transportation of agricultural products by rail is still carried out at the same tariffs.
Reduction of farmers’ and traders’ margins
Regardless of the percentage difference in tariffs in each case (direction), the rising cost of road transportation logistics in principle plays a major role, as shipments are made daily and in significant quantities.
“From a logical and economic point of view, road transportation now works according to a simple rule: whoever has a truck at the right time sets the price,” says Iurie Rija. – We are no longer talking about a linear tariff per kilometer, but a price formed under market pressure. During peak periods, transportation becomes a limited and highly demanded resource, and its cost grows exponentially.
From a financial perspective, the impact is immediate and direct. The increase in transportation logistics costs is fully included in the cost of exports and, accordingly, “eats away” part of the trader’s margin and the purchase price offered to the farmer. Meanwhile, the increase in exchange quotations and “demand prices” under direct contracts, although it has been happening since the beginning of the war in the Middle East, but not so quickly and sharply.
The conclusion is obvious: at this stage road transportation ceases to be just a logistics service and becomes a determining factor in the formation of the final price of agricultural products.
Those who do not manage logistics properly lose competitiveness. The one who controls it actually controls the “middleman’s margin”.
