Views Divided on FMC Proposal for Ag Container Freight Indices

• Parties "unanimously stated that none of their agricultural shippers expressed a desire to have an agricultural freight rate index for ocean shipping." Some said such indices might give larger agricultural businesses an unfair advantage because larger businesses would have sophisticated financial analysts on staff and would be better able to process the available information.
• Some commenters worried that the freight rate indices may be inaccurate due to the numerous surcharges that are constantly being adjusted and which tend to be significantly more volatile than the base rates.
• Most didn't think this is a task that is appropriate for the FMC.
• NCBFAA members believed that shippers, which include NVOCCs, would most likely feel uncomfortable with their confidential service contracts being used for this purpose, and that it "would infringe upon their confidentiality."
• A public freight index might result in a weakening of competition among the vessel operators: "To the extent they have more visibility to their competitors' actions, the carriers may adjust their market behavior."
• Transparency of U.S. shipping rates could be misused by foreign governments to give improper advantages to their national NVOCCs: "Armed with this information a foreign government could provide subsidies to their constituents, who could then undercut the rates offered by U.S. NVOCCs.
• Even if the FMC has the authority to create such indices, it does not appear that the federal government has been involved in similar ventures for any other mode of transportation: "So, the question goes, why is it important to do so here?"
• In view of its limited budget, "this may not be the best time for the FMC to expand its regulatory activities into an area that appears to fall more closely into the realm of private, not public, concern."

In separate comments the Agricultural Transportation Coalition said "perhaps no issue addressed by the Federal Maritime Commission has generated a diversity of views amongst the agriculture and forest product export community," citing "dramatic differences of opinion amongst our membership." It said "our opinions are divergent on even the broader matters of inquiry, such as whether the shipping public would find targeted U.S. rate indices beneficial, whether the Commission should extract information from service contracts, if indices should be commodity and/or route specific, or more broadly based."

The New York Shipping Exchange recommended the FMC withhold from releasing any version of a container freight index, saying independent groups such as NYSHEX "would provide a better alternative to freight derivatives trading based upon an FMC generated freight rate index."

But the National Grain and Feed Association and North American Export Grain Association said "establishment and public release by FMC of container freight indices for U.S. agricultural exports could be a useful tool for the industry. Our memberships have indicated considerable interest in utilizing a FMC-maintained Container Freight Export Index. Many find the market for container freight currently lacks sufficient exchange- or forward-pricing information in advance of a general rate increase, and believe FMC indices could be the critical element in providing for much-needed improvement in the ability to manage the volatility inherent in container freight used to transport U.S. grains."

And the U.S. Department of Agriculture's Agricultural Marketing Service said it "supports new data resources that will facilitate the orderly marketing of agricultural products and believes the development of an agricultural export rate index would greatly benefit agricultural exporters. ... Ocean freight rate indices dedicated specifically to agricultural commodities will allow exporters to manage the risk of ocean freight rate volatility and better plan overall transportation costs. Ocean carriers will also likely benefit from a more efficient pricing process."